SAP Ariba and American Express partnership takes aim at B2B payments

The SAP Ariba and American Express partnership could be a good first step in making transactions more automated and intelligent, according to one expert.

A new partnership between SAP Ariba and American Express may make business-to-business payments on the SAP Ariba Network easier and more secure. The new capability was unveiled by both companies at the SAP Ariba Live conference in Austin, Texas.

The SAP Ariba Network generates vast amounts of money -- the company projects $3 trillion will flow through the network this year. But payments between buyers and suppliers are not always smooth and are generally conducted outside of the network.

The SAP Ariba and American Express partnership could help end that disruption, according to Sean Thompson, senior vice president of the SAP Ariba business network.

"We want to make it easier for companies to pay companies, and we realized that the SAP Ariba Network value proposition has to be something that allows for efficiency of business-to-business commerce," Thompson said. "Historically, the SAP Ariba Network has been about purchase orders and invoices; we want to make it about purchase orders, invoices and payments."

Integration will bring new benefits

As an SAP Ariba Network extension partner, American Express will use Ariba Network APIs to enable its virtual card capabilities within SAP Ariba's processes and platform. The APIs will ultimately enable seamless commerce, secure payments and easy reconciliation between businesses on a single platform.

Businesses will be able to use their existing American Express Corporate Cards to generate virtual card payments and won't need separate, stand-alone accounts. The American Express services are going to be available later in the year.

E-Bai Koo, executive vice president of global commercial services at American Express, said buyers and suppliers will realize several benefits from the service.

SAP Ariba's Sean Thompson (left) and American Express' E-Bai Koo (right) discuss the partnership to make payments on the SAP Ariba Network easier.
SAP Ariba's Sean Thompson (left) and American Express' E-Bai Koo (right) discuss the partnership to make payments on the SAP Ariba Network easier.

These include increased efficiency, because payments won't be handled as a separate, stand-alone process; better control, because token-based virtual access and usage controls will allow payment amounts and times to be set; better working capital for managing cash conversion cycles; and better reconciliation by providing more data on payments and status visibility.

"With tokenized payments, you can set exactly who you pay, how much you pay and how long that payment is good for," Koo said. "We want to make sure this is integrated within the payment flow and the customer experience. You can set it to default, so you have the same exact terms all the time, or you can set it depending on the supplier."

Virtual tokens also provide more flexibility in how payments are made, Koo said. Today, businesses generally provide a credit card number to a supplier, which can then be charged for multiple things and sometimes create headaches for them. For example, disputes can arise if a supplier splits an order and only half the items are shipped, but the whole invoice is charged. The virtual token ensures buyers will pay only for the items that ship.

Another significant benefit is better reconciliation of invoices, thanks to more granular data, according to Koo.

"The virtual token can be issued at the invoice level or, if you issue it, at the aggregate level when there's custom detail that you can add for different invoices," Koo said. "So, that will make life easier for both buyers and suppliers."

An important step for intelligent spend

The partnership between SAP Ariba Network and American Express is an important step in making transactions more automated and intelligent, according to Rivka Gewirtz Little, research director of global payment strategies at IDC.

"This will enable enterprises to run data with a payment, including an entire invoice, which lends itself to automation in invoicing and reconciliation, slashing time and manual effort," Little said. "I'm looking to see how that will be integrated into the SAP Ariba ecosystem, because they're saying that they're moving into intelligent e-commerce, intelligent procurement and the intelligent network."

The American Express integration should help businesses in a few categories, including the need to step outside of the network to process a payment, Little explained.

"It's a true ecosystem, 'platformication' and marketplace coming to life, and I welcome it," she said. "Providing a virtual token not only enables automation, but goes a long way in fraud prevention and risk management. So, I think all of that is good."

The SAP Ariba and American Express partnership should only be seen as a good step toward improving B2B payments, but companies should be provided with other innovative and less costly payment methods.

"Enterprises don't want to pay the money that it costs to run their payments on guardrails, so I'd like to now see SAP Ariba talk about moving into alternative rails, and/or I'd like to see AmEx and its competitors, MasterCard and Visa, move into nonguardrail payments," Little said.

Payments can run on a debit network for about half the cost, for example, or they can be made directly from shared networks between banks, which are starting to emerge in Europe and Asia, for about a quarter of the cost.

"This is a great start, and I'm happy to see deep integration with actual payments within the SAP Ariba Network," Little said. "The next step will be incorporating more innovative payments into this intelligent ecosystem."

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