It was announced this morning that American Express and SAP Ariba have entered into a strategic multi-phased partnership designed to offer buyers and suppliers new payment and financing options on the Ariba Network. Full details of the announcement can be found here.
To find out more about the partnership and what it means for corporate treasury, The Global Treasurer spoke to Sean Thompson, senior vice president, SAP Ariba Business Network & Ecosystem, and E-Bai Koo, executive vice president, Global Commercial Services at American Express.
When asked why the two organizations have worked together on the initiative, Thompson commented: “The network value proposition for Ariba has historically been about purchase orders and invoices, primarily. We said we’ve got to go beyond that, especially for buyers and suppliers that are connected with each other because POs and invoices are becoming commoditized. The natural next place to go was to help from a money transfer and a cash flow perspective. We asked, what can we do to provide buyers and suppliers with choice in terms of how they want to pay, and how they want to receive?
“American Express has a longstanding relationship, not only with SAP Ariba, but also with the overall portfolio, with SAP Concur, especially as Ariba, Concur, and Fieldglass all coming together. Because of this we got together with American Express nine months or so ago.
“When I hear from American Express that they want to be the leader in the global B2B payments space, and given overlap that we have, because we share customers and brand values, it was a natural marriage. At the same time, we realized after trying to set up initiatives like Ariba Pay, we needed to stick to what we do best and take an open, partnership approach, create API’s and invite others in to help us. American Express being the most strategic partner for us to move forward with. It’s about playing to your strengths and ultimately providing more value than we are today between the buyer and supplier.”
“What I would add, is if you look at our large and global customers, more than 50% of them use SAP Ariba today,” explains Koo. “In terms of picking a partner to do something with, it was a natural choice.
“We are constantly talking about customer needs and Ariba and a better procure to pay process comes up fairly often. As Ariba create the ecosystem, how do we actually bring more value to that ecosystem, help in the transaction and be focused on buyers and sellers? We think we can create value for both sides and we expect this to be a long-term relationship where we could actually add even more value.”
For now, Koo sees the virtual card as a game changer in terms of actually having it fully embedded inside Ariba, so there’s no need to step outside and handle Card Payments separately.
“As far as I know, we’re the only one who can provide a virtual card payment today, based on an existing corporate card or purchasing card. Everybody else you have to set up a separate account and manage that separate account and separate reconciliation. So that is a distinct advantage we have.”
Koo explains that the virtual card can be used by any existing corporate card or purchasing card customer. “When they use it through the Ariba system it’ll generate a token-based virtual card payment,” he says. “That payment is a one-time use payment, where you can set the parameters around who you pay, how much you pay and how long it’s good for. In the old days, you could give your corporate card and somebody could charge whatever they wanted to it. The buyer is therefore worried about losing control. This new solution means you don’t have to worry about that in the future. You can set 20 additional customizable fields; you can add enhanced data into your payment.
“If you’re paying multiple invoices at the same time, you can actually say this payment is for invoice numbers 4, 6, 7 and 8 for these amounts and therefore the reconciliation is a lot easier, versus getting a check for $1,000 that you don’t know what it’s for. People spend a lot of time today on this.”
Koo adds that, because you can get up to 50 days credit depending where you’re at on the card cycle, from a working capital standpoint it’s of great benefit for the buyer. The single account is easier to handle too.
When asked if there is a sweet spot in terms of organizations that will really benefit from the new initiative, he says that it’s really for larger global clients – traditionally SAP Ariba’s core customers – with $500m in revenue and above. However, the solution is scalable, meaning as SAP Ariba makes moves to go down market, Amex will follow suit.
The benefits for corporate treasury teams are there too, according to Koo. “If you can enable more card payments, there’s obviously monetization of that spending back to the company. Just from a cashback perspective, there will be something coming back in from rebates. The payment extension I talked about earlier using a card gives you options. You automatically get more days to make those payments, so you can think about investing differently.
“And then, as we think longer term about other benefits we can bring, I think the financing side is very interesting. Having more efficient processes, where you’re not spending money on back office reconciling processes is going to help in terms of your opex and drive technical efficiencies. I can think of at least two big large global companies that spend millions of dollars on reconciliation. If this initiative gets rid of the reconciliation issue, it will deliver value.”
Thompson adds: “I like the procurement space, especially in times of uncertainty because it’s all about saving money on what you said. We haven’t bridged the treasury gap until now. If we can break down the silo between procurement and treasury and create an overall efficiency, then there’s huge potential. That’s why we’re so excited by this announcement.”