Coronavirus drives major increase in virtual card signups
The coronavirus pandemic is driving up demand for digital payments at B2B network Finexio, as suppliers opt for virtual cards for faster payments.
Stay-at-home mandates from governments and employers are disrupting the once-staid B2B payments landscape, forcing many buyers and suppliers to reconsider how they pay invoices and receive payments.
Invoices that may have been traditionally paid with paper checks and ACH are now being transformed into virtual card payments, as suppliers are demanding faster funds access and large companies are struggling to adapt their payment processes to ones that can work from home. While the switch to digital for many has been sudden, the change is likely to be permanent.
“We’re the busiest we’ve ever been since we were founded," said Ernest Rolfson, founder and CEO of Finexio. "The trend is that companies want to pay digitally because they are locked out of their facilities or have a mandate to do so. Everyone is being forced to work remotely and what they were doing manually can no longer be done in a [work from] home environment. Signups for virtual cards are up 2,000% in the last month.”
Finexio isn't alone in this observation. Fattmerchant, a digital merchant acquirer, launched a virtual card platform at the start of the pandemic and has seen a rush of interest.
Finexio was founded in 2015 and launched nationally in 2017. It manages $2.3 billion in B2B invoice spend annually over its network of 50,000 suppliers, and reported a surge in demand for digital payments over paper-based ones that could have long-term, lasting changes in the B2B payments space.
“Once companies move off paper-based cash cycle processes, it will be permanent. Smaller companies can execute faster, and they have been the hardest hit so far, so [it] will happen there first and likely already started if they are surviving,” said Steve Murphy, director in the commercial and enterprise payments advisory group at Mercator Advisory Group.
Additionally, cash-strained suppliers can no longer wait days for an ACH payment or weeks to months for a physical paper check.
“We’ve done a poll across our entire supplier base and found that 76% are being paid late as of this last week," added Rolfson. "Additionally, 29% said that they would be willing to pay a fee just to get paid faster. No one wants to wait to get a check these days. We are in a recession."
Rolfson noted that as the country moves forward it will take longer to heal, particularly for the most affected industries such as travel. Finexio serves a number of major hotel chains, and Rolfson says those chains are already asking themselves how they can send and receive payments more cheaply and with fewer people involved.
“Once you get somebody off of paper, it’s hard to get them back on," Rolfson said. "Why would we go back to the old way? One benefit of digital is that we give clients a tracking number where the payment is like a FedEx shipment you can track. It’s very sticky when you change to digital.".
Companies may also want to shift away from paper payments to avoid fraud. According to the AFP’s Annual Payments Fraud and Control Survey, over 80% of organizations experienced real or attempted payments fraud in 2019.
According to Crunchbase, a website that tracks investments in private companies, Finexio has raised about $8 million over three funding rounds since 2016.