If it seems like Visa has been on a B2B payments kick lately, it’s because they have. The payments giant has struck several new partnerships, expanded its commercial capabilities into new markets and developed new B2B payments solutions – all within the last few months.
In its latest move, Visa announced a deal to acquire Fraedom, a longtime partner that provides expense management technology to FIs and direct to businesses. Fraedom already powers Visa’s IntelliLink Spend Management platform, but an acquisition – Visa’s head of global business solutions Kevin Phalen recently told Karen Webster – means Visa will be able to take Fraedom’s reporting and spend management capabilities to a broader stage, and to new use cases.
“They’ve been great in reporting and spend management, and in moving their solutions into digital,” Phalen said. “We think we can accelerate that as an integrated solution.”
The takeover of Fraedom is about more than just scaling up a business partner, however. The deal goes deeper into Visa’s overall strategy for the commercial payments market, which involves many moving parts – partnerships, new product development, acquisitions – to address the many points of friction in a notoriously complicated space.
“I think there is a perception of simplicity, but the reality in commercial payments is that there are many parties, there is a lot of friction,” the executive explained. “And once you go global, it creates more problems. Ultimately, what you have to do is attack each component of that complexity, rather than assume there is one answer to everything. You have to do so in a thoughtful way, one bit at a time, versus either assuming the answer is simple, or assuming the market is complex and there is an easy answer.”
The takeover of Fraedom is one piece of that puzzle, Phalen said. With Fraedom, that means integrating those expense management and reporting capabilities into other areas of corporate finance and banking.
“Whether it’s cards, whether it’s virtual accounts, or whether it’s what we’re doing with B2B Connect, we have to make sure we’re bringing our corporate and FI partners a full view of all of the payment capabilities, and now we can deliver that into one app,” he said. “Through APIs, you can then connect this app into treasury workstations, connect it into other forms of reporting.”
Key to expanding the possibilities of Fraedom’s capabilities – indeed, key to addressing many of B2B payments’ points of friction – is understanding what to do with data. This is largely based on the recognition that a B2B transaction is never one-sided: A payable always lands in accounts receivable, and commercial payments have to include transaction data from invoices, purchase orders and more. Expanding B2B payments capabilities also means elevating analytics capabilities and finding new ways to use the transaction data under Visa’s umbrella of solutions and services.
“Ultimately, we’ve got to be excellent in payments, and also make sure we’re providing extensive, enriched and expanded data,” the executive continued. “Payments are central to what we do, but just as importantly, we’ve got to deliver the full end-to-end breadth of payments data and reconciliation.”
He explained that today, addressing corporates’ finance and payments needs reaches far beyond facilitating the movement of money.
“They’re looking for ways to do things that create transparency for them,” Phalen said. “Speed is becoming more important. They want to make sure there is security, visibility and transparency. And if you start to address those things, then all of our sudden our clients become more valuable to corporates.”
Phalen pointed to Visa Consulting & Analytics (VCA), its business advisory unit, which relies on rich transaction data to provide valuable insight for corporate customers.
“What we’re doing specifically in this space is building out a commercial practice to address this data,” he explained. “You have all of this data and, now all of a sudden, we can do benchmarking, we can do analytics, but where else should we go? Where else is there an opportunity to help our clients, whether in trade finance, supply chain finance?
“The data we have from Fraedom and other apps,” Phalen continued, “we can then take back to our clients and tell them things about their industry, about their vertical, and give them information that they can then turn to their end-corporates and provide value to them. That’s where Visa should be, and that’s our vision of data enrichment.”
The acquisition of Fraedom and a focus to ramp up VCA are just two components of Visa’s overall B2B payments strategy – because, as Phalen noted, a complex market cannot be addressed with a single, simple solution. Another is Visa’s B2B Connect, which Phalen said is now in Phase 2 of testing and will likely be ready for commercial rollout later this year.
“There is still a lot of friction, and there are ways – through our acquisition of Fraedom, through the development of our VCA and B2B Connect – to attack a point of friction, or multiple points of friction, and build upon that,” he noted, adding that Visa will continue to invest in B2B payments through building out new products and making more strategic acquisitions. And yes, as a payments company, Visa’s goal will be to enable seamless B2B transactions. But Phalen emphasized the importance of data in Visa’s overall commercial payments aspirations, too, to “reduce a bit of that friction and make it easier for our partners to manage the payables data, the receivables data, and activity between buyers and suppliers.”
That can only happen bit by bit, acquisition by acquisition, market by market and new product by new product.
“We’re trying to address client needs to go after them piece by piece,” said Phalen. “We’ll make acquisitions, we’ll build capabilities. The puzzle will not be perfect – this is an emerging space that constantly changes. But what you’ll see is Visa filling in the pieces where you need to see a piece.”