Virtual Payments Best Practices and Program Optimization A New Role for Cards: Catalogs Greg Hamilton, Business Leader, Public Sector February 28, 2017 Public Sector Purchasing Card Survey 2
Public Sector P-Card Survey: Best practice and needs improvement Best Practice Needs Improvement Percent Difference Transaction Capture with P-Cards Transactions under $2,500 placed on p-card 67% 22% 205% Transactions between $2,500 and $10,000 placed on p- card 46% 7% 557% Transactions between $10,000 and $100,000 placed on p- card 22% 3% 633% Cardholder Activity Measures Monthly spending per card $3,060 $1,407 117% Monthly transactions per card 6.37 5.01 27% Spending per transaction $480 $281 71% Active cards in a typical month 82% 80% 2% 3 RPMG Group 2015 Card Account Types of Best Practice and Needs Improvement Groups Best Pract ice Needs Improvement Dist ribut ion of Plast ic Cards P-card-to-em ployee rat io 18.9% 6.8% Type of Card Account s Used by Organizat ions % using plast ic p-cards 99.3% 99.2% % using ghost account s 44.1% 27.6% % w it h EAP cards 31.0% 14.5% % w it h ot her t ypes of p-card account s 4.4% 3.0% RPMG Group 2015 4
Program Optimization Steps, by Best Practice and Needs Improvement Organizations Target specific commodities/services for p-card payment 47% 52% Target specific vendors for p-card payment 33% 51% Analyze check payments to identify merchants to be encouraged to accept p-cards 15% 38% Review purchase requisition traffic to identify employees who need p-cards 23% 26% Use bank list of card-accepting merchants to identify additional p-card accepting vendors 14% 24% Target specific types of purchases to be paid with EAP accounts 13% 16% Best Practice Group Needs Improvement Group 5 MasterCard Spend Optimization Services Benchmark Analysis Policies & Practices Analysis Payables Analysis Supplier Engagement Plan & Track it easy for Issuers and their clients to convert government-tobusiness payments to card 6
Accounts Payable Automation Trends 7 AP Trends Turning AP into Profit Centers Optimizing Payment Strategies Moving to Electronic Payments Proliferation of Fintech, BPO Automating Accounts Payable Process B2B E-commerce Amazon Business 8
Virtual Card Solutions Value & Use Case Virtual Card as a Business to Business(B2B) Payment Vehicle Virtual Card Benefits $ Enhanced Data Greater Control Decreased Fraud Streamlined Process Increased Rebate Standard Use Cases Accounts Payable Travel Meetings & Events Advantages vs. Traditional Methods Larger payments that require a PO process X Payment info is included with the payment itself X Check like Control without the overhead X 9 Key Features of Virtual Account Technologies MasterCard In Control for Commercial Payments (ICCP) streamlines payments, helping to simplify reconciliation and accounting processes through: 1. Virtual Accounts 2. Transaction-level Controls 3. Workflow Control 4. Automated Reconciliation 5. Enhanced Data 10
Spend $ Choose the Implementation Option That Suits You & Your Clients A. Web-based Application B. Accounts Payable Batch File C. Full Integration 11 Three Roles of Cards Settlement Tool Card Products as Enablement Tool Purchasing Tool Transaction Volume 12 Lots of PO Lots of s Manual Process Ad Hoc Requests Some Virtual P- Card
P2P Process PO Requisition Receipt Processing Approval Payment 13 Objective: Turn A/P Payments into a Profit Center Earn revenue (fee income) from virtual card (vcard) Earn revenue (fee income) from enhanced ACH payments Decrease costs Streamline processes Increase security by using one-time use vcards Leverage a turn-key approach, to effectively execute electronic payment strategies to drive bottom-line results 14
P2P Optimization Commercial Landscape 15 Cards in Channel Management Three Roles in cards in demand channel management Demand Demand Demand Type Material Service Demand Channel T&E Card Non Work Order Reservation Work Order Ariba Buyer Fulfillment Channel Vendor Managed Inv. Inventory Items with OC Inventory Items without OC Direct Buy with MM Free Text (D/Charge no MM) Catalog Non-Catalog Reqn. Form Check Reqn. Procurement Mechanism Retail Store On-Line Shopping Contract Auto PO (Lights-Out) Manual PO or (Lights-Out) Manual PO Contract Blanket PO Blanket PO Storage Location Supply Chain Inventory Supply Chain Warehouse Cost Allocation P Card report (month end) EDI Files Goods Issue Goods Receipt Time Entry Processing Processing Presentment CPI File ERS Legal CMS Freight Mgt System No Ariba Paper Payment Method Credit Card SUA ACH/Wire ACH Debit Check Cards as a Purchasing Tool and a Channel Cards as a step within the channel as a Settlement Tool Cards as an Enabling Tool for steps within a Channel Utilities Processing WebPortal Processing No 16
Three Types of B2B Catalogs Buyer Hosted 3 rd Party Hosted Supplier Hosted 17 Why Catalogs? Catalogs are B2B e-commerce Goods, services, and materials (commodities) are pre negotiated, contracted, and authorized Controlled environment Risk is mitigated Streamline P2P Process Virtual PO and s 2 Way Match Costly manual errors are mitigated Strong Value Proposition Cost to buy reduced Cost to supply reduced 18
Third-Party Hosted Catalogs Commercial Landscape 19 B2B E-commerce Catalogs The Future 20
Catalog Adoptions Businesses Fall into one of three categories Use catalogs for procuring/settling with checks/ach Moving to B2B e-commerce/ catalogs as part of broader AP automation Not there yet 21 Summary More & more businesses are continuing to invest in AP Automation B2B e-commerce represents $855b in 2016, more than half of global business are expected to put 50% of purchasing online Catalogs are controlled and mitigate risk, opening up opportunities for cards The streamlined PO invoice two-way patch process drives value for both buyer and supplier Repositioning cards as an enabling tool creates huge opportunity to capture incremental spend 22
Questions? Greg Hamilton Business Leader, Public Sector Gregory.Hamilton@mastercard.com 303-621-4487 23