Commercial Payments Overview
Darren Muise
Visa Commercial Partnerships
April 2013
Agenda
• Commercial Payments
 VisaNet
 Commercial Payments
Trends
 Payment Strategies
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VisaNet
64 Billion
Transactions
Includes payments
and cash transactions
16,600
Financial
Institutions
Acquirers
Issuers
1.8 Billion
Cards
Merchant Processors
Card Processors
35 Million
Merchant Outlets*
$2.7 Trillion in
Payments Volume
$4.6 Trillion
in Total Volume
Merchants
Cardholders
Note: Data for four quarters ended June 30, 2010
Source: Visa Inc. for four quarters ended June 30, 2010
* As reported by client financial institutions and therefore may be subject to change; includes merchant outlets in Visa Europe territory
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Commercial
Payment Trends
U.S. CCE =
$20.7
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Payables Automation Overview
70% of all B2B payments will be electronic by 2013
 This growth will be led by organizations with revenue
greater than $1B, where 88% of transactions are
expected to be electronic
 Smaller organizations are also expected to make great
strides, estimated at 59% by 2013
Source: American Productivity and Quality Center 2010
Electronic Payments – Trends in Accounts Payable
Sample: 280 Accounts Payable professionals in
organizations spanning 15 industries
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6
Large/Middle Market Trends
U.S. Commercial Payment Card
Purchase Volume by Type 2007 2016
$Billion USD
$300
$206
$200
$100
$94
$0
Large and Middle Market Trends
• Anti-fraud and security measures continue to be topof-mind for companies, even with fraud rates on the
decline
• Purchasing and Prepaid are primary drivers of U.S.
product growth
• Traditional Corporate Card volumes will benefit from
strong business travel levels
• Mobile innovation and reporting/auditing tools will
be two key options for growth outside of classic card
benefits
• Green and Eco-business Initiatives are at the
forefront of successful product strategies
• U.S. Markets show greatest opportunity, but
Emerging Markets will play a key role in growth
• U.S. Commercial Card Growth is Greater than Small
Business and volume growth will be led by Visa
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Corporate
Purchasing and Fleet
Source: Packaged Facts, December 2011
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Payments Mix
Check displacement & payment integration with AP are powering
electronic payments.
Source: AFP Electronic Payments Survey data for 2004-2010; .2011 First Annapolis Commercial Card Market Landscape
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Expected Growth Rates in Purchasing Card
Spending from 2011 to 2016
Source: RPMG Purchasing Card Benchmark Survey 2012
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Average Growth Rates in Purchasing Card
Spending
Source: RPMG Purchasing Card Benchmark Survey 2012
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Transactions by Payment Below $2500
Source: RPMG Purchasing Card Benchmark Survey 2012
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Payment for All Over transactions between
$2,500 and $10,000
Source: RPMG Purchasing Card Benchmark Survey 2012
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All Payments Over $10,000 but Less Than
$100,000
Source: RPMG Purchasing Card Benchmark Survey 2012
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Legislative Affairs
•6050W – (1099K) Acquiring banks and other payment settlement servicers will
need to report gross annual receipts for each merchant. The income reporting will
apply to "any transaction in which a payment card is accepted as payment"
•TIPRA – (Tax Increase Prevention and Reconciliation
Act) lobbying to repeal/revise current law requiring
3% withholding on Federal, State and Local Government payments
C
•3402(t) – (1099 Misc) Passed health care legislation repeals the long-time
exceptions under section 6041 for payments to corporations and payments for
merchandise
•Surcharging – Industry proposed a settlement to a seven-year long litigation,
this settlement included modify industry regulations around merchant surcharging.
Surcharging regulations do not supersede state laws where surcharging is not
allowed. (CA, CO, CT, FL, KS, ME, MA, NY, OK and TX)
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Frequently Asked Questions
• What will it take for a merchant to be able to surcharge?
• How will the process be regulated?
• What can a client do if they feel a merchant should not be
surcharging?
• How does surcharging notification work?
• Are Purchasing Cards considered Credit Cards?
• Does this impact Debit Cards?
• How many merchants have already signed up to
surcharge?
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Payment Strategies
Payment Strategies
Buying Organization Payment Type Decision Factors
Source: NAPCP / First Annapolis, “End-User Perspective on Suppliers’ Acceptance of Card Payments,” June 2010 (n=146).
Question: How often does your organization consider the following factors when determining how to pay a supplier willing to take any form of payment?
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Payment Strategies
Historically, purchasing cards have been used to pay for small dollar
purchases; however, technology now exists to embed cards into an
automated PO process and to thereby handle much larger transactions.
Purchasing Card Highest Ticket Capture
Source: NAPCP / First Annapolis, “End-User Perspective on Suppliers’ Acceptance of Card Payments,” June 2010 (n=146). Question: Is it very common or common for your organization to place
the following transaction amounts on a card?
Query identifies responses of "very common" or "common" in successively larger average ticket ranges. For example, answering "very common" or "common" for $2,500 - 5k and for $5 - 10k, but not
for larger ticket ranges would bucket respondent into $5 - 10k.
High revenue = $1 billion or more in annual revenue / budget
High spend = $20 million or more in annual purchasing card spend
High capture = purchasing card spend = 4% or more of budget / revenue
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Process Efficiencies
Source: First Annapolis Consulting / Commercial Card Market Landscape February 2012
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Working Capital Management
Source: First Annapolis Consulting / Commercial Card Market Landscape February 2012
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Payment Strategies
Traditional Checks
 Most common form of B2B payments, but highest cost to process
 Suppliers will often permit 45 – 60 day payment terms
 Check payments take 3 – 5 days to settle, increasing a supplier’s DSOs
 Generally offer same day settlement for the buyer and supplier
Wire Transfers
ACH
(Automated Clearing
House)
 High transaction fees to send and receive
 Typically reserved for large dollar or international transactions, since for
smaller, reoccurring transaction the high cost can be prohibitive
 Utilizes an electronic network via a daily batch process with a 1 – 2 day
settlement delay
 Standardized payment files with limited remittance information
 Can be easily integrated into AP systems
Conventional /
Traditional Use of PCards
 Most widely used card payment product for procurement of goods by various
channels
 Can replace the traditional PO / invoice / approval process
 May have embedded controls to ensure compliance
Source: First Annapolis primary research as of April, 2010.
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Payment Strategies
 These solutions integrate into an AP system to complete the automation of the
procure-to-pay process through virtual card solutions such as buyer-held ghost
accounts, supplier-held lodged accounts, single-use cards, and buyer-initiated
payments.
 Organizations retain their PO, invoice, and reconciliation process but eliminate the
paper check.
 Payables automation with virtual commercial cards is well positioned for suppliers
with whom the buying organization conducts a high number of transactions, for
higher dollar amount transactions, transactions that require additional approvals or
controls prior to payment, and for goods and services for which the buyer would
prohibit payment by a traditional plastic purchasing card.
 While payables automation accounts can be used for many supplier and transaction
types, they are not generally viewed as a substitute for plastic cards, but rather to
augment the capture of transactions and to enhance value derived from purchasing
card technology.
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Payment Strategies
 These solutions integrate into an AP system to complete the automation of the
procure-to-pay process through virtual card solutions such as buyer-held ghost
accounts, supplier-held lodged accounts, single-use cards, and buyer-initiated
payments.
 Organizations retain their PO, invoice, and reconciliation process but eliminate the
paper check.
 Payables automation with virtual commercial cards is well positioned for suppliers
with whom the buying organization conducts a high number of transactions, for
higher dollar amount transactions, transactions that require additional approvals or
controls prior to payment, and for goods and services for which the buyer would
prohibit payment by a traditional plastic purchasing card.
 While payables automation accounts can be used for many supplier and transaction
types, they are not generally viewed as a substitute for plastic cards, but rather to
augment the capture of transactions and to enhance value derived from purchasing
card technology.
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Unanswered Questions?