Maximizing epayables by Maximizing Supplier Acceptance of Card Sam Sarin, CPCP Director, Senior Product Manager Bank Of America Merrill Lynch
epayables Why not? epayables is an AP card solugon that enables payers to convert check payments to electronic card payments without any changes to internal AP processes. no Did you know? epayables: Requires limited IT resources Has no implementagon charge or hidden fees Eliminates manual processing associated with ghost cards Reduces fraud exposure ACH Debit 25% Commercial Card 15% 1 Source : 2011 AFP 2011 Payments Fraud and Control Survey Check 93% Fraud by Payment Type 1 Benefits: Win- win for all Financial benefit through improved working capital and cash flow visibility Efficiencies gained in accounts payables through eliminagon of paper checks and reduced vendor follow- up Improved supplier relagonships while maintaining controls in purchasing processes No IT investment and ease of implementagon Reduced DSO for suppliers, freeing up working capital
Supplier aftudes towards card Reasons suppliers give for taking cards Quick payment 66% 68% Reasons suppliers resist or will not accept cards 71% Fees too high 76% Guaranteed payment 49% 53% Too hard to set up 25% 35% Process ease 34% 38% Don't understand benefits 19% 35% To be "preferred" 29% 35% Few customers request 8% 4% Lower AR process cost Reduce AR staff 25% 29% 12% 15% Too much to maintain Don't understand acq contract 8% 9% 8% 15% Overall High capture End- user survey on supplier acceptance, Nov / Dec 2009, n=146 Don't have proper staff Frequencies are for "regularly cited" responses only. 23% of respondents were deemed to be High Capture with annual p- card spend equal to or greater than 4% of annual revenue (private sector) or budget (public sector). For taking cards, a response of "Decreases hard- dollar costs (e.g., banking fees, paper invoices, postage)" grouped within "Lower AR process costs." A response of "CompeLLve advantage over non- acceplng suppliers" grouped within "To be preferred. For not taking cards, responses of "regularly cited" for "Cant find acquirer" and "PCI compliance" were less than 5% of overall respondents. End- user survey on supplier acceptance, Nov./Dec. 2009, n=146 3 7% 6%
A menu of opions to fit payee needs Exact Auth One Card per Supplier Client: ease of reporing and reconciliaion Vendor: enables keeping card on file eliminaing need to manually enter card number each Ime; vendors that cannot keep card on file may obtain the same through secure remioance Push Payments epayables One Card per TransacIon Ideal for paying infrequently used suppliers Client: eliminates need to set up, maintain and cancel cards for one- off suppliers Vendor: Eliminates need to store card account on file for one- Ime payment
Push Payments Overview Push Payments enables payers to push the exact amount to their push- pay enabled suppliers, without suppliers having to take any acgon to inigate the payment. Most issuers solugons enable clients to send push payments in same file as exisgng AP card payments file. epayables Supplier inigates the card transacgons. Supplier needs to know the card account details. Push Payment Buyer inigates the transacgon; funds se^le to the supplier's DDA without any acgon required by supplier. Supplier does not need to know card account details.
Push Payments Value ProposiIon Drive Payment Efficiencies Reduce Fraud Rebates Buyer Achieve auto- reconciliagon by pushing exact payment amount Control payment Gming Eliminate need to provide card account number to supplier Earn rebate on push payments. Issuers differ in their treatment of rebate for push payments Drive Receivables Efficiencies Enhanced Security Reduce DSO Supplier Eliminate need to process card transacgons Chargeback reducgons No declined transacgons to contend with Eliminate need to house card account details PotenGal for accelerated receipt of funds by eliminagng lead Gme for supplier to manually process payments
Supplier response to push pay? Historically, suppliers response has been lukewarm Push pay does not fit with accounts receivables processes Fear of losing control over a transacgon for which they pay a fee Time and effort to be set up for push payments Inadequate awareness Resistance to change but we re beginning to see a shiy
To Push or Not to Push When is Push Payments right for you? Push Payments is an opion for suppliers that: ProacGvely elect to enroll in push payments Accept push payments from another provider, if convergng from another card provider Decline to keep card on file AND are not willing to receive card account details through secure email ConGnue to be a source of significant manual reconciliagon work
Exact AuthorizaIon Exact Auth Override (EAO) for epayables provide payers with greater control of the payment by restricgng the amount the supplier can process, down to the penny. Buyer Value ProposiIon Supplier Drive greater auto reconciliagon by controlling the amount of payment that may be processed, down to the penny. Drives efficiencies by eliminagng manual errors of processing inexact amount. Any vendor that is a Visa or MasterCard acceptor may be set up on EAO
One size does not fit all Exact auth may not be a good fit for all suppliers May interfere with a suppliers accounts receivables processes Does not work well with cross- border payments May cause a decline due to a supplier s terminal limits
MulIple payment opions to fit you and your suppliers needs epayables Push Payments Exact Auth Override Supplier may charge any amount up to the amount of purchase request. The payment delivered to the supplier matches the amount of purchase request. Supplier can only get an authorizagon for exact amount of purchase request down to penny. Supplier inigates card transacgons. Supplier needs to know card account details. Buyer inigates the transacgon; funds se^le to supplier's DDA without any acgon required by the supplier. Supplier does not need to know card account details. Supplier inigates card transacgons. Supplier needs to know card account details.
Secure Email: Helping You Maximize Check to Card Secure email to drive spend, accelerate card payments and drive efficiencies. Grow Spend Capture new spend on card with secure remioance template Accelerate payments, Drive efficiencies No more phone tag with vendors Smart Facts 79 clients used the feature in the first three months, to target 715 vendors with $19 MM in monthly spend Of the vendors that say no to keeping card on file, 42% accept card when presented with secure remi^ance opgon Smart Facts Create card 39 days 18 days First post
Shaping Industry TransformaIon We are commi^ed to leading the industry towards a more equitable value model that does not penalize the supplier. COST SAVINGS TRANSPARENCY COST SAVINGS TRANSPARENCY COLLABORATION PROCESS EFFICIENCY COLLABORATION PROCESS EFFICIENCY Buyer Supplier
Mandatory Changes to Large- Ticket Interchange (LTI) EliminaGon of $1,000 registragon fee, removing barriers to vendor adopgon of LTI More transacgons qualify automagcally for LTI, lowering barrier to card acceptance Min transacgon size going up from $4,160 to $6,980 Visa Interchange Changes April 2012 Level II and Level III data congnue to be a requirement to obtain LTI rates Opportunity: Educate vendors who decline based on merchant fee on new LTI rates
OpIonal Program TargeIng Large Dollar TransacIons Visa Interchange Changes, EffecIve April 2012 Offers progressively decreasing, low interchange rates for Gered transacgon sizes Program is expected to stem de- enrollment and drive card acceptance In direct relagon with reduced interchange, spend is expected to earn lower rebates OpGonal for clients to pargcipate, where rates are driven by buyer, not merchant This program is directed at balancing the value proposiion for suppliers.
MeeIng Supplier Needs to Drive Card AdopIon Accelerate cash flow Process efficiency Reduce AR costs Reduce Fraud PCI Compliance Push pay P Secure delivery of card account Exact Auth One card per supplier P P P One card per transacion Reduced merchant fee program paricipaion P P P P P P P P P
Convincing Suppliers to Accept Card High capture more likely to stress importance of cards and of size Copyright 2010 NAPCP All Rights reserved Note: groups responses of "frequently" or "somelmes" together. Excludes "seldom," "never," and "unsure. Q42, Q4, Q6. Copyright 2010 NAPCP All Rights reserved
Supplier aftudes towards card Reasons suppliers give for taking cards Quick payment 66% 68% Reasons suppliers resist or will not accept cards 71% Fees too high 76% Guaranteed payment 49% 53% Too hard to set up 25% 35% Process ease 34% 38% Don't understand benefits 19% 35% To be "preferred" 29% 35% Few customers request 8% 4% Lower AR process cost Reduce AR staff 25% 29% 12% 15% Too much to maintain Don't understand acq contract 8% 9% 8% 15% Overall High capture Don't have proper staff 7% 6% End- user survey on supplier acceptance, Nov / Dec 2009, n=146 Frequencies are for "regularly cited" responses only. 23% of respondents were deemed to be High Capture with annual p- card spend equal to or greater than 4% of annual revenue (private sector) or budget (public sector). For taking cards, a response of "Decreases hard- dollar costs (e.g., banking fees, paper invoices, postage)" grouped within "Lower AR process costs." A response of "CompeLLve advantage over non- acceplng suppliers" grouped within "To be preferred. For not taking cards, responses of "regularly cited" for "Cant find acquirer" and "PCI compliance" were less than 5% of overall respondents. End- user survey on supplier acceptance, Nov./Dec. 2009, n=146 18
Best PracIces To Drive Card Acceptance 1 2 Treat suppliers as partners Make vendor enrollment ongoing process UIlize secure email UIlize ReporIng Educate suppliers on benefits of card acceptance using mulg- pronged communicagon plan Submit AP file to your Issuer every six months for a vendor match; use pre- nogficagon le^ers where possible Enroll vendors unable to keep card on file Generate & review Card status report monthly to idengfy cards rarely or never used Address supplier pain points around cost of acceptance, offering incengves, as needed Incorporate cc payments as standard payment opgon in supplier agreements, RFPs To send card account number securely to vendors who elect to keep card on file Pay pargcular a^engon to undelivered email nogficagons
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