While the commercial card continues to make waves in the U.S. as businesses broaden its use beyond travel and entertainment (T&E), other jurisdictions of the globe haven’t seen quite the same level of traction.
In Germany, for instance, the corporate credit card is often more valuable in theory than in practice for businesses large and small, according to Malte Rau, CEO and co-founder of FinTech Germany-based business card pliant.
The traditional financial services industry has held the business credit card back from gaining maturity in the market, he said, but that’s left plenty of opportunities for newcomers to step in and fill the gap. Speaking with PYMNTS, Rau described the biggest value propositions for the corporate card in the country and the opportunity for technology to address the current corporate card pain points left by the banking sector.
The Reality Of Cards
Businesses in Germany understand some of the biggest value propositions of paying via card, according to Rau. As card penetration grows in the consumer payments landscape, businesses large and small alike want the same convenience and ease of use for their own transaction workflows.
Yet, in reality, the current banking landscape makes corporate cards a friction-filled payment tool.
“Everybody knows it’s a convenient way to pay, but the card itself makes the payment harder,” he explained. “On one hand, banks often don’t give you sufficient limits to use a payment card for broader spend. You also have to write your bank a letter to get an employee bank card, instead of just pushing a button.”
That manual management burden is also seen in the way businesses manage their card spend. According to Rau, banks also provide card statements once a month via mail, making it impossible for companies to gain a real-time view of spend data. Further, he added, Germany’s corporate card market lacks digital maturity, with virtual cards few and far between.
But acceptance of cards is on the rise across the market, and as a result, demand among businesses is also growing for not just card products but also value-added functionality from the card issuer.
In lieu of this market gap, pliant recently announced a partnership with Visa to roll out the Visa Infinite Business credit card, a solution the company says can address the need for businesses wanting higher credit limits and other key features like competitive rebates.
The solution is launching at a time in which the opportunities for cards to add value for business spenders is shifting.
Historically, said Rau, corporate cards have been used for in-person transactions in the T&E and business travel arena. Yet, with the pandemic, businesses have been shifting their spend from restaurants and hotels towards online purchases — a change that bodes well for FinTechs like pliant that can support virtual card issuance.
The value of the virtual card includes the control and visibility of spend on an employee-per-employee basis. This is particularly valuable to boost the security of transactions. Single-use cards allow businesses to ensure that recurring payments with vendors, for example, are allocated only for that vendor and for a specific amount, while companies also have the ability to allocate a single-use virtual card with a new, untrusted supplier that may not have adequate processes in place to store card details.
Overall, Rau said there is opportunity for cards to expand among business payers in other areas. Beyond online purchases and business trips, accounts payable and supplier payments are another promising frontier. Cards have already proven valuable for Germany businesses making cross-border payments to overseas suppliers, for example.
“Even if you look towards China, cards are quite predominate,” he said, pointing to foreign companies’ card acceptance, driving greater demand among German buyers to use the tool. It brings value to both sides of the transaction, he noted, highlighting the cards’ ability to mitigate the risk of nonpayment and accelerate receivables for the supplier. At the same time, for payers, it’s the card networks that hold the burden of risk, allowing buyers to secure refunds in the case of vendor fraud or failure to deliver. Further, cards can be a convenient alternative to financing, Rau noted.
Rau said the German market will still need more time for corporate cards to gain ubiquity, particularly in areas like accounts payable. But already, the demand is there, and infrastructure is catching up to meet the needs of corporate buyers.
“Once there is more availability of the card, I am certain there will be a trend towards adoption,” he said.
NEW PYMNTS DATA: BUY NOW, PAY LATER CONSUMER STUDY
About: Buy Now, Pay Later: Millennials And The Shifting Dynamics Of Online Credit, a PYMNTS and PayPal collaboration, examines the demand for new flexible credit options as well as how consumers, especially those in the millennial demographic, are paying online. The study is based on two surveys, totaling nearly 15,000 U.S. consumers.