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Maximizing ePayables by Maximizing Supplier Acceptance of Card Sam Sarin, CPCP Director, Senior Product Manager Bank Of America Merrill Lynch
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Page 1: Maximizing)ePayables)by)Maximizing) Supplier)Acceptance… · Maximizing)ePayables)by)Maximizing) Supplier)Acceptance)of)Card) ... $2011$AFP$2011$Payments$Fraud$and$Control$Survey$

Maximizing  ePayables  by  Maximizing  Supplier  Acceptance  of  Card  

Sam  Sarin,  CPCP  Director,  Senior  Product  Manager  Bank  Of  America  Merrill  Lynch  

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no  

ePayables  …  Why  not?    

Did  you  know?  ePayables:    

� Financial  benefit  through  improved  working  capital  and  cash  flow  visibility  

� Efficiencies  gained  in  accounts  payables  through  eliminaGon  of  paper  checks  and  reduced  vendor  follow-­‐up      

� Improved  supplier  relaGonships  while  maintaining  controls  in  purchasing  processes  

� No  IT  investment  and  ease  of  implementaGon  

� Reduced  DSO  for  suppliers,  freeing  up  working  capital  

Benefits:  Win-­‐win  for  all  

ePayables  is  an  AP  card  soluGon  that  enables  payers  to  convert  check  payments  to  electronic  card  payments  without  any  changes  to  internal  AP  processes.  

1  Source  :  2011  AFP  2011  Payments  Fraud  and  Control  Survey  

Check93%

ACH Debit25%

Commercial Card15%

Fraud  by  Payment  Type1  

� Requires  limited  IT  resources  

� Has  no  implementaGon  charge  or  hidden  fees    

� Eliminates  manual  processing  associated      with  ghost  cards  

� Reduces  fraud  exposure    

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3  

Supplier  aFtudes  towards  card    

66%

49%

34%

29%

25%

12%

68%

53%

38%

35%

29%

15%

Quick payment

Guaranteed payment

Process ease

To be "preferred"

Lower AR process cost

Reduce AR staff

Reasons  suppliers  give  for  taking  cards  

 

Frequencies  are  for  "regularly  cited"  responses  only.  23%  of  respondents  were  deemed  to  be  “High  Capture”  with  annual  p-­‐card  spend  equal  to  or  greater  than  4%  of  annual  revenue  (private  sector)  or  budget  (public  sector).    For  taking  cards,  a  response  of  "Decreases  hard-­‐dollar  costs  (e.g.,  banking  fees,  paper  invoices,  postage)"  grouped  within  "Lower  AR  process  costs."    A  response  of  "CompeLLve  advantage  over  non-­‐accepLng  suppliers"  grouped  within  "To  be  preferred.”  For  not  taking  cards,  responses  of  "regularly  cited"  for  "Cant  find  acquirer"  and  "PCI  compliance"  were  less  than  5%  of  overall  respondents.  End-­‐user  survey  on  supplier  acceptance,  Nov./Dec.  2009,  n=146    

71%

25%

19%

8%

8%

8%

7%

76%

35%

35%

4%

9%

15%

6%

Fees too high

Too hard to set up

Don't understand benefits

Few customers request

Too much to maintain

Don't understand acq contract

Don't have proper staff

Reasons  suppliers  resist  or  will  not  accept  cards  

Overall

High capture

End-­‐user  survey  on  supplier  acceptance,  Nov  /  Dec  2009,  n=146  

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A  menu  of  opIons  to  fit  payee  needs  

ePayables  

Exact  Auth    

One  Card                  per                      Supplier  

                     One  Card                    per    TransacIon  

Push    Payments  

Client:  ease  of  reporIng  and  reconciliaIon  

Vendor:  enables  keeping  card  on  file    eliminaIng  need  to  manually  enter  card  number  each  Ime;  vendors  that  cannot  keep  card  on  file  may  obtain  the  same  through  secure  remiOance  

Ideal  for  paying  infrequently  used  suppliers    

Client:  eliminates  need  to  set  up  ,  maintain    and  cancel  cards  for  one-­‐off  suppliers    

Vendor:  Eliminates  need  to  store  card    account  on  file  for  one-­‐Ime  payment  

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• Most  issuers  soluGons  enable  clients  to  send  push  payments  in  same  file  as  exisGng  AP  card  payments  file.  

Push  Payments  –  Overview  

Push  Payments  enables  payers  to  push  the  exact  amount  to  their  push-­‐pay  “enabled”  suppliers,  without  suppliers  having  to  take  any  acGon  to  iniGate  the  payment.    

ePayables   Push  Payment  � Supplier  iniGates  the  card  transacGons.  

� Supplier  needs  to  know  the  card  account  details.  

� Buyer  iniGates  the  transacGon;  funds  se^le  to  the  supplier's  DDA  without  any  acGon  required  by    supplier.  

� Supplier  does  not  need  to  know  card  account  details.  

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Supplier  

Buyer  

�  PotenGal  for  accelerated  receipt  of  funds  by  eliminaGng  lead  Gme  for  supplier  to  manually  process  payments  

Push  Payments–  Value  ProposiIon  

Drive  Payment    Efficiencies  

� Achieve  auto-­‐reconciliaGon  by  pushing  exact  payment  amount  

� Control  payment  Gming  

Reduce  Fraud  

�  Eliminate  need  to  provide  card  account  number  to  supplier  

Rebates  

�  Earn  rebate  on  push  payments.  Issuers  differ  in  their  treatment  of  rebate  for  push  payments  

Drive  Receivables    Efficiencies  

� Eliminate  need  to  process  card  transacGons  

� Chargeback  reducGons  � No  declined  transacGons  to  contend  with  

Enhanced    Security  

�  Eliminate  need  to  house  card  account  details  

Reduce  DSO  

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Supplier  response  to  push  pay?    

   Historically,  suppliers  response  has  been  lukewarm…    

� Push  pay  does  not  fit  with  accounts  receivables  processes    � Fear  of  losing  control  over  a  transacGon  for  which  they  pay  a  fee  

� Time  and  effort  to  be  set  up  for  push  payments  

� Inadequate  awareness  � Resistance  to  change  

   …but  we’re  beginning  to  see  a  shiY  

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To  Push  or  Not  to  Push  

Push  Payments  is  an  opIon  for  suppliers  that:    

When  is  Push  Payments  right  for  you?    

 

� ProacGvely  elect  to  enroll  in  push  payments  

� Accept  push  payments  from  another  provider,  if  converGng  from  another  card  provider  

� Decline  to  keep  card  on  file  AND  are  not  willing  to  receive  card  account  details  through  secure  email  

� ConGnue  to  be  a  source  of  significant  manual  reconciliaGon  work  

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Exact  AuthorizaIon  

Exact  Auth  Override  (EAO)  for  ePayables  provide  payers  with  greater  control  of  the  payment  by  restricGng  the  amount  the  supplier  can  process,  down  to  the  penny.    

� Any  vendor  that  is  a  Visa  or  MasterCard  acceptor  may  be  set  up  on  EAO  

Value  ProposiIon  

Drive  greater  auto  reconciliaGon  by  controlling  the  amount  of  payment  that  may  be  processed,  down  to  the  penny.  

Buyer   Supplier  

Drives  efficiencies  by  eliminaGng  manual  errors  of  processing  inexact  amount.    

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One  size  does  not  fit  all    

   Exact  auth  may  not  be  a  good  fit  for  all  suppliers    

� May  interfere  with  a  suppliers’  accounts  receivables  processes  

� Does  not  work  well  with  cross-­‐border  payments  

� May  cause  a  decline  due  to  a  supplier’s  terminal  limits  

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MulIple  payment  opIons  to  fit  you  and  your  suppliers’  needs  

ePayables   Push  Payments   Exact  Auth  Override  Supplier  may  charge  any  amount  up  to  the  amount  of  purchase  request.  

Supplier  iniGates  card  transacGons.  

Supplier  needs  to  know  card  account  details.  

The  payment  delivered  to  the  supplier  matches  the  amount  of  purchase  request.  

Buyer  iniGates  the  transacGon;  funds  se^le  to  supplier's  DDA  without  any  acGon  required  by  the  supplier.  

Supplier  does  not  need  to  know  card  account  details.  

Supplier  can  only  get  an    authorizaGon  for  exact  amount  of  purchase  request  down  to  penny.  

Supplier  iniGates  card  transacGons.  

Supplier  needs  to  know  card  account  details.    

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Secure  Email:  Helping  You  Maximize  Check  to  Card  

Secure  email  to  drive  spend,  accelerate  card  payments  and  drive  efficiencies.  

Smart  Facts  

Grow  Spend  Capture  new  spend  on  card  with  secure    

remiOance  template  

Accelerate  payments,  Drive  efficiencies  

No  more  phone  tag  with  vendors  

Smart  Facts          

39  days  

18  days  

Create  card   First  post  � 79  clients  used  the  feature  in  the  first  three  months,  to  target  715  vendors  with  $19  MM  in  monthly  spend  

� Of  the  vendors  that  say  no  to  keeping  card  on  file,  42%  accept  card  when  presented  with  secure  remi^ance  opGon    

 

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Shaping  Industry  TransformaIon  

We  are  commi^ed  to  leading  the  industry  towards  a  more  equitable  value  model  that  does  not  penalize  the  supplier.  

Buyer   Supplier  

PROCESS  EFFICIENCY  

COLLABORATION  

TRANSPARENCY    

COST  SAVINGS  

PROCESS  EFFICIENCY  

COLLABORATION  

TRANSPARENCY    

COST  SAVINGS  

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•  EliminaGon  of  $1,000  registraGon  fee,  removing  barriers  to  vendor  adopGon  of  LTI    

•  More  transacGons  qualify  automaGcally  for  LTI,  lowering  barrier  to  card  acceptance  

•  Min  transacGon  size  going  up  from  $4,160  to  $6,980  

•  Level  II  and  Level  III  data  conGnue  to  be  a  requirement  to  obtain  LTI  rates  

•  Opportunity:  Educate  vendors  who  decline  based  on  merchant  fee  on  new  LTI  rates  

 

Visa  Interchange  Changes  –  April  2012  

Mandatory  Changes  to  Large-­‐Ticket  Interchange  (LTI)    

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•  Offers  progressively  decreasing,  low  interchange  rates  for  Gered  transacGon  sizes  

•  Program  is  expected  to  stem  de-­‐enrollment  and  drive  card  acceptance    

•  In  direct  relaGon  with  reduced  interchange,  spend  is  expected  to  earn  lower  rebates  •  OpGonal  for  clients  to  parGcipate,  where  rates  are  driven  by  buyer,  not  merchant        

Visa  Interchange  Changes,  EffecIve  April  2012  

OpIonal  Program  TargeIng  Large  Dollar  TransacIons    

This  program  is  directed  at  balancing  the  value  proposiIon  for  suppliers.      

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Push  pay   Secure      delivery  of  card  account  

Exact  Auth  

One  card  per  

supplier  

One  card  per  

transacIon  

Reduced  merchant  fee  program  

parIcipaIon  

Accelerate  cash  flow  

P    

Process  efficiency  

P    

P   P  

Reduce  AR  costs  

P    

P   P  

Reduce  Fraud  

P    

P   P  

PCI  Compliance  

P   P   P  

MeeIng  Supplier  Needs  to    Drive  Card  AdopIon  

 

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High  capture  more  likely  to  stress  importance  of  cards  and  of  size  

 

 

Note:    groups  responses  of  "frequently"  or  "someLmes"  together.    Excludes  "seldom,"  "never,"  and  "unsure.“  Q42,  Q4,  Q6.  ©Copyright  2010  NAPCP  All  Rights  reserved  ©Copyright  2010  NAPCP  All  Rights  reserved  

Convincing  Suppliers  to  Accept  Card  

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18  

Supplier  aFtudes  towards  card  

66%

49%

34%

29%

25%

12%

68%

53%

38%

35%

29%

15%

Quick payment

Guaranteed payment

Process ease

To be "preferred"

Lower AR process cost

Reduce AR staff

Reasons  suppliers  give  for  taking  cards  

 

Frequencies  are  for  "regularly  cited"  responses  only.  23%  of  respondents  were  deemed  to  be  “High  Capture”  with  annual  p-­‐card  spend  equal  to  or  greater  than  4%  of  annual  revenue  (private  sector)  or  budget  (public  sector).    For  taking  cards,  a  response  of  "Decreases  hard-­‐dollar  costs  (e.g.,  banking  fees,  paper  invoices,  postage)"  grouped  within  "Lower  AR  process  costs."    A  response  of  "CompeLLve  advantage  over  non-­‐accepLng  suppliers"  grouped  within  "To  be  preferred.”  For  not  taking  cards,  responses  of  "regularly  cited"  for  "Cant  find  acquirer"  and  "PCI  compliance"  were  less  than  5%  of  overall  respondents.  End-­‐user  survey  on  supplier  acceptance,  Nov./Dec.  2009,  n=146    

71%

25%

19%

8%

8%

8%

7%

76%

35%

35%

4%

9%

15%

6%

Fees too high

Too hard to set up

Don't understand benefits

Few customers request

Too much to maintain

Don't understand acq contract

Don't have proper staff

Reasons  suppliers  resist  or  will  not  accept  cards  

Overall

High capture

End-­‐user  survey  on  supplier  acceptance,  Nov  /  Dec  2009,  n=146  

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2  1  

Best  PracIces  To  Drive  Card  Acceptance  

Treat  suppliers  as  partners  

Make  vendor  enrollment  ongoing  process  

UIlize  secure  email  

UIlize  ReporIng    

Educate  suppliers  on  benefits  of  card  acceptance  using    mulG-­‐pronged  communicaGon  plan  

Submit  AP  file  to  your  Issuer  every  six  months    for    a  vendor  match;  use  pre-­‐noGficaGon  le^ers  where  possible  

Enroll  vendors  unable  to  keep  card  on  file  

Generate  &  review  Card  status  report  monthly  to  idenGfy  cards  rarely  or  never  used  

Address  supplier  pain  points  around  cost  of  acceptance,    offering  incenGves,  as  needed  

Incorporate  cc  payments  as  standard  payment  opGon  in  supplier  agreements,  RFPs  

To  send  card  account  number  securely  to  vendors  who  elect  to  keep  card  on  file  

Pay  parGcular  a^enGon  to  undelivered  email  noGficaGons  

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Disclaimer  

“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., all of which are registered broker‑dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed.

This presentation is for informational purposes only. It does not constitute an offer or commitment to buy or sell or a solicitation of an offer to buy or sell a security or any financial instrument, or a commitment to enter into a transaction, of the type generally described herein. The information contained herein, and any other communications or information provided by Bank of America Merrill Lynch, is not intended to be, and shall not be regarded or construed as, a recommendation for transactions or tax or investment advice, and Bank of America Merrill Lynch shall not be relied upon for the same without a specific, written agreement between us.

We do not provide legal, compliance, tax or accounting advice. Accordingly, any statements contained herein as to tax matters were neither written nor intended by us to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on such taxpayer. If any person uses or refers to any such tax statement in promoting, marketing or recommending a partnership or other entity, investment plan or arrangement to any taxpayer, then the statement expressed herein is being delivered to support the promotion or marketing of the transaction or matter addressed and the recipient should seek advice based on its particular circumstances from an independent tax advisor. Notwithstanding anything that may appear herein or in other materials to the contrary, the Company shall be permitted to disclose the tax treatment and tax structure of a transaction (including any materials, opinions or analyses relating to such tax treatment or tax structure, but without disclosure of identifying information or, except to the extent relating to such tax structure or tax treatment, any nonpublic commercial or financial information) on and after the earliest to occur of the date of (i) public announcement of discussions relating to such transaction, (ii) public announcement of such transaction or (iii) execution of a definitive agreement (with or without conditions) to enter into such transaction; provided, however, that if such transaction is not consummated for any reason, the provisions of this sentence shall cease to apply. Copyright 2012 Bank of America Corporation.


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