Why B2B marketplaces should offer financial services

Christophe Spoerry
Dec 8, 2020 · 3 min read

In just a few years, the marketplace model has revolutionised B2B e-commerce and e-procurement.

Platforms like Alibaba and Amazon led the way, disrupting traditional long-term, trust-based relationships between corporate buyers and sellers.

It was risky bet, but it paid off: Alibaba generated revenue of US$35.8bn in 2018, while Amazon Business reached US$10bn in sales the same year, only three years after launching.

In 2019, there’s a B2B marketplace for just about every sector, from logistics and machinery to agricultural supplies, and their model is evolving: initially heavily vendor-focused, marketplace platforms are now giving more attention to buyers.

This is where adding credit services and extended payment term options becomes a real differentiator.

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This Buddha embedded in a Banyan tree makes me think of financial services embedded in B2B marketplaces (Photo by Marek Okon on Unsplash)

Flexible financing for SMEs

Thanks to B2B marketplace platforms, small corporates gain instant access to a wide range of providers, saving both time and money on procurement.

Meanwhile, SME sellers can improve their reach and cut marketing costs by using a marketplace.

While these are helpful developments, the biggest problem SMEs the world over face is not marketing or procurement: it is cashflow.

Marketplaces as a solution to the cashflow problem

50% of start-ups do not make it past the five-year mark, and according to Investopedia, half of those who fail name a lack of working capital as their main reason for not managing to stay in business.

Marketplaces have an opportunity to use technology to fix this problem: where SME buyers used to fill lengthy loan applications with banks (often to be rejected), they could have the option to receive extended payment terms, subscribe to trade credit insurance or sell their invoices with one click at the time of purchase.

At the same time, SME sellers could be paid instantly, avoiding delays and freeing working capital. The streamlined, multi-discipline nature of marketplaces makes them the perfect spot to incorporate credit services for SMEs.

Loyalty and differentiation

Marketplace competition is real, and credit services are a significant selling point. A large majority of B2B payments are still done by check, and as mentioned earlier, the SME underwriting process for working capital or trade loans is lengthy and cumbersome.

But the number of platforms looking to disrupt these processes is increasing: in Singapore, DBS and Singtel teamed up to form the 99%SME B2B Marketplace, with payments and financing central to the offering; Alibaba and PayPal both offer credit terms and payment solutions for clients, and this year, Fundbox made its underwriting platform available to B2B marketplaces.

“As online commerce continues moving at the speed of light, we understand that B2B businesses can no longer remain hostage to asynchronous transactions and delays caused by paper checks, invoices, and extended terms”, said the company upon launching the service.

Consultancy Roland Berger identifies payment services as one of five challenges the B2B marketplace sector is facing.

“It is a central and crucial component, involving customer experience as well as compliance with national and international legal and financial requirements, and even special accreditation of financial institutions,” the firm said in its 2018 report B2B marketplaces are blossoming.

With marketplaces becoming the dominant model for B2B purchases, and more and more credit providers looking to jump onto the bandwagon, now is the time to add these services to B2B marketplaces before it becomes the norm.

alpine-style

Wild ideas, unexplored routes, unchartered summits.

Christophe Spoerry

Written by

Building the future of B2B commerce

alpine-style

We build innovations in B2B trade, trade finance and credit insurance. We create business options for tomorrow. We start from a blank sheet of paper, and take each venture to the summit. We focus on platform business models, data-driven strategies and decentralized finance.

Christophe Spoerry

Written by

Building the future of B2B commerce

alpine-style

We build innovations in B2B trade, trade finance and credit insurance. We create business options for tomorrow. We start from a blank sheet of paper, and take each venture to the summit. We focus on platform business models, data-driven strategies and decentralized finance.

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