October 16, 2020
October 16, 2020 | The Nilson Report | NEW YORK — Last year, commercial card purchase volume generated by cards issued in the U.S. reached an all-time high of $1.523 trillion, which amounted to 22.7% of combined commercial and consumer purchase volume, also an all-time high. The potential purchase volume that could migrate to commercial cards is enormous. Business-to-business (B2B) spending is believed to be in the $20-trillion range in the United States and to exceed $100 trillion worldwide.
Boost Payment Solutions pursues commercial card spending opportunities at large enterprises—public and private corporations and government agencies—where its end-to-end, straight-through processing (STP) system can best benefit buyers and sellers (suppliers). Buyers use Boost to initiate payments to suppliers when it best suits their own days payable outstanding (DPO), maximizing working capital. Suppliers and buyers benefit from the automatic reconciliation to their enterprise accounting systems from STP. In B2B, every buyer is also a supplier.
Payment by credit card can give the buyer one, two, and occasionally even three payment cycles of DPO. By comparison, buyer payment made by check, wire, or through the ACH results in cash leaving the buyer’s bank almost immediately.
Boost’s accounts payable automation system is commercial card-centric. It provides buyers with ready access to rebates made available by their card issuers. Rebates rarely accompany payment by check, wire, or ACH. Buyers, suppliers, and card issuers benefit from flexible interchange for card payments initiated by midsized and large companies to their suppliers.
Mastercard, which is also a customer of Boost, was the first network to offer flexible interchange rates for commercial card payments. It granted proprietary interchange rates for use by the Boost Dynamic Discount platform in 2017. Last month, Visa also signed on to Dynamic Discount and granted proprietary interchange rates.
Both networks recognize that lower interchange will tip more B2B spending to commercial card products. Combining lower interchange, rebates, and extended DPO make cards very competitive with all other payment channels. In particular, the combination opens new markets for card acceptance among low-margin businesses that have avoided cards, including manufacturers. Lower interchange and STP is also effective in retaining card acceptance among suppliers that already accept payment from commercial cards.
Boost is not a direct acquirer of card transactions. In the U.S., it is a registered payment facilitator and independent sales organization (ISO). Outside the U.S., it is an ISO and payment gateway.
The Boost platform is available to issuers and acquirers as a cloud-based software-as-a-service product to serve their large enterprise clients. As Covid-19 continues to crush travel & entertainment card spending, B2B spending can be an opportunity to replace some of that lost revenue.
The Boost platform handles everything associated with the complexity of B2B sales, including straight-through processing, optimized pricing, automated reconciliation, exception handling, and enforcement of card network rules for buyers and suppliers.
Boost’s revenue comes from a percentage of the acceptance fees paid by suppliers. The company handles card spending from 36 countries on five continents. Suppliers never see card data and therefore do not incur any expense associate with PCI compliance.
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