B2B Processing Growth Not Impacted by Economy

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Kate Fitzgerald's recent article in Cards & Payments put some umph in recommendations that wholesale or business to business merchants give some serious thought to accepting credit and purchase cards for payments.

It seems some major card issuers are seeing purchasing and T and E (travel and entertainment) card activity on the move...upwards - as more businesses make the shift from spending with paper check to plastic.  The benefits are bountiful in tough economic times - primarily - the ability to track and control costs across the board.  Benefits go deeper - but substantial cost savings are a great place to start.

But how does this affect the wholesale merchant or business providing services and products to these businesses that now purchase with cards?

Fitzgerald notes that key categories for purchasing card transactions include computers, telecom and printing equipment, media and advertising services, as well as transportation and delivery serivces. 

Merhants who sell these products and services to other businesses should take note, processing commercial cards with the wrong equipment or without a specialized B2B merchant account can be costly.  B2B credit card processing or wholesale processing is more than just taking cards.  Level II processing requires the appropriate input of information with the transaction and Level III processing means the appropriate equipment, programming and merchant account...if you want to process your customers cards at the lowest possible interchange or discount rate.

Besides keeping your customers who now buy products with corporate credit or purchasing cards happy, your business can benefit from reduced paper transactions in the same way your customers have.  Consider Fitzgeralds references to the cost of an average paper transaction - $90...up to $150 in large organizations!  How about eliminating paper invoices and bulky statements? 

It's true, accepting the card vs a check has a cost to it as well - interchange fees and the cost of the service, but quick, guaranteed payment via the card is huge, not to mention those overhead cost savings Fitzgerald touts. 

Purchasing cards are being touted as the norm in as little as "five years" ...will you be a B2B processing merchant by then? or more importantly, will you be a profitable, B2B processing merchant?  

The Future of B2B Processing

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Are You a Prepared Merchant?

B2B transactions are on the rise. 

According to Celent - a financial industry research firm - in 2007 there were 11 billion in B2B transactions in the US alone amounting to $36 trillion in dollars spent.  Of these transactions, 70% were traditional paper check payments.  More importantly - at the time Celent estimated that approximately 4 billion of these transactions will move to electronic payment in 5 years.  Processing giant First Data goes so far as to estimate that in the next 7 years.... only 10% of B2B transactions will be made with paper checks. 

Business to Business electronic payment processing. Wow.

Government, hospital and school purchasing departments using purchasing cards to buy everything from toilet paper and office supplies to intricate medical devices or components used to manufacture high tech military weaponry. 

Large corporations issuing corporate credit cards so controllers can monitor travel and entertainment expenses  or various department expenditures and budgets (unless you work at AIG - no monitoring there).

Even small mom and pops - solicited by their local banks to accept company cards with lines of credit - with rewards programs attached for cash back or travel.

Makes sense.  Are you a prepared merchant?

In traditional tiered pricing - (a good 90% of the small and mid size businesses we help are on this merchant pricing program) - purchasing, corporate and company card transactions typically downgrade to the non-qualified price...the highest price the merchant could possibly pay. 

The writing is on the wall - merchants who are not prepared to at a minimum process at the B2B level II processing rates - will pay a steep price for falling asleep at the wheel.