Exploring Corporate Payment Cards with Alan King, Fleetcor

Sure, so I'm titled as group president for our international business, which basically covers the UK, Europe, Russia, and Australasia as the main geographies where we have presence. I run various businesses within that region through my team. Those businesses operate pretty much exclusively in the B2B space, B2B payment space, with a heavy focus on fuel cards and fuel card payment systems. But in addition to that, also some businesses that operate in the sort of B2B software business or software space as well, SaaS space, within the fleet domain. And FLEETCOR is an organization again predominantly a B2B payments business. So we are one of the largest US B2B payment businesses, competing directly with banks and other fintechs on the business payment side. We're also one of the, if not the largest now, foreign exchange non-bank foreign exchange businesses across border payments, let's call it, across border payments businesses globally, and again through a couple of acquisitions that we've made over the last couple of years. So essentially we're a B2B payments business. My background is payments for the last 25 plus years, being at FLEETCOR for five and a half years. I spent 11 years at Mastercard in a variety of roles on both the commercial payments and the consumer payment side, both on the product side and running businesses. I also spent time at Citi in again commercial payments, and at Visa for a short period of time in various roles from the product side. So I'd say pretty well versed in payments generally, with a bias towards B2B.

Again, corporate payments is a broad category. At the top end, enterprise and large public sector in the UK is relatively sophisticated, largely electronic. But there are opportunities to become more efficient, especially in the procure-to-pay process and using digital tools. Within the payment process itself, companies can make smaller decisions about which payment channels or rails to use. For cross-border payments, businesses may need help navigating pricing complexities and hedging opportunities. So payment is no longer just making the payment; you can book forward contracts or hedge for future payments to manage risk. Despite sophistication in the top-end market, there are still opportunities for further efficiency, especially for global or multi-market businesses. Moving down the scale, opportunities emerge differently. Bolting on working capital solutions to payment capabilities becomes relevant, using open banking to serve up better payment options. Automation creates efficiency for SMEs. For example, in the mid-tier or large SME segment, there is still significant inefficiency in the end-to-end purchase-to-pay process: how invoices are received, ingested, workflows for approvals, payments, reconciliation, and integration into accounting systems. The payment itself may be electronic, but the surrounding processes are inefficient. For micro and small businesses, cards become more relevant, and working capital solutions can encourage smarter payment solutions. Cross-border payments for smaller businesses often rely on banks with inflated prices. Overall, it's a relatively advanced marketplace with plenty of opportunity around added value services and optimization.

Yeah, I think it's a couple of things. One is the cash flow, but even before that, the practicality of managing payables efficiently when working remotely. A lot of invoicing is electronic, but there's still a mixture. When you have remote teams, automation plays a huge role in driving efficiency and reducing errors. Software and front-end automation can reduce admin headache and set up payments in the most efficient way to help manage cash flow, through intelligent AI-driven software. So COVID has accelerated the drive towards automation, control, visibility, and transparency, providing benefits not just during the pandemic but long-term.

I think it's yet to be seen in the meaningful end of corporate payments. Most challenger banks today are playing at the very bottom end: micro businesses, entrepreneurs, contractors. They provide deposit-taking, easy account setup, basic tools. They do a good job making it easy for small businesses to get started. But whether they've made inroads into the more mature end is debatable. The proposition to switch banks is low. As businesses mature, they need credit and financing, which challenger banks don't have the balance sheets for. There are niche players like Capital on Tap for revolving business credit, Tide for small businesses, Funding Circle for lending. So they are disrupting niches, but I don't see anyone grabbing the full range of products that a traditional bank offers. Disruption is in a niche, not a general environment.

I think the only disruption would be in the ups and downs of trade. The act of making the payment seems untouched by Brexit; it's just a question of how much business we do with European partners. The actual initiating and receiving payments through various rails is constant. The other element is pricing: we need to see how regulation impacts that, and whether costs increase as payment service providers may be opportunistic in a non-unified regulatory environment.

I'm going to pass the buck on that one because I'm not fluent in all those areas. I'm afraid I'll leave out quite a bit or get it wrong, so I prefer not to answer.

It's very varied. Even within Europe, you can't say one size fits all. In the UK, sophistication has manifested through use of cards for commercial payments, electronic bank-to-bank, checks are insignificant. It's a true multi-rail digital market. In parts of continental Europe, like Germany, there are a lot of electronic payments via banking network, but card usage for corporate payments is way lower. In the US, it's advanced in plastic but lags in other areas: 50% of B2B payments are still paper checks. That presents a significant opportunity. The US also struggles with real-time bank transfers, but virtual cards are way ahead due to the check problem and high card acceptance. In Europe, virtual cards are relevant only in specific verticals like travel. So it's a mixed bag; opportunities vary by country. In continental Europe, Eastern Europe, and Asia, the commercial card opportunity is still significant with low penetration. Even in the UK, penetration is relatively low overall.

Yes, I think there is more openness to collaboration. Fintech disruptors tend to focus on a niche, get strong, then either broaden themselves or work with partners. For example, marketplaces with a captive audience work with partners to offer ancillary services. Open banking is creating opportunities to partner. At FLEETCOR, we don't provide lending, so we partner with others like Modulr for faster payments infrastructure, and with open banking data providers to serve up intelligent information to customers. Then we may work with a specialist lending company to offer working capital solutions. There's much more recognition that collaboration is a quicker way to market than trying to do it all. Even traditional banks are now more open to leveraging assets from smaller, nimble players.

It depends on the geography. In the US we have a full suite of capabilities; in the UK we have part of the puzzle. We help businesses manage fuel card processes and digitization. Over the last couple of years we branched out to provide more holistic AP payment solutions. We're still building those capabilities. So yes, depending on how extensive we want to go, we can showcase things. For a construction or logistics company, a big chunk of operating expenses is tied to fuel, drivers, fleet. We have solutions to help with that, and we're building out AP automation through an acquisition. So we can showcase some things, though we don't have a huge track record yet because we're still building.

I think businesses need to look at where the low-hanging fruit and headaches are. At the front end, are you receiving a lot of paper invoices? Do you have employees incurring expenses? Do you need to buy supplies quickly? Based on the problem statement, there are easy solutions. For employees that travel, a corporate card can make you more efficient and a better employer. That's super low-hanging fruit. Then moving up, if you receive lots of paper invoices, software tools can simplify the process. The whole 'Making Tax Digital' initiative in the UK is a driving force for businesses to adopt smarter ways of managing payments. So identify the biggest problem first and use tried and tested solutions.

It depends on the geography. Globally, we've done a good job growing our position as one of the biggest B2B payments companies. In Europe, we need to diversify further and become a one-stop shop for commercial payment needs, providing working capital solutions to help manage payments effectively. We want to provide a better digital set of solutions for companies to manage, ingest, and make payments, delivering a full end-to-end experience. We can be that full partner without being a deposit taker. Our strategy is to continue growing our presence in B2B payments, both domestic and cross-border, through building solutions and acquiring businesses that have those solutions.