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EIPP and Card vs. ACH

This Guest Post is from Will Donovan of Paystream Advisors of USA

There’s been some recent discussion at PayStream surrounding EIPP on the receivables side and payment channel issues. The question: Does/will EIPP drive ACH adoption, thus intruding upon middle-tier B2B electronic payments, an arena that credit-card companies have dominated.

ACH payments is a problematic process, and B2B card use mitigates many of these problems – Cards provide instant, although expensive, access to supply chain finance – Card payments are guaranteed by an FI – Cards are always “push” and never “pull” payments, which larger corporations may object to – Cards provide more remitance data – etc. etc. etc.

EIPP offers the opportunity to mitigate the problems with ACH in an efficient matter, but problems remain. The issue of “push” versus “pull” payments, the fact that cash must be available to make the payment. At the same time, many companies are beginning to view EIPP as the killer-app for onboarding ACH and ridding themselves of having to pay fees associated with card-payments. This is particularly important in low-margin industries whose clients would love to use cards because they are small-to-medium sized clients. One particular mentionable of note is that EIPP can solve remitance data problems through meta-data.

So the question that needs to be answered here is – What are the implications for cards and card-issuing FI’s as receivable-centric EIPP models are adopted at an increasing rate? Is there a new B2B card option on the table with a more reasonable fee-structure? Are advantages of cards poorly communicated? Is there more to the story of card FI’s than merely being margin-gobblers are unfair partners? Will this become a larger issue as more card-issuing FI’s jump into the EIPP game?

Thoughts?

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  • Hi Will,

    In the UK, most companies have BACS (now BACstel-IP) integrated with accounting and ERP systems. So, we do not have the same problem you have with low penetration of ACH in North America. However, most on-line transactions use some form of card payments.

    Unfortunately, the wider use of BACS also cause a problem for the second “P” of EIPP. To my knowledge, EIPP is only used for exchange of documents between suppliers and purchasers and not for payment.

    In case anyone is wondering, FI is Financial Institutions

  • Hi Will,

    In the UK, most companies have BACS (now BACstel-IP) integrated with accounting and ERP systems. So, we do not have the same problem you have with low penetration of ACH in North America. However, most on-line transactions use some form of card payments.

    Unfortunately, the wider use of BACS also cause a problem for the second “P” of EIPP. To my knowledge, EIPP is only used for exchange of documents between suppliers and purchasers and not for payment.

    In case anyone is wondering, FI is Financial Institutions