From Fuel Cards to AP: Why Fintechs Will Win the B2B Payment Market

Business payments are complex. Most businesses are spending money through two different motions – invoice payments, which are centralized, and field payments, which are decentralized. Accounts payable (AP) teams are working with multiple payment modalities – check, ACH and its variants, credit card, and wire.

Today, most businesses make payments across all motions and modalities through one or more banks. A decade from now, banks may still be moving the money. But most businesses will be making payments through a fintech company that can handle all complexity with ease.

To understand why fintechs will take this market, consider the case of fleet cards, also called fuel cards. Corpay – along with our parent company, FLEETCOR –  has our roots in the fleet card business. What we’ve built to service that market over the past four decades transfers to most other types of business payments – including AP payments.

Fleet cards are basically just credit cards for organizations that maintain large vehicle fleets, such as trucking and logistics companies, transportation companies, schools, governments, and construction companies. Vehicle operators can use fleet cards to pay for fuel and for maintenance items, like oil changes and tires.

Credit cards are a big part of what banks do. They are a form of lending, which is what banks are chartered to do. Yet they have essentially relinquished the fleet market to specialized card providers. That’s because there’s a set of additional requirements around fuel cards that go beyond lending, which is their core competency.

Consumer credit cards are a simple, unsecured lending product. The bank underwrites you and issues you a card. You spend money and they send you a statement at the end of the month that details when and where you spent money, and how much you spent.

Banks can issue a business card as long as it looks pretty much like a consumer card. Maybe they provide some basic workflow and administrative tools for the program manager so that they can order and cancel cards. But if the program gets more complex than that, it’s too far outside their wheelhouse.

Fleet card programs are more complex because fleet owners and managers need more controls and more data. When an operator uses a fleet card to fuel up, they have to enter a PIN number and an odometer reading to turn on the pump. That PIN pull tells the fleet manager who’s driving what vehicle, along with how many gallons and what type of fuel they bought.

If the fleet uses a GPS program, they can marry all that data together and be able to say, “Matt was in Franklin driving vehicle number one, which is an F150 with a 35-gallon tank. He pumped 31 gallons of unleaded fuel and the odometer reading was 21,016 miles.” They get a report that says Matt’s F150 is getting 16.8 miles per gallon.

This is all tremendously valuable information for managing your fleet and your people. You can use it to make business decisions. But you don’t get that information if your drivers are just pulling their 18-wheeler into the gas station on the corner. You need a network of approved vendors who will accept the card and meet the requirements.

So, to serve the market, you have to enroll vendors in the network. You have to build those relationships and negotiate terms, discounts, and rebates. The vendor base always churns, so you have to stay on top of those updates.

Drivers can’t pull another credit card out of their pocket if the one they have doesn’t work. And they can’t pay five or six hundred dollars out of their own pocket. If they can’t get fuel, they can’t get from point A to point B, so they're basically shut down. The relationships have to be solid, the service has to be better, and the reporting has to be better. That means continued work, processes, and workflows that aren’t supported by the basic card infrastructure.

What we have done in the fleet card space is build that vendor network. We’ve built the tech infrastructure to handle the workflows, capture the data, deliver the reporting, and integrate it into companies’ different business systems. We’ve also taken on the underwriting piece, and as we’ve expanded into new industries over time, we process over 30% of Mastercard® virtual card volume.

This is a true fintech solution: comprising networks, technology, integrations, services, and finance. You can take these same capabilities and apply them to any number of industries outside of fleet management. And you can also apply them to the AP space.

To pay vendor invoices electronically, you have to enable vendors for ACH, or ideally, virtual card acceptance. Virtual cards offer the highest level of fraud protection, help with working capital management, and on top of that, generate rebates. But getting vendors enabled to accept card or ACH payments is a heavy lift for individual organizations. A fintech can enroll vendors at scale and customers can plug right into that. 

You have to use technology to manage the workflows for invoice approval and transmitting payment files to the ACH, card, or cross-border payments network. You have to integrate with the ERP system so you can get all the data together for reporting. You have to provide services, because inevitably, there will be some cases where the payment amount is wrong, or the bank account information is wrong, and there is some remediation required.

On the expense management side, you have people out in the field spending the company’s money in a decentralized way. You need to have proactive controls around that, and then you need to audit and allocate that spending after the fact. All of these things are within our core competencies.

Banks are chartered with stewarding and moving money. There's no question that they are at the heart and the soul of business payments today. However, they don't have the vendor networks that companies need to utilize digital payment modalities. They certainly don't provide the tools to support an efficient payment workflow with real-time visibility into payment status. They don’t provide any support for payment remediation on the back end. And they don’t provide the robust controls and audit capabilities that you need to manage field spending.

This is why processes in AP are so fragmented and manual. You have multiple banks and card networks moving the money, multiple technology providers handling the workflows, and the AP team filling in all the gaps.

Companies have resigned themselves to these inefficiencies because they don’t know there’s a better way. For a long time, there wasn’t. B2B fintechs are bringing together all of the assets and infrastructure that AP teams need to manage spending across multiple spend motions.

Like fleet cards, AP payments present a level of complexity that consumer payments do not. AP can operate a lot more efficiently working through a fintech provider. They get a single, automated workflow for all payment modalities. They can tap into a vendor network that allows them to make a much higher percentage of their payments electronically, and to maximize card payments and therefore rebates – without having to enroll vendors themselves. They get standardized reporting and dedicated relationship management across all payment motions. That is why fintechs will win the market for business payments.