The expense management ecosystem has seen significant innovations in recent years as more and more FinTechs have entered the market to help companies track expenses more carefully.
For decades, expense management has often been coupled with business travel to remove the frictions of post-business expense reporting, which is still so often filled out in spreadsheets and reimbursed weeks or months after expenses are issued.
But the scenarios in which companies pay for goods and services have evolved. Employees no longer have to travel to spend company money, not even across borders. And while those latte and taxi rides remain important purchases for business travelers, employees are also making higher value purchases in their offices or at remote workstations that are not eligible for the reimbursement model.
With fewer employees willing to take the risk and companies looking for a more effective way to automatically track and reconcile expenses outside of Accounts Payable (AP), expense management technology is spreading beyond business travel – and across borders.
Speaking to PYMNTS, Dileep Thazhmon, co-founder of the newly formed FinTech FinTech Jeeves, spoke about the importance of tackling global spending management at the infrastructure level and the unique challenges that high-growth companies face in managing money spent around the world.
Cross-border pain points
Global transactions are not a lack of friction for companies, regardless of the payment method or the train used. When it comes to cards, the familiarity of the payment tool and the ability to automatically capture payment information make it a popular companion to expense management technology even today.
However, when these expenses are cross-border, foreign exchange (FX) fees can hit particularly hard. The alternative is also fraught with friction, noted Thazhmon, highlighting the process many companies have to go through when operating in new jurisdictions: opening a new account and receiving a card from a local issuer, calculating currency conversions, and having difficulty getting clear Transparency of spending across markets and regions.
The procurement of a corporate card product in different markets can also be a challenge for any financial institution (FI) due to the individualized underwriting processes.
“The companies we target tend to grow rapidly and either generate monthly income or are well ventured companies,” said Thazhmon. “And yet, ironically, they don’t get access to credit.”
Some issuers will need years of tax returns to prove an applicant’s growth path, a practice Thazhmon said is “fair” for some companies, but not for all.
An infrastructure approach
Giving businesses access to a corporate card that can be used across borders without foreign exchange fees is one solution to this pressing problem. But it’s not the full picture of the solution for cross-border spend management, noted Thazhmon.
While local jurisdictions around the world continue to invest in domestic payment infrastructure, cross-border transactions remain complicated, especially in B2B payment scenarios. Thazhmon emphasized the importance of developing and owning infrastructure – what he called the “orchestration layer” – to actually move funds.
“We looked at this from the perspective, ‘If you want to connect several countries, how would you do that?'” He said.
The AP distinction
Owning this infrastructure is important to enable more agile product development for a solution like Jeeves. Flexibility will be crucial, especially as cost management is constantly evolving.
While Jeeves began development before the pandemic broke out, last year accelerated what Thazhmon said he saw a change in mindset in how companies make their employees work. With professionals now able to operate and make purchases from anywhere, it is expected that the need for cross-border-friendly expense management tools will increase.
And while Thazhmon said he was optimistic about business travel returns, business travel is not FinTech’s key market. Rather, it’s the cloud-based services like Amazon Web Services that tend to pop up. These are high-quality purchases that can be made domestically or across borders, depending on the individual needs and situations of each company.
The realization that expense management is no longer just about business travel will be important for the ongoing development of FinTechs in this area as they offer solutions that look more and more like AP tools.
“The distinction [between expense management and AP] is not in functionality, ”said Thazhmon. “The distinction is made more from a process perspective. For accounts payable, you need an invoice. That is quite a big difference to expense management. “
While Jeeves has the potential to facilitate accounts payable transactions – and Thazhmon said the company will eventually seek to expand those invoice processing capabilities in the future – the focus today remains on digitizing and optimizing unbilled, cross-border business spend.
There’s a greenfield opportunity for businesses to switch more of their high-quality purchases to cards, with Thazhmon referencing a customer who previously spent more than $ 40,000 on FedEx charges to a card because that company couldn’t get a card product special market. Reducing reliance on bank transfers and cash, especially across borders, can bring a new level of transparency and control over the flow of money out of a business that traditional expense management practices cannot.
“Now almost every company is in some way a global company,” he said. “We have employees in six different countries and we still have to submit an expense report.”
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