American Express Thinking Beyond the Card

American Express has long wanted companies to use cards – plastic, purchasing cards, virtual cards, ghost cards, you name it. The pitch to buyers to use cards has always been spend now, pay 47 days later and get rebates to boot.

But the use of purchasing cards has been largely limited to low value transactions. Current efforts are to expand their applications to mid-size transactions, which is much more challenging in the B2B world because of disputes, short pays, etc.   Why?  The model for B2B Pcard transactions when dealing with disputes is based on B2C transactions.

As a vestige of consumer credit card practices, corporate purchase cards still put the onus of charge backs directly on the supplier, possibly circumventing existing contracts between buyers and sellers. In a typical scenario, buyers have up to 6 months to dispute a transaction and push it back to suppliers. This is too long—especially if card associations and banks want suppliers to use purchase cards for large transactions. There is simply too much risk for both the supplier and the acquiring bank to assume over such an extended period.

By abiding by the purchase card chargeback rules, both parties forfeit their right to other means of dispute resolution, thus complicating this scenario further. More importantly, the supplier has little recourse against the buyer besides initiating a chargeback arbitration process with the card association that is heavily weighted in the buyer’s favor.

Given the above, American Express watched as more and more business was being done on marketplaces of all sorts:

  • Multiple Sellers – Multiple Buyers
  • One Seller – Multiple Buyers
  • Multiple Sellers – Select Buyers

They said lets use our vast assets – including the fact Amex is also a bank! And being a bank, they can move money and take action with rules based engines.

So American Express has made a big investment in developing a B2B division focused to become the backbone of B2B commerce and reposition Amex into B2B supplier payments. This is not just about pushing more virtual or pcards.

This is all new for a company whose main inroads has been T&E, not supplier payments. Working with what they call a Closed Loop Network – where you have a group of buyers and sellers trading can be very powerful.

So the approach is to go to B2B networks, and connect financial supply chain services into their workflow. For example, they can offer a B2B network ACH, cheque, and card capabilities plus the Amex brand and ultimately FX and lending services for that captive network tied to workflow.  This is a very different approach by American Express.

There are many B2B trading networks that are great platforms for bringing buyers and sellers together but struggle around payment, settlement, and finance. When companies buy on trading platforms, whether it be marine fuels or legal services, or nursing hours, finding a way to pay the seller of the product or service seamlessly is the first problem.  The second problem is injecting funding if needed.

Take the case where a shipper logs in to buy marine fuel for a ship. They request to buy fuel in Tokyo.  The platform can match the buyer with all the physical suppliers in Tokyo, send the suppliers the RFQ, update suppliers’ dashboard, and submit bids. All action buttons can negotiate, confirm and process a deal.   But what about making the payment and providing funding?  This is where the challenges are.  This is not Uber, where you leave the car and payment has been made seamlessly.

This is where American Express is looking to build their solution set so they can fill that void.

It’s a far cry from the T&E days.

For those interested in understanding this space more, please contact me at dgustin@globalbanking.com

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