By Mitch Kitamura, Managing Director at DNX Ventures
Consumers now have more options than ever for sending instant payments, often without fees. On the other hand, businesses don’t have the same breadth of payment options as consumers do, and that’s a costly problem. With Paystand’s blockchain-enabled commercial payments platform, innovation in B2B payments is finally here.
The Challenges Facing the $25 Trillion US B2B Payment Market
Volume of B2B payments in the U.S. was over $25 trillion in 2018. North American businesses write more than $12.5 trillion in paper checks annually, but it is a painfully slow affair. Invoices take seven to 10 days on average to process, and the typical lifecycle of a B2B transaction stands at 34 days in the U.S. market. Moreover, the processing costs of paper checks are as much as $550 billion each year. Yet more than half of all global commercial payments are still made with paper checks. Mastercard estimates the global annual B2B payment volume at $125 trillion. That’s $62.5 trillion every year in payments that could, nay, should be made more efficiently. Still, the B2B payments market lacks recent innovation.
B2B payments are typically limited to checks, wire transfers, electronic bank transfers, credit cards, and online payment gateways. One of the reasons 50% of all B2B payments globally are still made via paper check is because the other options don’t make economic sense for most mid-size and enterprise-level businesses. Paying 3% on a $50,000 or $100,000 invoice for a contract that is already predetermined with payment terms is untenable. And while ACH and wire transfers do work, they all run over existing infrastructure built before the rise of the internet. So, they’re slow, error-prone, and often come with additional fees. There’s definitely room for improvement.
Innovation Trends Flow From Consumers to B2B
It’s not uncommon to see innovation emerging with products for consumers then grow into the next level that spreads into B2B options. Case in point, text messaging platforms, WhatsApp and iMessage made our personal communication easier and better connected. These apps were followed by Slack’s real-time company messaging service, which made it easier to communicate with our work teams.
Consumer payments now have new/user-friendly/better platforms; B2B payments are next. Consumers have seemingly endless payment options, many of which offer near-instant payments with little to no fees. For example: Facebook Pay, Venmo, PayPal, and Square Cash. Businesses lack the same options. Now is the time for the B2B payment industry to be just as smart/savvy like us(the consumers) and come up with a new way of making payments.
What is Paystand?
Paystand, a blockchain-enabled commercial payment platform, is a top innovator in enterprise financial services. We are thrilled to share that we, along with existing investor LEAP Global Partners, led the $20M Series B funding round for Paystand. You can find the official announcement here: Paystand’s official press release.
Paystand offers a Venmo-like B2B payment option for corporations that is real-time, fund-verified, and blockchain-assured. By executing enterprise payments using Paystand, corporations can speed up the time to cash, automate the payment process, reduce the labor burden, and eliminate unnecessary transaction fees. Paystand offers this with a predictable, fixed monthly fee, subscription model, and their focus is on small-to-medium enterprises.
Overall, Paystand saves businesses, on average, more than 50% of the cost of realizing receivables and reduces days sales outstanding by more than 60%. That’s a clear benefit for business customers, who on average, will save $30,000 annually in labor costs and cut down days of sales by 50 days or greater.
What’s even more impressive about Paystand is that they are already delivering value to 160,000 businesses in their network. The company has remarkably found a product-market fit in the enormous B2B payment market. As we all know, finding the right market your company can win and build a business in is not an easy thing to do.
With this round of financing, the company plans to accelerate the expansion of its products and services, as well as expanding sales, marketing, success, and engineering teams in its Scotts Valley, California and Guadalajara, Mexico offices. If you are interested in joining the team, check out the open positions here.
Paystand’s Opportunity in Japan
Demand for innovative B2B payment solutions is universal, and Japan is no exception. Japan not only has a shrinking population but the long-time practice of lifetime employment is outdated, meaning human resources are more likely to be allocated away from back-office tasks such as accounting and more to bringing topline revenue.
The $10 trillion B2B payment market in Japan is primarily cash-based, with few credit card and transfer payments. Each year, cash-based payments in Japan cause an estimated $500 billion to $1 trillion in lost productivity and ROI. Japanese companies can benefit greatly from Paystand’s automation in payments, which can make the process more efficient both in time and cost.
In late 2019, Paystand and JCB, Japan’s leading card issuer, signed an agreement to build a B2B payment solution for the Japanese market. CEO Jeremy Almond’s ambition to expand the business globally resonated with me, as I started DNX to connect U.S. startups to the Japanese market. We are excited to help Paystand expand in the Japanese B2B payment market with our extensive network of corporate Limited Partners, which can be customers as well as distributors of Paystand business payments.
A Global Tipping Point
Japan and the United States are some of the most advanced economies in the world and they are both only beginning to address the problem Paystand solves with new digital infrastructure. With the rise of globally interconnected businesses and the seamless nature of enterprise work today, the time for investment in new technology is now. We’re excited to work with companies like Paystand to help businesses prosper and remain competitive in the digital economy.