Exploring Paperless Transactions
The evolving payments landscape in B2B was the focus of a marquee panel at the 2019 TRANSACT conference in Las Vegas this spring. Payments industry veterans Greg Cohen, Rob Nathan, and Sid Subramanium spoke about the challenges and opportunities for the industry in the evolving B2B space. Cohen, former ETA president and former president of Paya Connect, a Reston, Virginia-based integrated commerce and payments technology company, has spent a significant portion of his 30-year career working to improve payment processes for manufacturers, wholesalers, and distributors. It’s a massive part of the global business payments chain that, until the past few years, has been underserved by new technology. The fact that paper checks are still a mainstay of many small businesses presents an opportunity for payment processors accessing new software and technology. “Over the last few years, there has been tremendous innovation in the B2B space,” Cohen says. “You see banking and financial services players in that space, but also a lot of fintech and startups taking a very specific problem and solving it through the web.” Transitioning from paper checks to digital forms of payment will be helpful to businesses that currently rely on an enterprise resource planning (ERP) solution for most B2B payments—accounts receivable and payable—rather than a standalone piece of software like Clover or Square used in retail, according to Cohen. Software as a Service (SaaS) companies, such as Bill.com, AvidXChange, Ariba, and BillGo, are helping to drive much of the transformation, and businesses that leverage new solutions, says Cohen, are seeing advantages such as improved cash flow, simplified bookkeeping and tax management, and increased security. “As you start to look where the opportunity is, it’s where checks are moving to electronic payment,” Cohen explains. “That is true nowhere more than in the B2B space and the service areas around that. This area has taken a long time to evolve with B2B. We’ve seen massive amounts of investment in retail and restaurants, and you hear about Clover and Square [among point-of-sale systems]. This whole B2B market is late adopters—and a huge trillion-dollar global opportunity we can all take advantage of.” But it won’t be easy. The biggest hurdle—often the case when it comes to introducing new technology to businesses —is convincing decision makers to move away from their tried-and-true way of handling payments and collections. The evolution is coming, “but what slows it down is the legacy infrastructure of the old ecosystems,” Cohen says. “A lot of these people don’t want to change their legacy systems; they just want to upgrade them. You’ve got buyers who don’t want to change their habits.” Nevertheless, change is on the
horizon, and the good news for the market is that the penetration is low, according to Cohen. He believes there will be opportunities, even with companies that may be resistant to change. “Think about what it takes to run a lumberyard or a big wholesaler,” he explains. “They’re legacy businesses, and there is new software that is coming in that’s cloud-based. That requires a refresh. The biggest pain point is collections. You send an invoice and you wait and wait and hope somebody pays. It just takes forever.” When these companies are open to new ways of doing business—embracing the efficiencies while enduring the inevitable pains of change—they can transform the most important part of their business: managing the bottom line. “The opportunities are around speeding up cash flow and accounts receivable management,” says Cohen. Nathan, executive vice president of integrated solutions at CardConnect, now owned by First Data, also believes the opportunities are immense, but says enticing bigger companies to change is more difficult than convincing small retailers or restaurants to do so. “Larger companies’ B2B environments will naturally move slower, so I think the opportunity is much larger because of that, and that’s what we’ve seen over the years. There is a huge market there, and there are a lot of people going after it,” Nathan says, explaining that making payments easier and building in incentives for on-time or early payments can benefit both sides of the transaction. “How do you streamline that? That is the cool part of this topic,” Nathan adds. “How do you [look at a] Paypal or Zelletype payment in the peer-to-peer world, or B2C world, and transition that to a seamless business-to-business experience? Those are things that I see as exciting as the future arrives.”
Disruption and Opportunity
To make inroads in the B2B digital transition, Discover is building single, unified platforms that introduce business clients to accounts payable automation software, according to Subramaniam, who is senior manager at Discover Financial Services. “When you look at the end-to-end B2B transaction, there are so many payments and transactions involved in that data flow, which leads to several points of friction in the cycle,” he says. The cost of making and receiving B2B payments remains high, but new technologies can help, according to Subramaniam. “Five years ago, there wasn’t much innovation,” he says. “Now, while there is innovation, the adoption has been slow. When you look at all these things together, there is tremendous opportunity for new players, or existing players, to be a part of the solution.” B2B payments only became profitable in the past two years, according to Subramaniam. “Consumers don’t want to pay for transactions,” he explains. “They are used to getting value-
Bonus Content: Learn about more opportunities for software solutions to serve the needs of the B2B space from the 2019 TRANSACT session, “The Time Has Come To Disrupt B2B.” Log in and listen to the session via the ETA member portal.
20 Fall 2019 | TRANSACTION trends