The Nuts and Bolts of B2B Fintech Innovation

Supply chain automation, working capital optimisation, electronic (and sometimes fake) invoices, no real-time cash visibility, friction in buyer-supplier relations, the upcoming PSD2, blockchain, Internet of Things, Basel III, machine learning…you fill in the rest. You get the gist of what’s on the table when we talk about the B2B Fintech space.

Where B2B Fintech innovation can be found and who the challengers are
We have heard that the B2B payments/ecommerce industry is big and that the opportunity is huge. But how big? We could create a good picture by giving the following estimates some thought. Out of the USD 1.2 trillion global payments market, B2B payments are accounted for an estimated USD 550 billion.

If you look at the challenges for any business using the traditional methods of payment, you will typically see major banks, FX providers and payment service providers involved. The fees they charge are huge. Blockchain, however, challenges that and acting as the agent of disruption in B2B payments, it eliminates the middle man and the fees. With advantages such as end-to-end payment tracking, same-day use of funds and no fees, no wonder that an array of initiatives has come to fruition last year.

For instance, Belgium-based facilitator of global bank transfers SWIFT launched a cross-border payments initiative using blockchain in December. The project, called the Global Payments Innovation Initiative, will focus on business-to-business payments in early 2016 and aims to help companies strengthen global supplier relationships and improve treasury efficiencies.

“The initiative will build on the strength of secure, cross-border payments day in and day out”, said Gottfried Leibrandt, SWIFT CEO.

In April of last year, Align Commerce raised USD 12.5 million and launched a new cross-border payment solution for small and medium-sized businesses using blockchain rails and swear by the features brought by it: “real-time tracking, full transparency, and payment processing at the click of a button are all benefits of this amazing technology ”, said Elina Manevich who leads the marketing at Align Commerce.

Banks has been really keen on blockchain too: “These days blockchain is a blockbuster at banks”, well said Enrico Camerinelli, Aite Group expert.

In the estimated 170 billion global invoice volume for the B2B/B2G/G2B segment and at least 330 billion for the B2C/G2C segment — according to Billentis -, there is money to be made. Taulia, for example, provides a cloud-based invoice, payment and discount management solutions for large buying organisations. The company offers dynamic discounting by turning the invoices into revenue opportunities and increasing supplier liquidity by automating early payments on 100% of the invoices. Taulia’s Marketing Manager Matthew Stammers claims that although supply chain finance has proven to be an incomplete offering — it could be part of a broader solution designed to address a strategic issue: the customer-supplier relationship (page 20). You should read into this as being the friction that Fintech can remove.

All things considered, conducting businesses today requires, no doubt, managing an increasingly complex set of relationships within an ecosystem that has become global and digital. And, while these relationships continue to grow in complexity, clients are demanding “more efficient financial supply chains, improved payment terms, reduced prices and improved cash flow efficiencies”, argues John Bruggeman, the CEO of Traxpay, a venture founded in 2009 and backed by global leaders in banking, payments, Fintech, and enterprise software.

So what has changed? The attitudes are shifting and B2B Fintech is not just a daring idea anymore, instead, electronic payments are becoming the norm in the business-to-business context. Non-bank providers are becoming more common and, dare I say, most welcome. E-invoicing — with or without value added services — is also growing. What’s more, research and advisory firm Frost & Sullivan highlights that US B2B online sales will reach USD 1.9 trillion by 2020, while B2B online sales in China will reach USD 2.1 trillion. This means that Asia is a particularly interesting market. There, powerhouses like Alibaba are behind the main trends in B2B ecommerce growth that will push B2B online sales to about USD 6.7 trillion by 2020. It’s time to put on the game face and play. Or risk being left out.

You can lead a horse to the water but you can’t make it drink
If you look at the B2B Fintech challenges, the list is quite long: corporates not knowing what to make of B2B Fintech applications, fraud, the omnichannel wave, Internet of Things, regulatory constraints, and generally a lack of understanding of what the alternatives are and how and when to use them. Douwe Lycklama, one of the founders of Innopay and one of the thought leaders in ‘networked services’ particularly advises corporates to keep an “active eye on the opportunities with innovative B2B Fintech applications”. On September 16, 2015, Total Solutions and Innopay presented the results of a survey among corporates on their views towards Fintech and showed that currently, only 14% of corporates make use of B2B Fintech solutions and another 70% of the corporates are following the B2B Fintech market but have not engaged yet. The two main reasons underlined in the report are a lack of sufficient knowledge about and insight into the impact of using Fintech solutions and concerns about the continuity of the Fintech company.

B2B fintech winners, Mirela Amariei

In a nutshell, I truly believe winners will be those who:
• Don’t overlook the middle market;
• Tightly integrate with the supply chain; 
• Leverage insight into actual debtor/creditor payment behaviors to offer working capital and other financing solutions;
• Use innovative technology such as blockchain, machine learning etc.;
• Don’t ignore mobile, IoT, omnichannel, social media trends;
• Make fraud prevention their top priority;
• Make regulatory / compliance requirements their strength, not their biggest weakness;
• Include millennial, passionate workforce in their teams;
• Select the right partners;

Show your support

Clapping shows how much you appreciated Mirela Amariei’s story.