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A Wolf in Sheep’s Clothing

“A wolf in sheep’s clothing” (Def.): One thing (usually destructive or with ill intent) disguised as something innocuous or even beneficial.

This widely known saying has been around since biblical times – possibly even before (as often attributed to Aesop in the 6th century BC) – and the meaning is pretty obvious.  What is not so obvious (until often too late) is when one of these fleece-clad canines covertly comes along.

I bring this up because in the B2B payments space, I am starting to see a lot of sheep with big fangs.

Take for example this recent announcement by Coupa and MasterCard.   On the surface this seems like a great idea for all involved as it promises it will “allow millions of businesses that accept MasterCard to get their invoices paid faster without negatively impacting their customer’s cash position.”  Who wouldn’t like that!   And  “With MasterCard’s virtual card…buyers can automatically issue payment upon transaction approval…with rich remittance detail.

Seems like a great deal! But like all wolves in sheep’s clothing, it is not necessarily what it appears to be at first glance…and the benefits accrue only to the wolf.

Hidden Fangs

Beneath the surface of such fleecy prose is the fact that this offering and others just like it – e.g. Basware Pay (in association also with MasterCard), American Express Buyer Initiated Payment (BIP), to name two – at root are not much more than Pcard payments on approved invoices.   And while they promote the promise of beneficial B2B payment for suppliers, there are hidden fangs:

  • Uncapped Interchange fees – Like every other card offering, the supplier pays a fee of 2% – 3.5%+ for the privilege of accepting card as a form of payment.   And this fee is uncapped!  In the B2B payment world, where individual payments often easily exceed the six figure mark, a supplier being paid $100k has to fork over at least $2,000…just to get paid!   Ouch…that’s quite a bite!
  • Buyer-Initiated…No guarantee of early payment – With traditional Pcard on PO, at least the supplier is getting paid when the order is received.  So it can be argued they are accelerating their cash flow over the time it would otherwise take to invoice and get paid.  But with these card-on-invoice products, the key Phrase is “buyer-initiated”. Or as the Coupa release states, buyers “can” issue payment upon transaction approval.  The reality is that the whole point of this scheme is to allow buyers to extend their DPO by paying suppliers at invoice due date (NOT early) with the card, then benefiting from the card billing cycle to pay the card company later.
  • Rich Remittancefor Buyers – Card products promise increased, rich remittance because of the card data, often referred to as Level 3, that can be captured at time of transaction.  However, this level 3 data, captured at point of sale, is beneficial only to the paying company.  For the supplier receiving payment in a B2B context, the remittance needed is in the PO & Invoice detail.  And a card product has absolutely no visibility into that. True rich remittance can only be delivered via a business network that already has this data and can seamlessly deliver it with the payment…none of these card products are capable of that.

Bottom line to suppliers for card based payment on invoice:  Extortionist fees, marginal improvement to cash flow (at best), negligible additional insight or reconciliation, and no improvement into pre-payment visibility.

Given the above, why would anyone ever use these products?  Because there are indeed great benefits…just not to the suppliers being paid.

The Wolf’s Share

Card-based invoice payment products proliferate for the same reasons purchase card products do.  There are plenty of benefits to the buyer…alas, all of them borne on the backs of their suppliers.

  • Increased Cash Flow – by paying the supplier on time with a card, a buyer gets to extend their DPO by an average of, say, 14 days (per Amex).
  • Electronic payment – Get rid of nasty checks by forcing supplier to take card.
  • Rebates, Rebates, Rebates! – Ah, rebates…the fuel that drives card growth.  How else to explain the growth of card payments, given their usurious rates, other than the fiscal benefit motivation for Payers to push these products?   Indeed, for every card payment, the payer gets a kickback from the card issuer of between 1%-1.5%!   So in our $100k B2B payment example above, while the supplier is paying at least $2000, the buyer receives back at least a $1000 payment from the issuing bank.   Quite a gig, if you can get it!

2%-4% uncapped transaction fees.   No early payment benefit.  Rich data…unreliably provided.   To suppliers, it’s pretty clear this sheep has fangs.

But buyers should beware too.   Because with such high fees and no real benefits to your suppliers, buyers need to be careful lest this wolf turn around and bite them in the form of higher pricing down the road!

Better B2B Payments

Make no mistake, B2B payments are in need of innovation and change.   They are opaque, complex and fraught with fraud & risk. Buyers have to capture, manage and maintain sensitive supplier bank information, and suppliers have little to no information about when and for what they are getting paid. 


In a B2B payment context, buyers need to untangle themselves from the risk and cost of maintaining bank information or paying by check and provide to their suppliers access to all the pre- and post-payment info they might need.  And suppliers need to have full self-service visibility to forecast, accelerate and reconcile payments at will…without the exorbitant pricing card products bring.


AribaPay is just such a soluiton.  Based on the Ariba Network and utilizing the risk mitigation and settlement strengths of the Discover network, AribaPay is a non-card B2B payment solution that solves these problems by making B2B payments secure, certain and simple…without the pain and expense associated with Card-based invoice payment products. 

Card-based payments are not the solution.   At best they are the same old, one-sided card products repackaged and repurposed. At worst, they are wolves in sheep’s clothing getting fat by eating into supplier’s margins.

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