The way customers pay for goods and services has changed drastically. The events of the past two years has accelerated that change. But what about Business-to-Business transactions? Have there been any improvements with how businesses pay each other? In this episode Al speaks with Ballal Ahmad, VP Product Management at Mastercard to talk about how businesses are paying their vendors.
The way customers pay for goods and services has changed drastically. The events of the past two years has accelerated that change. But what about Business-to-Business transactions? Have there been any improvements with how businesses pay each other?
In this episode Al speaks with Ballal Ahmad, VP Product Management at Mastercard to talk about how businesses are paying their vendors.
Also in this episode:
Chapters:
Al Grego:
Coming up on shop talk.
Ballal Ahmad:
We're focused on small businesses, mid-size businesses, and large businesses, but fundamentally what we're talking about is how do these businesses, we can refer to them as buying organizations, pay their suppliers, right? So at a very basic level, that's what we're talking about.
Al Grego:
Hello everyone. I'm Al Grego.
Atia Sabour:
And I'm Atia Sabour.
Al Grego:
And this is the August 2022 edition of Shop Talk with Moneris. Welcome to the shop talk podcast, Atia.
Atia Sabour:
Thank you, Al. It's great to be here.
Al Grego:
Atia, you're the manager of B2B marketplace strategy at Moneris.
Atia Sabour:
That's right.
Al Grego:
So you're the perfect cohost for this month's episode.
Atia Sabour:
Really? Why? What's the theme?
Al Grego:
B2B?
Atia Sabour:
Ah, yes, I know a thing or two.
Al Grego:
So why don't we start with the obvious, what does B2B stand for?
Atia Sabour:
B2B stands for business to business, so essentially any transaction that takes place between one business and another.
Al Grego:
As a customer, there are plenty of options to pay for goods and services, whether it be cash, debit, credit, et cetera. But of course, businesses are also purchasing goods and services from other businesses.
Atia Sabour:
They sure are.
Al Grego:
So I guess I never thought about how those transactions would be processed. How are they being processed today? Is it still a lot of checks or is there a movement to more digital solutions?
Atia Sabour:
I'd say we are moving further and further away from checks. There's definitely still checks being processed out there, but especially with the pandemic and the acceleration and digitization, we are seeing a lot more digital solutions around transactions, especially B2B.
Al Grego:
Interesting. So you are, like I said before, are the strategy manager for the B2B marketplace? What exactly is that?
Atia Sabour:
The B2B marketplace is a digital platform that we're building for our businesses, so they can buy and sell to one another.
Al Grego:
Oh. Excellent. When is it launching?
Atia Sabour:
It's coming early 2023.
Al Grego:
Looking forward to it.
Atia Sabour:
So, who do you have lined up for this month?
Al Grego:
Well, my feature interview is with Ballal Ahmad. He's the VP of product management, commercial products and B2B payments at MasterCard.
Atia Sabour:
Ballal is a great authority on the subject of B2B.
Al Grego:
Then I speak by the numbers with Jon Purther. He's the director of market insights at Payments Canada.
Atia Sabour:
I'm sure you'll get some great data from Jon.
Al Grego:
And last, but certainly not least, on our ask the expert segment, I speak with your boss, Rob Wilkinson, the VP of B2B sales at Moneris.
Atia Sabour:
He's certainly an expert.
Al Grego:
But first here's my chat with Ballal from MasterCard.
Speaker 1:
Featured interview.
Al Grego:
I'm joined by Ballal Ahmad. He's the VP of product management, commercial products, and B2B payments at MasterCard. Ballal thank you so much for joining me today.
Ballal Ahmad:
Oh, thank you for having me.
Al Grego:
So this month we're talking about B2B. What is that MasterCard doing in the B2B space?
Ballal Ahmad:
When we think about B2B payments from a MasterCard perspective, we're focused on small businesses, midsize businesses and large businesses. Fundamentally what we're talking about is how do these businesses, we can refer to them as buying organizations, pay their suppliers, right? So at a very basic level, that's what we're talking about. But the reason why it's important is, the B2B payment process is much more complex than perhaps, you and I, when we go to do our retail shopping, we go there, use our card, get a receipt, we go home. In a B2B process, you can raise a purchase order, you receive an invoice, you make a payment, you have to reconcile all of those different components, so the actual process is much more complex. That's why B2B is about the payment, but it's much more than the payment.
Al Grego:
Right. And I mean, historically that was done mostly by check, right?
Ballal Ahmad:
Yeah. And there's still a lot of check in play, in North America and Canada specifically, what we do know is that the COVID has sort of accelerated the decline of check. We found that during COVID obviously, it was difficult to go into the office and do your check runs, so a lot of check payments, or traditionally check payments did shift to more of the e-payable solutions. And what we mean by e-payables are electronic payments. So whether that's EFT or card, certainly saw increase during and post COVID.
Al Grego:
Now, I mean, I feel like the reason checks have survived as long is because it was just easier to keep record and reconcile with bookkeeping and stuff like that. So what are the benefits of digitizing the B2B transaction?
Ballal Ahmad:
Yeah, if you think about the check process, right? So you need to print a check, you need to post a check, the supply side, there could be delays, and we saw a lot of delays during COVID. And this uncertainty, has the check been posted, hasn't it been posted, following up, and then once you receive it, you have to bank it, so the whole cost of actually the check process is quite expensive. And then the time and uncertainty around check payments is something that is a pain point for suppliers as opposed to getting paid automatically, straight into your bank account without you having to do anything manually, right? So one of the things Moneris does, which is straight through processing, means that as a supplier, you get your card payments directly into your bank account without any manual interaction. But on top of that, you get the data, right? So the data or the invoice data, the PO data, all of those, all of that information bundled with the payment helps to automate that reconciliation process with the payment.
I think one of the key things that we are looking at and we're working with our industry partners, and Moneris are very much part of so helping to solve some of the friction points between buyers and suppliers. So, as I mentioned earlier, in some instances there are a lot of invoices that are flowing back and forth between the supplier and the buyer, the payments are flowing back and forth. But the challenge is at the point of reconciliation. If you have five invoices for a hundred dollars, how do you know which payment is being made, well against which invoice?
What if the payment was $99 and it was short, how would you reconcile that against invoice? And then often what happens, especially what we've seen during COVID is supply chain challenges occurring. So often the costs of the actual delivery of the goods with the shipping is much higher than the actual invoice amount. There's a lot of friction points. So typically what happens is then you pick up the phone, or you send an email to your supplier or to your buyer and you try to make contact, and that's time consuming, and that's also kind of a manual process. Where what we're trying to do is solve that friction point between buyers and suppliers with a product called Track BPS, which stands for business payment services, and at a very simple level, what it does, it is basically makes a connection between the buyer and the supplier.
So the buyer can go and search for a supplier. It can understand the supplier's payment preferences. So for example, I like to get paid by card if the payment is below a certain amount. I'll accept cards from any buying organization or from some specific buying organizations, so all of those payment preferences are built into the track solution. And secondly, and I think importantly, what it allows us to do is to send the payments through straight through processing, and again, Moneris are very much providing that service with the data, right? That's the key point, and it provides the data that the supplier is looking for to automate their reconciliation process.
Al Grego:
Right. So rather than sending the digital version of a check might be an email money transfer, but those things don't have enough information for your bookkeeping needs.
Ballal Ahmad:
Exactly. Yeah. And you'll remember these are mid and large size corporations. They can have hundreds, if not thousands of invoices a week, thousands of payments on a daily basis or a weekly basis. So if you have to manually enter those payments into a terminal or process those checks, you need a whole army of people to do that, right? And then, like I said, there are so many inefficiencies in that process. There are a lot of manual processes. There are a lot of mistakes and errors, duplicate payments, or non-payments that you have to follow up on, so having all of that information with the payment and having the funds go directly into your bank account is really a huge time saving benefit that solutions like Track BPS can provide.
Al Grego:
If I wanted to learn more about what MasterCard is doing in the B2B space, where can I find more information?
Ballal Ahmad:
Obviously, through the MasterCard website, that's really the primary source of information, so mastercard.com or mastercard.ca, where we have a lot of information around our products and services.
Al Grego:
Thank you very much Ballal for your time today.
Ballal Ahmad:
Thank you. No, I appreciate it, and I appreciate being on this call and taking some of your questions.
Mat Belanger:
This podcast has brought to you by Moneris. Today has shown us, tomorrow has changed; changed how we'll live, work, and do business because now we're more open to what's possible, open to contactless payments, online bookings, curbside pickups, and more. Open your business to more opportunity with solutions to help you succeed online, in store, or on the go. To talk to one of our business advisors, call 1-866-Moneris or visit Moneris.com today.
Speaker 1:
By the numbers.
Al Grego:
I'm joined by Jon Purther. He's the director of market insights at Payments Canada. Jon, thank you so much for joining me today.
Jon Purther:
Thanks for having me, Al.
Al Grego:
So Jon, before we begin for those who don't know, what does Payments Canada do?
Jon Purther:
Since Payments Canada does a lot of work behind the scenes, I'm not surprised that you're asking that question. It's a good question to ask. Payments Canada is an organization that really underpins the Canadian financial system and economy, and we do so by owning an operating the clearing and settlement infrastructure of payments, meaning the systems, the bylaws, the rules, the standards. Our job is to really make payments easier, safer, and smarter for all Canadians.
Al Grego:
Interesting. So this month we're talking about business to business payment transactions. So giving your position at Payments Canada, you're the perfect person to ask. How are businesses paying each other? They're not still using checks, are they?
Jon Purther:
Well, checks are still used, although the use of checks has declined a great deal. In 2021, the three most used were electronic funds transfer, EFT, credit card payments, and check payments. So let me start with electronic funds transfer, because those really led all other payment types. It had a 25% share of total business expenditure, which was really unchanged from the previous year. And in general, businesses tend to use EFT for recurring expenses, payroll disbursements, government payments, their utility bills, their insurance payments, their rent bills.
And then if we move on, the next one that I mentioned was business credit cards, that made up 17% of total business expenditures in 2021. That was actually down slightly from 19% in 2020. And mainly businesses use their business credit cards for one time expenses, primarily, office supplies, computer equipment, travel related, right? When travel is big being made. Fuel costs. And the main reason that businesses use credit cards are because they're widely accepted because of the reward systems that are attached to it, they're perceived as being convenient, and there really is an ease of payment tracking. That's especially vital for SMEs when it comes to managing their cash flow.
Checks came in third place. That was accounting for 11% of business expenditures in 2021. That was a considerable drop from 2020, where it was at 17%. And the decline in check payments was even higher with mid-market businesses, where we found that was down 54% from the previous year, whereas with SMEs, it was down still considerable amount being 26%. But businesses who continue to pay by check do so for a number of reasons. It's wide acceptance, the ease of payment reconciliation, and some suppliers have a preference for it. And it's important to note that the prevalence of check usage, coupled with the preference for checks, it indicates that there are still many businesses that are operating within certain industries, real estate is a good example, that have payment structures that are still based on checks and not necessarily around electronic payment method.
Al Grego:
It's amazing to me, even though it's in third place, that 11% of people still use checks. I can't remember the last time I wrote a check. This movement to digital, have you found that it's sped up thanks to the pandemic?
Jon Purther:
Oh, well, there's no doubt that we've seen digital methods significantly increasing because of the pandemic. Businesses have absolutely transformed the way they do business. It was accelerated by the pandemic, most notably, as you say, tied to electronic payments.
Al Grego:
Right. Have you noticed any other key trends?
Jon Purther:
Well, sure. I mean, I mentioned the decline in the use of checks. That's surely one, but other things that we're really keeping our eye on and seeing in the business sector are flexible payment options, where businesses are using customizable payment systems and offering multiple payment methods to their clients, payment automation, including smart, automated, electronic payments, and those that are using cloud based systems. We're seeing a lot of collaborative commerce, which is really where a business will connect their systems with those of other businesses or those of their suppliers. One of the things that we're really excited about and we see as a real plus going forward, is going to be the addition of realtime payments that's driven by the upcoming launch of the realtime rail. And this realtime secure payment system is going to be operated by Payments Canada. It's going to be regulated by the bank of Canada and it's expected to go live in the middle of 2023.
Al Grego:
Oh, that's interesting.
Jon Purther:
Yeah. It's a new system that's going to provide 24/7, 365 day a year payments that are fast, convenient, final, and irrevocable. And it's a system that's going to feature account number based routing and ISO 20022 messaging, which really means data rich payments for those who use it.
Al Grego:
Jon, if somebody wanted to learn more about what Payments Canada is doing, where would they look?
Jon Purther:
First place I would suggest they look is the Payments Canada website at payments.ca. Lots to learn about us, what we're up to, research that we're involved in, our history, so I would absolutely send anyone who's interested there.
Al Grego:
Great. Thank you so much for your time today, Jon.
Jon Purther:
Al, thank you.
Speaker 1:
Ask an expert.
Al Grego:
Joined by Rob Wilkinson. He's the VP of B2B at Moneris. Rob, thank you so much for joining me today.
Robert Wilkinson:
Well, Al thanks for having me looking forward to it.
Al Grego:
So now we've heard from Atia, Ballal at MasterCard, and Jon from Payments Canada. So why don't we talk about B2B from a Moneris point of view? What are we doing in that space?
Robert Wilkinson:
Wow, we're doing a lot, and we've been on quite a journey over the last number of years. And when I get asked that question, I would say, I'd characterize it along the lines of, we've been on a bit of a modernization journey. So, in the industry, there's a lot of talk about modernization, certainly from a Payments Canada perspective, and I think we can largely say the same thing from a Moneris perspective, and that's looking at some of our more traditional payment processing solutions and just aligning them better from a business to business perspective. Recognizing that in a B2B world, a lot of businesses aren't really transacting with their customers face to face. They're transacting online over the phone, those kinds of things, so orienting our solutions to be more conducive to that kind of processing environment.
And then as well, doing some simple things around better educating suppliers around how best to process transactions to optimize the cost. And then, as well, layering in a bit of data and information capture to help provide a better reporting experience. And then I would say more recently, and this particularly aligns to things that we do at times in partnership with MasterCard, for example, really focusing on how we can better enable our customers to process commercial card payments and in particular, virtual card, which is emerging. And over the last number of years, we've commercialized a solution called Moneris B2B pay, which is straight through processing and really improves the experience of suppliers that are finding these virtual payments within their business. So big modernization journey, lots done, lots more to do, and certainly always exciting given the amount of change going on in the industry.
Al Grego:
That's great. And so what kind of growth have we seen since we've started with our focus on B2B?
Robert Wilkinson:
Yeah, growth has been really a positive story, and I'll talk to it in a couple of ways. The portfolio overall, so if I think about just general business to business payment volumes, pretty consistent, strong growth year over year, almost throughout that tenure. Interesting observation for us though, is if you look at the pandemic as obviously quite a material event that happened, it was encouraging when I looked at first year of the pandemic, so that would've been comparing say 2020 versus 2019, our B2B volumes grew high single digits in an industry where in fact most credit volumes were declining, certainly from a retail perspective.
So, I'll say that again, our B2B volumes in that first year of the pandemic actually grew by high single digits. And then interestingly, when looking at '21 versus '20, growing by sort of low double digits, which was actually consistent with the rest of our base. So the rest of the business was coming out of pandemic and B2B our volumes not only kept pace, but grew over what was previously a growth year. So all that to say, B2B continues to be, highly growth oriented and quite resilient, and it's one of the reasons, frankly, that we focus on that. We've seen the continued shift to more digital payments and certainly credit, and card, and commercial card is a big piece of that.
Al Grego:
So when we're talking about the benefits of B2B, I'm guessing timeliness is one, fraud might be another one. What are some of the other benefits to a business to business solution rather than the old fashioned cutting a check?
Robert Wilkinson:
Yeah. So, I mean, you hit a couple of them there, and it's important for us to think about what those benefits are. And I mean, if we focus on our customers, which is typically on the receiving payment side, certainly the timeliness. So, in most, all cases, payments that ride across the card rails are going to be more timely. And in fact, buyers are very conscious of that and they generally commit to paying their suppliers more quickly. So we would translate that into speed of pay or a working capital benefit, which is immensely important. Bank rate today, I think, or yesterday went up by a hundred basis points. So as interest rates go up, working capital becomes even more prevalent, particularly for small, medium business.
Fraud's another one, right? You know what fraudsters do, sometimes they're a step ahead. They migrate to the less secure, the less protected areas of the payment system and check fraud is certainly a massive target. And so again, one of the advantages we see in the space that we work from a card perspective, certainly a lot of tools and protection around fraud identity, all that stuff. When I think about what we do in commercial card space with straight through processing, I mean, our customers, suppliers, they don't even ever see a transaction. Everything is automated in the cloud on their behalf. They never see a card. They never touch a transaction. We process it all automatically. So, we really, really mitigate fraud.
And then I guess the last area would say would be, just around overall operational efficiency and visibility and reporting. There's a big element in the payments ecosystem, say what you will about check, check has worked and continues to work for a number of reasons. One, everybody knows one, how to write a check. Everybody knows how to process a check, right? Almost always, the check accompanies the details of the payment, whether it's written on the check or companies it, and so for a business, there's a lot of value in understanding who paid you, what they paid you for. And when you shift to electronic means, that's not always the case.
Particularly EFT in Canada, you often will hear stories of businesses that receive payments, they receive the money in their bank account, but unfortunately they lack the details around who paid them, and what they were paid for, and businesses have requirements around closing out invoices and stuff. And so I think the reporting side of things continues to become sort of top of mind for businesses. And so, if you can solve for working capital, if you can solve for fraud and security, and if you can build a bit of a story around reporting and efficiencies, you got a pretty good package of benefits or that business when they're considering making the shift to electronic, particularly commercial card and virtual card payments.
Al Grego:
So Rob, in the eight years that you've been focusing on B2B here at Moneris, how would you describe the state of the industry right now?
Robert Wilkinson:
I would say we're at a really good point and a point where I'm more comfortable now, than perhaps I ever have been on the alignment between sort of the major players in the industry. So I like to say I grew up in the payment space on the issuing side, I was at American Express Global commercial card for nine years, all B2B payments focused, all on the issuing making payments side. And now we spent the last eight years, interestingly, on the acquiring on the merchant supplier side of the equation, so if I was going to leave the audience with something, I'd say, yeah, we're at a really good inflection point in the industry. I feel like we have really good alignment between the stakeholders, and now this recognition that we cannot just exclusively focus on buyers and their benefits. We have to always be conscious of how do we make things work to the suppliers benefit as well, and I think we're doing that now more than ever as an industry.
Al Grego:
Very good, Rob, thank you so much for your time today.
Robert Wilkinson:
Thanks for having me.
Speaker 1:
Save the date.
Al Grego:
I'm joined by Ella Urquhart, she's a senior communication specialist for our events and ESG team. Ella, thank you for joining me today.
Ella Urquhart:
Thanks for having me, Al.
Al Grego:
So we're looking at the August calendar of events. What do you have for me?
Ella Urquhart:
So Moneris is sponsoring the Bears' Lair Indigenous Youth Entrepreneurship Dream Camp from August 15th to 18th. Aspiring and emerging young entrepreneurs ages 12 to 18 will work on teams with their coach and mentors to explore the world of small business startups. Within three days, they'll learn fundamental business skills to create, launch, and then present their own new ventures to the community.
Al Grego:
That sounds really cool. Well, where can we learn more about this?
Ella Urquhart:
You can visit bearslairtv.com for more information.
Al Grego:
Great. And what do you have next?
Ella Urquhart:
On August 24th, Moneris is hosting a fireside chat with BMO. Rob Wilkinson, our vice president of B2B at Moneris will be joined by Matt Bleecker, the managing director of payment optimization at BMO to discuss future proofing, your AP/AR strategies.
Al Grego:
Yeah, very good. And where can we learn more about that?
Ella Urquhart:
We'll be sharing the registration link on our social channels as well as in the description below.
Al Grego:
So keep an eye out on our social channels for that link. What else do you have?
Ella Urquhart:
On August 25th, Moneris is hosting the final webinar as part of the three part webinar series with small business BC. You can join Patrick Wilshire director of product at Moneris to discuss the importance of making sure you have the proper fraud production strategies in place for your business.
Al Grego:
Very good. And where can we learn more about that?
Ella Urquhart:
You can register for this webinar at smallbusinessbc.ca.
Al Grego:
Excellent. Thank you so much. Anything else for August?
Ella Urquhart:
That's everything for the events team.
Al Grego:
Okay. Thank you so much for your time, Ella.
Ella Urquhart:
Thanks, Al.
Al Grego:
And that's all we have for this month. I hope you found this episode informative. Before we sign off, I'd like to let you know that there are now two seasons of Yes, We Are Open podcast available to binge right now. Each season features eight stories of eight different small Canadian businesses. I tell their origin story, the story of their greatest struggle, and how they overcame that struggle. Here's a little taste of the latest season two.
Right now you can binge season two of the Yes, We Are Open podcasts. Eight Canadian businesses with eight stories of perseverance.
Speaker 9:
Yes, we are open.
Speaker 10:
Yes, we are open.
Speaker 11:
Yes, we are open.
Speaker 12:
Yes, we are open.
Speaker 13:
Hell yeah. We're open.
Al Grego:
Drive now to Yes, We Are Open, available wherever you get your podcasts.
Speaker 13:
Oh, yes We're open and we're not going anywhere.
Speaker 10:
I love it. That's great.
Speaker 13:
We're here to stay.
Speaker 10:
Perfect.
Atia Sabour:
If you haven't already, you can subscribe to this podcast and Yes, we are open wherever you get your podcast.
Al Grego:
If you'd like to support this show, share this podcast on your network or review us on Spotify or apple podcast. And finally, if you have a payment related question you'd like to submit to one of our experts, you can email us@podcastatmoneris.com.
Atia Sabour:
Join us again next month for more expert insight and data to help you grow your business.
Al Grego:
Atia, thank you so much for co-hosting.
Atia Sabour:
It was my pleasure, Al. Thank you for having me.
Al Grego:
On behalf of Atia, myself, and the rest of Moneris, thank you for listening to Shop Talk. Talk again in September.