Introducing PAYVE®, a new digital payment service from American Express
Earlier this year, I wrote a report that predicted the top ten things that will shape the AP market in 2012 and yes, you guessed it, one of the predictions was that 2012 has a very good chance of becoming ‘The Year of Electronic Payments” and I just wanted to say thanks to American Express for is doing its best to make that prediction come true.
American Express (Amex) recently announced the launch of PAYVE, a new B2B payment tool/service that allows mid-sized and large enterprises to centralize the processing and management of multiple forms payment including ACH, check, international wire transfers and Buyer Initiated Payments (BIP). To get the scoop on this latest announcement I had a chat with Andrew Jamison, Vice President, Global Corporate Payments at American Express.
A major challenge faced by AP departments is that there are too many distinct payment platforms with different payment methods that make it difficult to standardize processes and gain the proper visibility and control over this essential activity. This makes it all but impossible to have a strategic focus on key value –added financial activities as opposed to the physical operation of processing payments. According to my recent research (ePayables 2012: The State of the AP Market), paper checks still account for approximately 45-50% of payments, however, this is expected to change over the next two years due to heavy interest in migrating towards card programs and ACH payments. It really is a wonder why it’s taking so long, especially in the US, to migrate away from costly and terribly inefficient paper checks.
According to Andrew, payment processing and execution is not a core activity of most enterprises, but it is for Amex, who has been doing this successfully for decades in the T&E space. Additionally, Andrew says that Amex doesn’t want its clients to focus on payment operations, but rather, to focus on the core financial value that can be driven from AP and payment operations (i.e., improving cash flow and the management of working capital). In his words, “we got into checks to get organizations out of checks and we will work with organizations to extract the maximum value out of the conversion process” referring to PAYVE’s advisory approach to helping clients automate and streamline payments.
How does PAYVE work?
The PAYVE offering begins with a spend analysis exercise that is conducted by the Amex team on behalf of its clients using Spend IQ (a spend analysis tool/service). This exercise aims to identify and improve the efficiency of the payment process and put the client on a path to automation (i.e., away from costly and inefficient checks). This involves the gathering of detailed client data and in-depth analysis of it including payment method analysis, invoice frequency assessment and supplier segmentation.
The next stage is Supplier Enablement, which is perhaps the most critical factor and biggest roadblock to the overall success of an electronic payment initiative. Here, the Amex team leverages the insights gained from the spend analysis exercise to create and execute a program to enroll suppliers. This includes the creation and management of a communication program to targeted suppliers and ongoing support from the Amex Supplier Enablement team.
Once suppliers are enrolled, the client is able to manage and process payments via check (printing, mailing and tracking of check payments), ACH (much lower cost than checks, suppliers manage their own banking information), BIP (Amex pays suppliers on behalf of client, extending DPO) and international wire transfer (over 110 currencies).
A major part of PAYVE’s offering (which by the way is completely bank agnostic) is the advisory services that it will provide to clients. An example of which is conducting analysis to identify a supplier that is appropriate for BIP or ACH versus checks based on the frequency of check payments. The higher the frequency of check payments made to the same supplier the higher the benefit of moving to electronic payments. Once such an ‘improvement opportunity’ is identified and the client gives the go ahead, the Amex team contacts the supplier, gathers all the relevant information and gets them set-up to accept electronic payments.
AP departments are thinking more holistically about the entire AP process and as this trend continues, payments will take on greater strategic importance. PAYVE is a clear example of one leading provider’s approach to the issue. I expect to see a big push by banks, card providers and other electronic payment technology providers to introduce or enhance their offerings in the space and provide their customers more flexibility and control over their payments. These offerings will help ease the migration to electronic payments and work to steadily increase the volume of electronic payments in the market.
