Discover Financial Services will private-label its processing network for Ariba Network to create AribaPay, a single system to handle procurement, invoicing and payments.
Ariba Network serves as a marketplace to connect suppliers and their business clients. But buyers typically must use one system to order supplies and track invoices and separate tools to handle invoice settlement and payment.
"Right now, these two worlds of supply chain automation and payment settlement are separate undertakings," says Peter Lugli, Ariba's senior director of financial solutions. "Buyers and suppliers will exchange purchase orders and invoices, they'll even put in a payment maturity date to pay an approved invoice. But from the moment the invoice is good to pay, it switches to another system or infrastructure which is effectively the payment settlement department."
The new AribaPay service will allow businesses to handle supply chain management and make payments from the same platform. It will be available in early 2014, the companies announced Wednesday during Ariba's user conference, ongoing this week in Washington D.C. The companies did not provide pricing details.
Businesses use of combination of paper checks, credit cards, and wire and Automated Clearing House transfers to pay their bills. In a survey of B2B payments trends published in December by the Remittance Coalition, 60% of respondents said paper checks are the primary method for making payments and 65% said checks are the primary method through they receive B2B payments. The coalition is a consortium of businesses working to promote electronic B2B payments, backed by the Federal Reserve Bank of Minneapolis.
"The real sweet spot of AribaPay is the payment offered by check or ACH today and we're going to go after that market," Lugli says.
The Remittance Coalition's survey found that 88% of respondents receive remittance information from paper or electronic documents that must be rekeyed into back-end systems. The cloud-based AribaPay service will provide suppliers with detailed and automated remittance information in a digital format earlier in the settlement process.
"There's a lot of pain out there and one of the neat things that Ariba brings to the party is that we've automated everything that precedes the payment. We've created a digital conversation between buyers and suppliers," Lugli says.
"Purchase orders and invoices are all digital and it's relatively easier for us to feed that into a digital remittance device that's associated with the payment and addresses a very real pain point in the B2B payment space today," he adds.
Discover will process transactions across its payments network using ACH and Federal Reserve Wire Network, also known as Fedwire, transfers, says Bill Dulin, Discover director of global development.
Discover has been active in developing partnerships that connect its network with emerging payments methods, most notably in its effort to allow Discover merchants to accept PayPal payments at the point of sale and its support of Google Wallet and Isis. The company has also integrated its network with regional card networks, including Network International's Mercury network in the United Arab Emirates and China's state-backed UnionPay payment network. But the AribaPay alliance marks the first time has used its infrastructure in an initiative that's not consumer-facing.
"It continues to play with our long-term strategy of enhancing the network and finding innovative ways to continue to use our global reach," Dulin said.
In another example of a major card brand seeking to private-label its network, Visa and JPMorgan Chase are developing a 10-year partnership to furnish the bank with its own processing network and end-to-end payments platform. The strategy has not been embraced by others, including MasterCard.