Surveying the financial supply chain landscape, Alenka Grealish, manager for the Banking Group at analyst firm Celent Communications, sums up the current pace of adoption of e-payment technologies this way: "It's slow progress."

Grealish and other industry observers believe that the financial and physical supply and demand chains are inexorably moving toward convergence, driven by enterprises' need to automate the payments side of the business to remove such inefficiencies as the handling of paper checks, and by increasing interest among chief financial officers and corporate treasurers in improving cash-flow oversight and the efficiency of working capital, among other factors. However, in her January 2005 report, "Business-to-business Electronic Payments: Putting Wind in the Sails," the Celent analyst describes a "chicken-egg" scenario in which banks and technology providers are reluctant to roll out end-to-end e-payments solutions until they see more companies demanding such offerings, and vice versa.

As a result, checks continue to dominate B2B payments, although estimates of the extent of paper's dominance do vary. Checks still comprise more than 75 percent of the total volume of payments between enterprises at present, according to Grealish's report. Separately, in their report "B2B Spend Management Survey," based on an online survey conducted last year, MasterCard International and spend management solution provider Ariba reported that 80 percent of all B2B transactions are still being completed with paper checks. And Tom Glassanos, president and CEO of order-to-pay automation specialist Xign, has estimated that greater than 95 percent of business transactions in the U.S. market are still settled with paper invoices and paper checks today.

Paper is losing ground, however, as the different e-payment methods catch on with increasing numbers of businesses. For example, automated clearing house (ACH) settlements accounted for 17 percent of B2B payments by volume in 2003, according to Celent's estimate, based on data from the National Automated Clearing House Association (NACHA). In addition, Grealish says that the p-card continues to see increasing usage. "Since the MasterCard e-P3 effort has been integrated into the supply chain and offers rich remit detail, the p-card has room to grow and could extend its scope beyond the average $300 per transaction into higher values," she says, referring to MasterCard's program integrating the card company's settlement options into electronic invoice payment and presentment (EIPP) platforms to provide paperless electronic commerce, along with Level III data in its transaction reporting. Celent projects that purchasing cards, which currently account for about 7 percent of B2B payments by volume, will comprise 15 percent of payments by 2010.

The P-card Goes to School

Cristal Swain, for one, is prepared to push the limits of the p-card. In fact, Swain, director of materials management with the Adams 12 Five Star Schools district in Thornton, Colo., is attempting to equip an entire new school while paying for it entirely on the district's card.

The district set up the program through GE Corporate Payment Services five years ago as a way of reducing the amount of time that the purchasing department had to spend processing paper purchase orders (POs) and invoices. "As a department, we noticed that we weren't really adding a whole lot of value to the organization, because we'd spend so much time processing orders," Swain explains.

The district's MasterCard p-card program now has about 550 users and handles some 41,000 transactions annually, or about $17 million in purchases. Buyers can use the card to purchase just about anything that the district normally acquires — goods and services — and the district does not have any restrictions on buying items over or under a certain amount. To manage the program, the district uses GE's NetService, an online tool accessed through a Web browser that allows card program administrators to monitor spending activity, view Level II and III data for posted transactions, pay balances, dispute charges, and set credit limits and purchase controls, among other functions.