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Commercial Card Solution
Sam BoatengDirector, Commercial Cards
RBC Royal Bank
Optimizing Supplier Payments
Canadian Business Payment Value Breakdown
Source: 2017 Canadian Payment Methods and Trends – Payments Canada
EFT (30%) Cheque (29%) Credit Cards (27%)
Online Transfers (4%) Cash (4%) Debit (3%)
Prepaid (2%)
Key takeaways:
• Cardable opportunity is large - estimated at $400B annually, only an estimated 5% on Cards today (Visa/PayTech Canadian Commercial Card Market study – 2016)
• Traditional T&E card spend (discretionary in nature) is expected to grow marginally while B2B (supplier payments) card spend is expected to continue to grow quickly
• Businesses are indicating that their card use will increase due to reasons such as cost, rewards, speed, and reconciliation advantages
• Commercial Card solution is positioned well as the payment solution that will drive card growth because it meets the various needs of mid-to-large company stakeholders
• Suppliers are increasingly accepting cards shortening their accounts receivables cycle, reducing credit risk exposure and improving accounts receivables staff productivity
The Changing Payments Landscape
Faster Payment OptionsBusiness happens in real time but payment can take up to several days. Modern businesses are adopting faster means of making and receiving payments.
Data Rich PaymentsAdditional data which travel with electronic payments is being used to facilitate more efficient reconciliation and create insights which can be used for decision making.
Adoption of Digital PaymentB2B cheques usage are declining. In addition to fraud, cheques carry the risk of non payment. Organizations are evaluating their legacy processes and finding ways to apply digital payment solutions in order to improve productivity and become more competitive
Commercial Payment CardsTraditionally commercial payment cards were used primarily as a travel and entertainment payment solution, however this is changing quickly. With growing acceptance, card is now being increasingly used to pay for procurement/supplier payments.
Traditional Payment Card Solution Value for BusinessesRewards & Extending Days Payable Outstanding
Supplier
Purchaser
BankAdditional Days
Payable (47/51)
Grace days
(17/21)
Day 1 to 15 Day 30 Day 60 Day 77/81
Rewards
Working Capital
Rewards & Extending Days Payable are the two aspects of the traditional business credit card value proposition.
NEW Payment Card Solution Value for Businesses Meeting the Needs of Multiple Stakeholders
Treasury• Increased working capital
• Capture early payment discounts
• Extend days payables outstanding
Procurement• Streamlined and efficient procurement process e.g.
pay low risk transaction below $10K on corporate card
by passing the purchase order and invoice process.
• Pay suppliers on time
Accounts payable• Lower operational cost by making
it easy and cost effective to make
payments especially where there
are large numbers of small
suppliers
Travel Managers• Monitor compliance with travel policy
• Negotiate supplier discounts
• Monitor trends in travel expenditure
CFO/Controller• Improved governance accountability efficiency
• Insights into organizational spend
• Effective working capital management
• Smooth transmission and retention of data
The traditional value proposition met the needs of the Treasury Department but not the needs of the other stakeholders. As a result, more robust credit card programs were created.
Commercial Card Solution Value for BusinessesSatisfying the Needs of Commercial Clients
+ +
Rewards Working Capital Card Management
Reporting
Data Integration
Rewards Savings Insights Control
Commercial Card Solution Value Proposition
Control Rewards &
Benefits
▪ Issue cards
▪ Cancel cards
▪ Change limits in real time
▪ Block purchases by
merchant category code
e.g. casino and liquor
store
▪ Pool credit limit amongst
all cardholders
▪ Earn Avion points at one
point per dollar spent or
cash back at 0.5%
▪ Roll up points to the
corporate level or to the
owner
▪ Insurances e.g. corporate
waiver liability, auto rental
collision, interrupted trip
and trip cancellation
Insights
▪ Customized expense
reports e.g. supplier top
10 spend report
▪ Identify expenses which
violate company policy
▪ Capture spending trends
▪ Export spend data e.g.
to Excel
▪ Data integration with
expense management
program e.g. Concur
▪ Capture early payment
vendor discounts
▪ Extend days payable
outstanding
▪ Pay US dollar expenses
in USD
▪ Reduction in fraud
Savings
Perspectives on Fraud
Source: RPMG, PayTech 2014
Payment Method% Organizations
Reporting Fraud
Average Fraud
$ per Incident
Cheque 85% $1,221
EFT 26% $730
Commercial Card* 20% $130
*Overall fraud rates average <7 basis points (internal, external, misuse)
Research confirms that card-based payments are the most secure of common payment methods
Buyer Perspective: Not For Profit Cardable Supplier Payments
Goods & Services Marketing Office Supplies & Electronics
StationaryTelecommComputersSoftware
Cell PhonesServers
Furniture Mail Services
Paid Search Media Buy Companies
Social MediaPromotional Merchandise
Direct MarketingMarket Research
Seminars & Events
EquipmentHardware Stores
Retail StoresWholesale
Grocery StoresShipping
Food ServicesInsurance
International Suppliers
Supplier Perspective: Why Accept Cards?
THE VALUE PROPOSITION FOR SUPPLIERS
Expanded Customer Base Adoption of card-based solutions may strengthen, retain, and potentially expand buyer / client relationships.
Improved Working Capital Electronic payments enable faster receipt of funds from the time of payment initiation, which can decrease supplier DSOs and potentially improve cash flow and enhance working capital.
Reduce CostsEliminate need for credit check on new buyers; reduction in administration costs on lost / stolen cheques; reduced lockbox fees; reduced deposit fees; reduced collection costs; attaining a higher threshold on merchant discount rate
Reduced Processing TimesElectronic settlement can simplify payment processing by making funds available to the supplier when the transaction is processed and could eliminate manual processes such as invoice presentment and inquiries regarding payment status.
Enhanced DataEnhanced remittance data that accompanies a card solution can help improve the payment reconciliation process and reduce exceptions, errors, and disputes.
RBC Commercial Cards ContactRBC Commercial Card Specialist
Katie ArmstrongPhone: 647-217-6347
Appendix: Helpful Links
13
RBC Commercial Card Website
RBC Commercial Card Overview Video
RBC NextLogic Details Video
