Employee expense reimbursements using Visa Direct for ERP

Employee expense reimbursements using Visa Direct for ERP

Executive Summary

Today, most supplier/vendor payments are processed through Enterprise Resource Planning (ERP) systems that send payment instructions to their corporate bank for disbursement. In the United States, many of these payouts happen using paper checks, presenting a huge opportunity to simplify the process with Visa Direct and real-time digital payments.

The goal for Visa’s overall ERP enablement initiative is to build the capabilities/shared services that are needed to enable card payouts for different ERP systems. With this initiative, Visa helps provide a payment rail that is scalable and flexible, for the payer, convenient for the payee, and which could offer significant cost savings relative to paper checks.

Why Visa Direct is right for ERP Payments

ERP solutions enabled with Visa Direct can allow corporates and merchants to send money to payee accounts using debit card credentials. Compared with checks, which can take days to arrive and then must be deposited, Visa Direct can enable an easy and fast payment experience. Real-time payments with Visa Direct are also delivered faster than traditional money transfer schemes in the US and many countries globally, with issuers posting funds sent via Visa Direct in 30 minutes or less, 24/7.

Visa Direct can help enable significant cost savings compared to issuing checks. In 2020, Visa commissioned a study by Forrester Research that surveyed six diverse enterprises in the US and found that real-time digital payments could potentially produce a savings of millions of dollars for large enterprises. The projected savings were anticipated from three primary factors:

In some organizations, convenience fees passed on to payees for real-time payments can provide an additional financial benefit.

Finally, Visa Direct processes payments on VisaNet, Visa’s global payment network, with robust risk controls to help ensure that funds and information are handled securely and appropriately.

The B2B payments opportunity

According to the Large & Middle Market (LMM) Global Payments Research conducted by Visa in 2019, over 50% of surveyed companies are not satisfied with their existing ERP payment solutions. Surveyed companies cite cost, efficiency, security, and fraud reduction as their top expectations, and identify four key requirements for new payment solutions:

The same research shows that paper checks are still a widely used payment method in large and mid-market corporations, with large corporations often sending over 1,000 vendor payment checks monthly.

According to Business Insider Intelligence, B2B payments in the US alone were worth $21.8 trillion in 2019 and will expand at a 5.7% CAGR to hit $28.8 trillion by 2024. The scale of these payment volumes drives the desire to digitize but also makes the digitization process difficult, as firms have realized that the existing accounts payable systems are typically inefficient, slow, and costly, with poor visibility into payment data and fraud.

A case study: Visa’s internal employee expense reimbursement solution

In 2020, Visa began using a Visa Direct payment solution for its own employee expense reimbursements in the United States, partnering with Cross River Bank, a fintech-oriented commercial bank. While Visa employees typically pay for business expenses using a corporate card program, they may sometimes also use cash or personal credit cards that require reimbursement after expense approval. With Cross River Bank’s Visa Direct solution, reimbursements can be directly pushed to employees’ bank accounts via eligible debit cards, eliminating the need to print and mail checks to participating employees. Employees benefit by not needing to wait days to receive checks, and then deposit them into their bank accounts.

Employee expense reimbursement at most large and mid-size corporations in the US is complex and process-intensive. After employee expense reports are approved, the ERP payable module creates a payment invoice, typically providing only checks and ACH, printing the checks, and mailing them to employees. For ACH, employee must fill out an ACH form and provide bank account and routing information.

Significantly improving upon these manual processes, the Visa Direct employee expense reimbursement solution contains essentially two steps:

Recipient Card Enrollment Portal

Secure Capture UI

ERP Payment Processing

ERP Workflow Changes

File > API

During the covid-19 pandemic, most Visa employees began working from home, creating even more difficulties for the accounts payable team in going into the Visa office to print and mail paper checks. As a result, Visa released the Employee Expense Reimbursement solution with Visa Direct in early August of 2020. In the first month after the solution launched, 535 payments were made to employees using Visa Direct.

An employee survey after the solution’s initial launch in June 2020 revealed that all surveyed employees were satisfied with the experience using Visa Direct to get expenses reimbursed compared to receiving checks.

Example of how it works

Let’s consider this example of a Visa employee expense payout:

Ronald, a Visa employee, forgot to link his corporate card to a rideshare app for his business trip. Since he paid for his ride with his personal card, he must now get reimbursed for his expense by using his personal debit card.

Enrollment workflow

  1. Ronald goes to the card enrollment portal
  2. Ronald enters his debit card # in the secure card enrollment portal
  3. The token is stored in the Beneficiary Directory
  4. Secure account capture UI gets the card info and sends it to the corporate bank
  5. Corporate bank verifies the card info, generates a token and sends back to Visa
  6. Card payouts option is selected as Ronald’s default payment method

Expense payout workflow

  1. Ronald submits an expense report and receives approval
  2. Accounts Payable creates an invoice and processes the payment batch using the token
  3. Visa translates the batch into an API call and sends it to the corporate bank
  4. Corporate bank translates the token into a card number and sends the financial message to VisaNet
  5. VisaNet returns real-time response
  6. Ronald receives a payment and email confirmation

Disclosure

Case studies, comparisons, statistics, research and recommendations are provided “AS IS” and intended for informational purposes only and should not be relied upon for operational, marketing, legal, technical, tax, financial or other advice. Visa neither makes any warranty or representation as to the completeness or accuracy of the information within this document, nor assumes any liability or responsibility that may result from reliance on such information. The Information contained herein is not intended as investment or legal advice, and readers are encouraged to seek the advice of a competent professional where such advice is required.