Mastercard Takes Aim at Small-Business Payments in a Venture With AvidXchange

Payment card networks have for years eyed the broad market for small-business payments, which are still largely executed with paper checks. On Thursday, Mastercard Inc. and payables-automation company AvidXchange Inc. said they will attack that paper mountain with The Mastercard B2B Hub, which will be distributed to small- and mid-size busineses via Mastercard issuers.

Central to the new service, which the partners say will start rolling out later this year, are tools that will enable companies to convert to electronic payments with cards and what Mastercard calls “data-enriched” automated clearing house transactions. Neither company ventured an estimate of the volume potential for the new hub, but given the number of U.S. small businesses and the average value of their payments, it is clearly significant.

“We see this solution as helping organizations maximize every minute and every dollar that they invest in their business,” said Colleen Taylor, executive vice president of new payments business for Mastercard, in a press release. “The comprehensive automated payment experience we deliver will help improve supplier relationships and accelerate the conversion of B2B payments from paper checks to electronic payments.”

In a separate release, Charlotte, N.C.-based AvidXchange announced a $300 million round of private-equity funding to help support the new venture with Mastercard, which is one of four investors in the round. Michael Praeger, chief executive of the 17-year-old company, estimates 350,000 businesses are “currently operating in the middle market with antiquated processes,” according to the AvidXchange release. The company claims 5,500 U.S. clients.

While banks and commercial card issuers affiliated with Mastercard will deliver the service, banks can also participate through deals AvidXchange has with KeyBank and Comdata Inc., a Brentwood, Tenn.-based supplier of B2B payment services to small and mid-size companies.