How companies can unlock procurement value through commercial payments

Procurement departments are increasingly expected to deliver tangible value to their organisations. In today’s business environment, a successful procurement team is one that actively seeks opportunities to innovate, improve operational efficiency and strengthen supplier relationships.

This includes negotiating contracts with incentives for suppliers to enhance product quality and service delivery. In addition, procurement teams must work closely with suppliers to improve sustainability practices and streamline supply chain operations, driving value beyond mere cost reduction.

However, achieving these objectives is not without its challenges, as highlighted at the HSBC Commercial Payments Forum Summit recently held in Sydney. Expert panellists included Brian Tomkins from HSBC, Asha Cugati from Mastercard, Jualin Harris and Tony Sharpe from RobobAI, Dean Baruah from Macquarie Bank and Mangala Martinus from Payments Consulting Network.

The panellists explored prevailing trends in commercial payments, discussing how these intersect with the challenges and opportunities facing procurement teams. They shared best practices for effectively managing this dynamic environment, particularly emphasising commercial payments’ role in achieving the objectives of procurement teams.

Rapidly evolving payment landscape

A new ecosystem of digital payment solutions is reshaping commercial payments. The pandemic accelerated the use of virtual transactions, with the pause in business travel activity resulting in more unused credit lines being available. This drove rapid growth in business-to-business payments using cards. Card-based transactions have also made it easier for procurement departments to settle payments with suppliers.

“We’ve seen this great acceleration in supplier payments on cards,” noted Tomkins, Global Head of Commercial Cards at HSBC. “With the recovery and travel picking up, we’ve seen significant growth in transactions.”

Supporting this trend is the soaring number of payment options – from established international payment schemes to new digital wallets. Virtual card adoption is on the rise and offers benefits for procurement teams, such as enhanced working capital management and fraud protection, especially in high-interest rate environments.

“It’s a really interesting time to be in payments, and part of that is because there are all these technology partners coming in to take part in the value chain,” said Cugati, Senior Vice President for Business Development, Commercial Solutions at Mastercard Asia Pacific. “In Asia, we see a lot of countries now leapfrogging physical cards and moving straight to virtual cards.”

Improving purchasing maturity

Despite the promise of digitalisation, procurement departments of large organisations face several challenges in their efforts to drive value. Macro-economic uncertainties such as inflation and market volatility pose major obstacles, disrupting supply chains and complicating financial planning.

Geopolitical tensions and regulatory compliance add complexity, requiring procurement teams to navigate complex regulatory environments while adhering to industry standards. Internally, complex processes, delayed payments and fragmented systems slow down innovation.

These inefficiencies can affect not just supplier relationships but also overall business performance, according to Nic Hillier, Principal Director at KPMG Australia. “We see four main strategies to improve purchasing maturity, which, when combined with commercial cards and virtual cards, can yield the best outcomes for buyers and suppliers,” he said.

These include defining the right buying channels, implementing modern procurement solutions, taking advantage of generative artificial intelligence, and conducting “Lean process reviews” to identify and eliminate waste, inefficiency, rework and waiting times.

To address soaring costs, the panellists recommended leveraging innovative payment solutions such as cards to negotiate active discounts and refine payment terms.

“If you’re a transport provider, you can unlock discounts by improving payment timing,” said Tony Sharpe, Chief Commercial Officer of RobobAI. “You can use a combination of negotiation, process change and new tools like physical and virtual cards to pay suppliers without depleting your working capital.”

The power of having centralised data

The panellists agreed that data accessibility is critically important to making procurement processes as seamless as possible.

“I don’t understand how a procurement division can operate effectively without data and insights. If you can’t measure something, you can’t manage it,” said Julian Harris, CEO of RobobAI, which provides AI-driven payments analytics.

By analysing data, organisations can decide on the most effective payment methods for the goods they are purchasing. “It’s really about pulling data, aggregating it and categorising it,” explained Sharpe. “Everything starts with data.”

As Dean Baruah, Division Director – Global Head of Procurement Operations at Macquarie Bank, highlighted, centralised data is key to transforming procurement processes.

“Six, seven years ago, we had a very complex technology stack in a very manual environment. At that point, our catalyst for change was having connected data,” he said. “Consolidating onto a single procurement platform enables us to deliver a lot of automation and ultimately speed up our time to pay our suppliers, giving more autonomy to our businesses.”

Baruah added that his company’s approach centred on viewing procurement through a customer lens, both internally and externally. “Having a unified platform, rather than disparate datasets, has really enabled us to have a seat at the table with some of the business decision-makers.”

Strategic benchmarking for effective procurement

Benchmarking procurement activities against industry standards or other companies’ practices plays a key role in ensuring effective decision-making, according to Mangala Martinus, Founder and Managing Director of Payments Consulting Network. It offers insights on the timing of procurement activities and helps identify areas for improvement.

“It’s important to benchmark not just based on costs,” said Martinus. “In the payment space, for example, you might achieve a 20% cost saving. But even a slight improvement in authorisation rates – or successful transaction rates – could have an even bigger impact. You really have to understand which metrics are important.”

Charting the path forward

Procurement departments have the potential to drive transformative change in business. By implementing innovative strategies and embracing technology, they can drive substantial improvements in efficiency and growth.