With average credit card debt exceeding $15,000 per household, according to a report by NerdWallet Inc., a provider of consumer financial data, it’s safe to say that American consumers love shopping with plastic. They may not be crazy about interest rates, but the convenience, speed and security are hard to beat.
American merchants also enjoy using their credit cards, since they receive many of the same benefits. Though when it comes toaccepting payments, many merchants actively discourage their business clients from buying with credit cards. This is because card-based transactions carry fees ranging from 2% to 5%. Although fraud is far less likely in the business-to-business world, the potential damages are much higher since most purchases are for big-ticket or high-volume items.
This explains why credit card transactions account for only 10% of total sales within the B2B community.
If you don’t allow your corporate clients to buy via card, you’re definitely in the majority.
However, there are compelling reasons why you should change this policy. Believe it or not, there is tremendous value in expanding the number of payment options — including credit cards.
Why You Should Allow B2B Customers to Use Credit Cards
The most obvious reason to accept B2B card payments is because many of your clients prefer doing business that way. This is especially true when dealing with smaller businesses and startups — they tend to rely heavily on corporate plastic.
Here’s another way of thinking about it:
Although credit cards comprise a tiny fraction of B2B sales, the total sales volume is huge. According to Forrester Research, U.S. online B2B sales generated $780 billion in 2015 — and by 2020, that number could increase to $1.13 trillion.
By refusing to accept credit cards, you’re missing out on a lot of potential revenue, but there are other advantages as well:
- Credit cards lend themselves to payment integration. It’s possible to automatically sync all of your sales data with your favorite accounting, CRM and ERP software platforms. By contrast, checks and money orders have to be processed and reported by hand. (ERP, or enterprise resource planning software, can include multiple applications for managing such operations as inventory levels, financial records and customer order activity; it typically integrates with CRM, or customer relationship management software, for managing and marketing to customer accounts.)
- Credit card transactions clear much faster than most other payment solutions. This can be a huge advantage if cash flow is a concern or unexpected payment delays hold up important projects within your pipeline.
- But, arguably, the biggestadvantage is security. Whereas ACH payments, debit cards, checks and electronic payments are all directly linked to customer bank accounts, credit cards create a temporary buffer. If and when fraud does occur, both sides of a credit card transaction enjoy certain protections, including refunds. (ACH, or Automated Clearinghouse, is the interbank network known as the Automated Clearinghouse.)
Banks, by contrast, won’t always come to your rescue.
However, not all credit card security is created equally:
- Level I credit card processing is the most common—and it’s what merchants use when accepting traditional B2C payments. Most of the security protocols are focused on external threats from thieves and hackers.
- Level II credit card processing provides more information to the corporate, government or industrial buyer, making it easier for companies to monitor and analyze their spending. This type of processing also comes with a benefit of being able to control spend, number of transactions, or how and when a card can be used. The security protocols are focused on internal threats from employees and suppliers.
- Level III credit card processing offers even greater control by requiring users to provide more verification values and data. This is the B2B option most often used by merchants dealing with government agencies and multinationals.
Should You Begin Accepting B2B Card Payments?
By accepting B2B cards and offering level Il and III processing, you can actually save money with optimized interchange costs.
You will be more likely to have an easier time attracting new customers. Plus, given the processing times and payment integration that credit cards offer, making the switch could be a wise investment.
Kristen Gramigna is chief marketing officer at BluePay Processing LLC, a provider of payment processing technology and services. Follow her on Twitter @BluePay_CMO.Favorite