Bridging The Gap Between Suppliers And Cards

Up and down the supply chain, payments speed is key. But the process might be slowed in some spots where payments technology is less than cutting edge, and in some cases, suppliers and others typically do not use or accept credit cards.

In a first for Citi, the banking giant has launched a B2B payments business in the Asia-Pacific region, with a cross partnership between Visa and Invapay, the digital payments firm based in the United Kingdom, with an eye toward smoothing the cash flow cycle for suppliers, allowing them to be paid by accepting commercial cards.

In an interview with PYMNTS, Sid Vasili, Invapay’s chief executive officer, noted that large companies, by and large, “are still tied to an accounts payable process that is wedded to 1955, where there is the need to dot all i’s and cross all t’s and invoices are still received in the mail, and the process can take 16 days to 30 days just to get things turned around.”

Thus, noted the executive, cash flow management is far from optional, and for chief financial officers and payments executives, the key desire to stretch out days payable (i.e., dispensing cash) and balance that with accounts receivable (i.e., incoming cash) remains unfulfilled.

To that end, Invapay addresses each of several issues, maintained Vasili, including the continued movement to automated payments across FinTech and the necessity of a digital platform that helps streamline the payments process, with a focus on the suppliers, who, as Vasili put it, “aim to sell as many widgets as possible” yet do not traditionally accept credit cards. Technology plays a role in truncating the invoicing process, with as little as one- to three-day turnarounds from receipt to approval.

Early settlement means that days payable can be extended (optimally, for payors), while, for the suppliers, the assuredness of payment — on a timely basis, of course — helps cash flow. Profitability, chiefly through better working capital management, grows as well.

In the most visible example of the new triumvirate between Invapay, Citibank and Visa, the companies struck a pact with Hanson Australia, a building materials company. Vasili told PYMNTS that the deal helps Hanson manage a scattergroup spend that extends across as many as 1,500 suppliers. In essence, maintained Vasili, “we are a bridge” between Hanson and its suppliers, and in terms of the latter, the suppliers have traditionally been paid every two weeks. They have to rely on their own working capital in the stretch that lies between payments, the executive noted. The ability to now have credit cards in place to accept payments means that that two-week period can be much more reliable (and Hanson, in turn, can take advantage of rebates for early payments).

The issuance of cards might be something of a misnomer, as the Visa cards — numbering 50 in all, according to Vasili — work virtually across the Invapay platform, with bank account information acting as the key reference point (i.e., funds flow directly back and forth into accounts), and Vasili added that there remains no need for merchant acquirers in this scenario. The average spend that moves to Hanson suppliers comes in at roughly $70,000 in the Middle East, said Vasili, as much as A$9,000 in the home country and roughly £7,000 in the United Kingdom.

As might be expected, continued Vasili, the B2B focus and global reach of Invapay’s platform mean that cross-border transactions can be executed virtually anywhere and across currencies (thus, with no need for merchant facilities in place).