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The Risks of Using Credit Cards for B2B Payments

Businesses are beginning to realize the benefits of moving away from the use paper checks as the primary form of B2B payment(s). 

A 2018 Accenture study found businesses spent $523 billion on credit cards in 2018, and that number was expected to rise to $763 billion by 2022. There are many benefits to using credit cards for B2B payments over paper checks.

First of all, credit cards are more secure than checks. They are fairly straight forwards and are faster and more efficient in terms of processing payments. They can be integrated with a business’ digital backbone, and most even offer rewards such as cashback.

But, there are also plenty of risks to using credit cards for B2B payments. Most of these risks revolve around the security of data and the potential for fraud. 

Here are some reasons why credit cards are not the best source of B2B payments.

There Are Risks When Sending Payments

Not all vendors have secure online portals on which you can make credit card payments. The alternative, then, is sending your credit card information to the vendor to process the payment manually.

This is primarily done in one of Two ways.

One) Providing your credit card information over the phone. In this case, an employee with your vendor must write down your information and enter it into their system. You have to trust that they are then disposing of that vital information safely and securely.

Two) Sending your credit card information via email. You may type your card information directly into the body of an email. You may fill out a charge form that you scan and email back as a PDF.

Either way, you are putting your data at high risk by doing so. Email is not a secure method to send sensitive information. It can be easily hacked, and it’s often ultimately out of your vendors’ control. They rely on the security provided by tech companies such as Google or other email service providers.

There Are Risks When Payments are Processed

Regardless of how credit card information is sent, there are plenty of potential security risks.

Are your vendors PCI compliant? Do they have the latest version of TLS (Transaction Layer Security?)?

While most credit card companies require these two things in order for vendors to accept payments, not all companies are up to date on the security.

Does your vendor store your credit card payment details?

The answer is most likely yes, because it makes it convenient for them to process future and ongoing payments. If this is the method performed, it places your data at risk, as your vendor will need to store your credit card number and some personal info. 

To be fair, this information is stored under encryption, but surely you’ve heard about data breaches. And if that information found its way into the wrong hands, much damage could be done. Not including the chaos of dealing with the aftermath.

Online fraud is a huge problem. It’s projected to reach $25.6 billion by the end of 2020. 

But, even if there isn’t outright fraud committed on your credit card, having your information stored could still lead to an accidental or unapproved charge that could cause you real headaches.

There Are Risks with How They Work

Credit cards have a set account number, expiration date, and security code that doesn’t change. They are just like bank accounts in this regard. 

No matter how the payment is made, you need to use the full 16-digit credit card number for it to process. This goes for whether you’re swiping the card at a store, inputting your card over an online payment portal, or giving your information to a vendor over the phone.

The issue with this is that your credit card information could be stolen in one form and then used in many other forms in the future. For example, if your card number is stolen because an email was hacked, the bad actor could use your numbers to print a new card or make an online payment.

Other modern forms of B2B AP payments, meanwhile, take full advantage of the latest technology. Virtual cards, for example, use tokenization to generate account numbers randomly. They also expire at specific times, which adds a layer of protection if your account is somehow compromised.

Many forms of ePayables also don’t have any personal identifying information attached to them as well, making them even more secure than credit cards.

They Are Still a Manual Form of Payment

Beyond security concerns, there are also concerns regarding manual work and human error. Credit cards are a preferred B2B payment method to paper checks, but they aren’t the most efficient payment form.

Processing a credit card payment still requires much manual work that employees must do. They have to gather your credit card information and personal identifying information.

They must enter that information into their payment system to process the payment. They must then enter the approved payment into their accounting system to record the payment being made. They may even have to send a manual receipt for the payment.

On your end, an employee must gather the credit card information and send it to the vendor. Your staff member  must then follow-up to make sure the payment has been processed and recorded in your system.

At every step of the way, there is the chance that a mistake could be made — either in processing or recording the payment.

Today, the best form of B2B payments are ePayables. They are the safest and most secure method of payment. They also allow you to automate your Accounts Payable process to minimize the burden on your employees.

If you’re interested in learning how ePayables can help your company move forward, contact BluePenguin today.

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