Business payments are notoriously resistant to automation and innovation, though there are some signs of digital processing showing up in the education and science market.
McGraw-Hill Education, with nearly $800 million in total digital revenue for the company, is continuing to expand its corporate payments program with American Express.
"Many vendors have seen the value [of the new system] in the form of reduced uncertainty related to payment timing, greater ease in tracking the delivery and confirmation of payments and overall improvements in working capital management," said David Kraut, treasurer and senior vice president of investor relations at McGraw-Hill Education.
The company distributes learning materials to students, educators and professional organizations in more than 60 languages in the Americas, India, China Europe and the Middle East and is looking to automate payments as the content becomes more digital.
"There is a real need to integrate every aspect of the store to be able to address the acceleration of change in the space without losing sales," said Thad Peterson, a senior analyst at Aite Group. "Payments are a subset of commerce but they are elements of every aspect of the commerce equation. 'Payments as plumbing' is an apt metaphor for their role in the business."
McGraw-Hill Education's strategy includes the recent addition and future expansion of a new digital push payments platform. McGraw-Hill Education hired American Express to manage its T&E for employees and purchasing cards for supply chains, and added the supply chain buyer-initiated payment function primarily in the U.S., though it is looking at extending to other markets.
Buyer initiated payments are a type of push payment in which an intermediary, in this case American Express, executes and tracks electronic supply payments. McGraw-Hill Education orders from its suppliers, then submits instructions electronically to American Express, which pays the suppliers directly and notifies McGraw Hill when the payment is processed. McGraw Hill then pays an aggregated bill at the end of the cycle.
For years, McGraw-Hill Education paid vendors within 60 days under its standard payment terms. Buyer initiated payments allows expedited payments within 30 days—and a potential incentive payment to McGraw-Hill Education—if the vendors chose to accept faster ACH payments through American Express.
"Our goal was to drive straight through processing and electronic payments," Kraut said. "In addition, we wanted to find new ways to drive tighter management of days payable and further minimize the risk of fraud."
American Express has also partnered with SAP Ariba in an effort to reduce complexity in B-to-B procurement. Through Ariba Spot Buy, transaction data on American Express commercial accounts is automatically matched to purchase order data from Ariba Spot Buy, enabling businesses to reconcile purchases faster and with greater transparency.
"Back office and workflow functionality are major areas of focus for innovation in automation, most specifically for opportunities to streamline and digitize process flow for cost savings," said Susan Chapman Hughes, a senior vice president at American Express Global Commercial Payments. "As companies grow, there can be challenges in integrated systems and fluent communication between systems."
Companies of all sizes are under pressure to reduce checking, and push payments are emerging as a way to speed processing and automation. At the same time, supply chains are a target for myriad new payment technology plays as companies pursue the B-to-B market.