The changing face of commercial cards
Commercial cards are no longer just about the plastic. Modern commercial cards are increasingly a digital product. Yes sure, we are in a transition so physical cards are still alive and kicking and will remain so for some time yet. But the rise of virtual cards and provisioning them in digital wallets is a catalyst for change, and this is where the commercial card software offered to businesses really takes centre stage.
Traditional commercial cards offer businesses a distributed spending model which is often perceived to be uncontrolled. At the same time, spend management platforms are bringing increased control to the operational spend of a company by utilising software – pre-purchase, in-purchase and post-purchase. With greater visibility and control, business confidence to deploy and use cards is enhanced, and ultimately increased card usage improves business productivity and efficiency.
It has been fintechs that have built these spend management software platforms for SME’s, and the threat to traditional commercial card providers is now more than just nascent. The direct-to-market fintech model pitches the software ahead of the cards. The software is the differentiator that has a perceived value for which SME’s are prepared to pay, and the cards typically come for free.
Therefore the business and operating model for commercial cards is changing, but it is not all bad news for banks. They still have an advantage as the incumbent, trusted brand for these business customers. The opportunity to enhance the value proposition for SME’s and deliver incremental value across the customer journey offers them the possibility to substantially increase customer advocacy, whilst significantly improving fee based revenues through spend volume growth and the commercialisation of data.
Making a spend management platform the face of the commercial card product can transform the bank’s connectivity and engagement with its customers. The platform is more than just an extension of what is on offer today to support online servicing for commercial card customers. These still assume that the card is the product, so moving to the position where the software is the product and cards are an enabler requires a change of mindset. Those banks that adapt successfully will overcome many of the previous objections to commercial card usage, and ensure increased usage throughout the customer lifecycle of acquisition, activation, usage and retention.
However spend management is not just about cards, but needs to embrace the wider convergence across cards and payments. SME’s want to be able to decide how they pay – by bank transfer or cards, depending on merchant acceptance of cards and/ or their desire for greater working capital. Spend management incorporates both expenses and invoices (accounts payable), and for an SME a one stop platform is vital for full visibility of operational spend across the business.
As a result we are starting to see propositions that blur the distinction between cards and payments by enabling the booking of a payment on one rail and its fulfillment on a different payment rail. We fully expect these combined propositions to become increasingly mainstream over time.
Therefore whilst the commercial card business model is not broken, the landscape is changing. There has never been as much change and innovation in our market, and banks need to think anew about the distribution and delivery of their B2B payments products in the future. But most importantly, they need to implement any such strategy with the SME customer’s perspective clearly front of mind.