Consumers around the world have become intimately familiar with the “card-not-present” method of payment. Now businesses in Asia have an option to embrace “card not needed” as the pandemic continues to accelerate business models.
That option, which extends to commercial cards, is being presented by Singapore-based CardUp. The company’s core business is to enable businesses to access payment or collection of major expenses using credit cards where cards are not accepted, such as to pay rent, tax, invoices and payroll. It made news earlier this month by expanding its services to Hong Kong.
This means businesses can gain a lifeline during the pandemic by making use of their available credit to delay major expense payments for up to 60 days on payments to over 100 countries. The solution capitalizes on the company’s status as a Visa Business Payment Solution Provider (BPSP), which means it can offer customized rates and help companies maximize their cash flow at a competitive price.
According to CardUp CEO Nicki Ramsay, the solution adds benefits to commercial card usage, such as security, better control and visibility over expenses. Additionally, she said she sees the solution as a new financing tool for small- to medium-sized businesses (SMBs).
“We see it as a new way for small businesses to use and benefit from their commercial card, by enabling small businesses to use their card as a financing tool, similar to having a loan in your pocket,” Ramsay said. “With CardUp, business expenses not payable by card can now be shifted to an existing commercial credit card — even where recipients do not accept card payments. This allows business owners to make use of a pre-approved credit line, freeing even more cash on hand for other purposes resulting in improved cash flow.”
CardUp’s business model is charging the card for payment and delivering funds to the end supplier’s bank account through bank transfer. The supplier does not need to sign up to CardUp or have a CardUp account to receive the money, so there is no disruption to their operational processes.
According to CardUp, a survey by the Hong Kong General Chamber of Commerce (HKGCC) found that 42 percent of SMBs and 24 percent of large companies were concerned about their survivability during the pandemic. One of the factors involved was an exposure to reduced short-term cash flow. Ramsay said she believes the new B2B facility and its status as a registered Visa BPSP will help the businesses benefit from more flexible payment options.
Ramsay said she believes commercial cards have been underused in Asia. Cash and check payments are still the dominant method for B2B transactions on the continent. She said a reason for the low adoption of commercial cards is there are still limitations on what cards can be used for (for example accounts payable expenses like office rent cannot be put on card), as well as the banks’ risk appetite and ability to underwrite credit lines to SMBs in the region.
The CardUp solution also addresses some of the region’s issues with cross-border payments. According to Ramsay, the key challenges businesses face when making cross-border payments are a lack of transparency around the fees charged (both the foreign exchange, or FX, rate and the costs charged by the sending and receiving bank) as well as the security and assurance of the payment process.
There are also no credit facilities on bank transfer or remittances, so paying overseas suppliers upfront can impact cash flow. To save up on shipping expenses, companies often make bulk purchases which lock a large amount of cash in their goods and causes a short-term liquidity challenge for the business.
Ramsay said she also believes the solution will address the acceleration of digital payments in the B2B space.
“In the last five years, expectations around digital payments have accelerated as payments have embedded seamlessly into the customer purchasing journey,” she said. “Despite tech transformations, a similar process has yet to happen for B2B transactions to keep up with customer expectations while reducing time and cost for businesses. Businesses still spend almost 2,000 hours each year making and processing payments, and even more for larger corporations with more clients. This means companies are spending tens of thousands of dollars each year only on processing and chasing for payments.”
All of that creates friction between the buyer and seller. Ramsay said this friction often results from the buyer and seller needing to have an aligned payment method. For example, accepting a credit card payment requires the supplier to have a payment gateway or terminal, and for the buyer to own and use a commercial credit card. That slows down onboarding and adoption.
CardUp, Ramsay said, does not require the supplier to be onboarded onto CardUp or have any technical integrations or payment gateways set up. The payer charges the payment on the commercial card, while the supplier gets paid through bank transfer — a payment method they are currently on and comfortable with.
Ramsay said she believes removing that layer of friction will help her customers be more efficient when it comes to B2B payments.