Business-to-business mobile payments have been slow to take off. First, learn more about B2B mobile payments, then find out why experts think they haven’t really caught on yet.
Despite the fact that commercial payments were at $75 billion in 2016 and are projected to hit $500 billion by 2020, mobile B2B payments have been rather slow to take off.
Progress with mobile business payments includes Comdata launching ComData OnRoad, its mobile app that links to fleet driver funds, and Bank of America, CitiBank and Umb Bank investing in B2B payments.
In addition, Bank of America announced in 2018 it enabled corporate cardholders to use Apple, Samsung and Google Pay by adding mobile wallet support for a number of commercial cards.
And, on April 2, 2019, Bill.com announced a new partnership with Mastercard to bring faster, virtual payments to small- and midsized businesses.
Naney Pandit, managing director and head of commercial card product management at J.P. Morgan, feels companies should focus on mobilizing the corporate card in 2019.
In an interview with PYMNTS.com, she said mobile wallets are a convenience available to consumers, but “employee or commercial cards have lagged behind in offering this same experience — until now. We think 2019 will be a crucial year for this sector.”
Still, mobile payment adoption in the corporate world remains sluggish.
Why haven’t B2B payments taken off? How will this affect the corporate card industry? Keep reading to see what experts think.
See related: How to set up your mobile wallet
Why are B2B payments a good thing?
It’s always advisable for companies to follow consumer trends, and mobile wallets are certainly trending among consumers.
The same can be said for mobile corporate purchases — companies can simplify business purchases by allowing customers to integrate their commercial cards with mobile wallets.
That would make for really easy checkouts while customers are traveling for business and enable them to access features designed for convenient credit card management.
Mobilizing the commercial card would also enable cardholders to buy things in-store, online or via an app using mobile wallets such as Apple Pay, Google Pay and Samsung Pay.
And those cardholders would also get all of the benefits of using their physical cards, such as rewards, fraud liability protection and spending controls.
Using a commercial card in a mobile wallet will also boost card numbers’ security, because all wallet transactions are tokenized. That means that during a transaction, you’re not actually sharing your card number.
For an added layer of security, users can employ device authentication, which requires either a fingerprint or ID number to set up.
Risk could be the culprit
George Earl, founder of Corsairs Ventures, said the short answer regarding why B2B payments aren’t really taking off is risk.
In the rush to win this space, venture capital-backed firms set incredibly aggressive interchange rates (fees charged to merchants by card networks for processing a debit or credit payment) and mobile quickly got lower rates than brick-and-mortar stores, Earl said.
For example, when you make a brick-and-mortar purchase in person, the interchange rate if typically around 1.5 percent.
When you make a purchase online, it generally carries a rate of 2.3 percent.
But mobile payments’ rates usually run around 0.75 percent.
“PayPal tried unsuccessfully at first to set 2.75 percent rate for mobile but eventually gave up and acquired Venmo and others in the 0.75 percent realm,” Earl said.
That rate was supposed to mitigate higher risk in the case of the dot-com boom — but mobile payments never had a chance. Subsequently, many businesses that would potentially accept mobile payments can’t afford to subsidize both the risk and adoption of them, he added.
And Earl feels that because e-commerce is already incredibly convenient, using your phone to pay instead of the piece of plastic next to it is really more of a novelty.
“Mobile payments will boom when they are either better priced, lower risk or finally offer something truly valuable,” Earl said.
Businesses using mobile payments have higher stakes
Various security measures have been in place for personal mobile payment options for a long time now and they are definitely much more established than before, said Nathan Grant, credit industry analyst at Credit Card Insider.
There are secure checks and balances card issuers have put in place across steps in the mobile payment process and with mobile payment vendors and retailers to keep your personal finances secure, he pointed out.
That said, Grant feels business financial accounts have much higher stakes, and many banks — as well as businesses — are likely waiting until proper security standards are put in place and have been tested until they are trusted industry-wide.
Tokenization — a process in which the 16-digit primary account number is replaced by a token stored on the phone — is one method being used to protect business account information, Grant added.
“Time will tell if this becomes a standard for all businesses in order to do more B2B transactions,” Grant said.
Business owners must understand the benefits of mobilizing
Keith Rooney, COO and founder of Depositpp, said understanding the advantages of mobile payment solutions will help owners ensure their businesses are ready for an ever-changing industry.
The benefits of mobile payment solutions are hard to dispute, Rooney said.
“Although there are security risks with every payment method, the advantages of mobile payment solutions could make a very visible difference for your buying experience and overall bottom line,” Rooney added.
Mobile payments are projected to be a large part of the B2B industry going forward and are already profiting many businesses, according to new findings from Juniper Research.
And, Rooney warned, it’s important to keep in mind that risks often become reality due to user error, such as not paying attention to data hack news, not monitoring for unusual activity and using free, public Wi-Fi for banking.
See related: Cardholders desire security features from their mobile wallets
It might take more than ‘convenience’ for companies to make the switch
There are a lot of perks that corporate credit cards offer that mobile apps such as Apple Pay or Samsung Pay don’t, said Jacqueline Devereux, financial expert at SproutCents, a website dedicated to educating millennials on financial literacy.
Miles and cash back on certain purchases, plus other perks that are attractive to businesses, have made many companies reluctant to change from something that works to what is basically uncharted territory, Devereux pointed out.
In addition, Devereux said traditional cards are more reliable and accepted in more places, especially for international travel or travel to more rural areas of the country.
“Mobilization of the corporate card is definitely the future, but they need to offer more than just convenience for businesses,” Devereux said.
Businesses must encourage employees to ‘mobilize’
Kassandra T. Dasent, personal finance consultant, believes many companies either do not fully understand or are not actively promoting the benefits of using mobile B2B payments to their employees.
“Employers can mitigate the potential for data theft and fraud by encouraging corporate travelers to make purchases and submit travel expenses with their authorized mobile devices, which offer added convenience and enhanced security, including the use of token authentication,” Dasent said.
The investment financial institutions are making to provide mobile wallet support to the corporate sector is significant, Dasent added.
Along with companies advocating the use and benefits to their employees, to accelerate the rate of adoption, mobile B2B payment providers will need to continue to enhance solutions that businesses can buy into.
Get ready now
Whether you prefer to swipe, tap or scan, as mobile adoption increases, you’ll likely expect all of your cards to have the same features and work whichever way you choose to pay.
Businesses need to prepare their employees now so they will be ready to modernize — and mobilize — their payment experiences.
And companies can move toward adopting trending consumer spending models by working with financial partners that fully grasp those innovations.
See related: Mobile payments at register climb, but slowly