By Blair Jeffery

The growing acceptance of virtual cards, sometimes referred to as v-cards, by small to mid-sized businesses (SMBs) is increasing exponentially as billers embrace the improved security and convenience of this digital payment method over paper cheques.

But for most SMBs, including business to business (B2B) companies, the manual work of processing and reconciling the payments remains a challenge. While there are automated reconciliation and straight-through processing (STP) solutions for large businesses, SMBs continue to be underserved due to their smaller and less frequent invoices.

Things appear to be changing, however, as FinTechs realize the commercial value of serving this massive market of potential customers.

What is STP?

So, what exactly is STP? STP is a method used within the payment ecosystem to speed up the processing times of the key components of remittance and settlement. Its objective is to streamline payments, so that once a transaction is initiated, all activities associated with the payment processing are automated from start-to-finish without manual intervention.

STP, then, allows buyers and billers to electronically share information for quicker, more secure and effective transaction processing. When businesses adopt STP solutions, errors are reduced as accounts receivable employees are freed up from manually entering information and verifying whether a transaction has fully processed.

According to the Association for Financial Professionals, 47 per cent of organizations currently use STP to manage some of their payments and 44 per cent use STP to manage some receivables1. These are typically large businesses for whom sophisticated end-to-end payment cycle management solutions that automate manual tasks have been developed by third parties. In some cases, the businesses themselves have the resources and scale to develop their own solutions, such as proprietary payment portals.

Realizing v-card potential

Virtual cards (v-cards) offer a number of benefits that have led to their increased adoption by SMBs. In addition to the speed of payment, virtual cards greatly reduce the risk of fraud and identity theft through their one-time use and by protecting the customer’s personal and financial details. The resulting increase in v-card has necessitated more sophisticated solutions, such as STP, which allows billers to eliminate the manual tasks associated with reconciling cheque payments since all payment and invoice details are received electronically.

However, to realize the full potential of STP using v-cards the payment industry must continue to broaden the reach of its networks so that more SMBs are capable of accepting v-card payments. Breaking down traditional v-card acceptance barriers—like delivering payments via the SMBs’ preferred delivery methods, such as web, IVR, phone agents, e-mail and secure fax—are key to increasing SMB acceptance rates.

In order to serve SMBs, and capture the opportunities, FinTechs must be creative and flexible in their approach to developing new tools and systems for this market. They must provide solutions that address these businesses’ key challenges, such as simplified user interfaces, minimized authentication processes and the ability to facilitate the downloading of remittance information to commercially available products like QuickBooks and Xero.

Modernizing with STP is win-win

FinTechs collaborating to develop STP solutions for SMBs is a tide that lifts all boats. Not only will suppliers benefit from the efficiency and cost savings of automation, but other players in the ecosystem who deliver payments will also benefit through an increase in electronically delivered payments, generating revenue and improved service for their clients.

Other players in the payment ecosystem can profit from improved adoption of STP solutions by SMBs. Accounts payable solutions providers, processors and corporate payables departments at mid- to large banks can often have as much as 70-plus per cent of payments that cannot be delivered via v-cards. This is due to billers’ inabilities to accommodate the manual reconciliation of other relevant information, leaving them to rely on the same old costly and archaic delivery methods. By improving STP processes for SMBs, these players will greatly expand their reach of serviceable suppliers, resulting in higher revenues and better service for the clients they serve.

Blair Jeffery is chief operating officer for Noventis, Inc. ( Blair has over 18 years of payments industry experience with a strong focus on B2B payments.

1 Association for Financial Professionals, “2016 AFP Electronic Payments Survey”, report, September 2016.

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