After years of consumer payment innovation, people are beginning to realize the opportunities provided by business payment technology. I can’t speak for the market as a whole, but from our position as one of the early fintech providers in this space, we see ample evidence that the market has awakened.
The fundamentals have not changed: this is still a huge market. At over $125 trillion globally, commercial payments are three times the size of the consumer payments market. The problem also remains the same: businesses struggle to shift away from paper checks in favor of electronic payments, which have the same efficiency as consumer payments.
Since last year, we’ve also seen a dramatic increase in the number of partners reaching out to us. Just a few years ago, we were the ones knocking on their doors. More providers have also entered the space. Five years ago, when I spoke at conferences such as Money 2020 and APP2P, I was one of the same small group of panelists that always appeared at the one poorly attended session on B2B payments. When my co-founder Tana Law spoke at APP2P last fall, she was one of several panelists from B2B payment providers speaking to a full room of prospective customers.
As awareness grows and the world changes, new challenges emerge. Whereas the market previously suffered from an almost total lack of fintech solution awareness, the market today suffers from payment solution providers all sounding the same, making it hard for buyers to differentiate between solutions and find the right one for their needs. Payment automation as a category is still new enough that it isn’t clear to people how to think about and evaluate alternatives. Fintechs are redefining business payments, so companies need a new framework.
When choosing the best payment automation product for your business, the five framework measures you should consider are:
- Operational efficiency
- Fraud protection
- Supplier enablement
- Payment services
- Business continuity
Our study found that the number one reason enterprises consider payment automation is to increase operational efficiency. “Operational efficiency” is a relatively new term that was previously not part of the B2B payments discussion, because up until recently, businesses chose only to involve their banks. Talking with banks about ACH payments yields discussions of pricing. For card programs, it’s focused more on the rebate and the credit terms. Because banks have a narrow, transactional focus across single payment types, only a fraction of business problems is solved.
Payment automation is about using technology to provide operational efficiency across the whole payment process, so accounts payable can offload all of it. Today, more than ever, businesses need to know that you don’t have to send payments yourself. Instead, you can instruct your provider how much you want to pay, to whom and they’ll take care of the rest. You don’t even have to know if your suppliers prefer card or ACH payments. The provider manages all of that for you.
In our survey, it surprised us that payment fraud took second place as the most important reason cited for considering payment automation. I don’t think it would have even made the list at all, two or three years ago. It speaks to how much the awareness of payment fraud has grown. People used to only worry about check fraud, but now there’s a growing awareness of ACH fraud risk.
We’ve seen a constant stream of headlines about phishing and social engineering scams where bad actors pretend to be suppliers and convince AP to change the receiver’s ACH information to their own. Major corporations have been victimized, and for large sums of money. Now cybercriminals are capitalizing on the fear and chaos surrounding the coronavirus pandemic to launch new scams.
These growing concerns highlight the importance of asking providers how they manage payment data, especially requests to change data, and how they protect their customers if fraud does occur. You should not have to take on the payment risk, and your solution provider should hold the payment data and assume the risks associated with holding, securing and sending funds based on the data.
Supplier enablement has long been one of the biggest hurdles in making a high percentage of electronic payments. In the past, issuing electronic payments required enormous manual effort. They had to contact suppliers to see if they’d take card or ACH payments, and then collect, manually input, and maintain their banking information in their ERP. AP departments were often forced to rely on an additional headcount and cobbled-together processes to complete these tasks. That’s absurd. The reason you move to electronic solutions is to gain efficiency, not to hire folks to enter and manage data manually.
Today, almost every solution provider in the market says they do continuous enablement. Buyers need to dig into what exactly that means, and what the service level agreements (SLAs) are. For example:
- How many suppliers will they attempt to enable? The answer should be “all of them,” but you will find that many only enable the top 10 or 20%.
- What is their definition of “continuous?” To many providers, “continuous” means that they’ll reach out to your suppliers once or twice a year. That’s not continuous, that’s intermittent.
- Do they ask you to take on unnecessary data risks? Some providers require their customers to assume the risk of storing and protecting supplier data, as well as the risk of sending that data in a payment file. ERPs were never meant to store and protect supplier data and this is a task and risk your team should not have to bear.
Cloud networks have changed the game, allowing payment providers to offer truly dynamic, continuous enablement. For example, Nvoicepay matches every received payment instruction against our supplier network to determine the best electronic payment method for each supplier individually. If they’re not set up for electronic payments yet, our service team reaches out to enable them. Once they’re set up, they can be paid electronically by any of our customers. If we change one piece of data, it’s updated for all the suppliers in our network. The data is validated, secured and protected each time it’s touched.
This is how you do continuous supplier enablement at scale, with a combination of humans and technology. With our acquisition by FLEETCOR last year, Nvoicepay now has one of the biggest—if not the biggest—supplier network in the industry. That means our customers pay more of their suppliers electronically by card and ACH than with any other payment automation provider.
One of the challenges B2B payments experience more than consumer payments is the number of ways that things can go wrong—things that can be hard to fix. Suppliers make mistakes on invoices. Customers make mistakes on payments. Data frequently changes, and there are a lot of valid reasons why a payment might release before an update to invoice or banking information is communicated. Money can land in the wrong place, or with the wrong amount—or someone doesn’t get paid at all.
The burden of correcting those errors has always fallen on AP, so it may not even occur to them to consider payment support as a buying criterion. However, the ability to field and resolve payment errors so the AP team doesn’t have to do it themselves is a huge differentiator between providers. HUGE.
Every provider will say: “Yes, of course, we offer support. Here’s our phone number.” But using their support is another matter. A solution provider should have SLAs for their offerings, spelling out what they will resolve, how quickly they will respond, and how quickly they will reach a resolution and communicate it back to you for each type of payment exception your team experiences. Payment support is the single most important driver of efficiency, so ensure your provider delivers the level of service required to free your team from this burden.
This didn’t come up in our survey, and a few weeks ago, I would not have thought to add this to the list of buying criteria. The coronavirus crisis has exposed the vulnerability of paper and location-based payment processes. Simply put, if you’re not in the office, you can’t cut checks, walk them around for approvals and put them in the mail. You might not be able to field supplier phone calls either. Given the business-critical nature of payments, payment operations must continue in the face of disaster. In our current scenario, that means accounts payable needs to be flexible enough to approve and send payments from home, while suppliers need to be able to check payment status without picking up the phone. Be sure to ask solution providers about remote work capabilities, back-up data centers, failovers and contingency plans for all types of disasters.
Buyers owe it to themselves to dig into the details and ask questions of prospective solution providers, like:
- What are the payment support and resolution SLAs?
- What does the provider take responsibility for?
- How is data managed?
- How does each provider candidate define continuous enablement?
- How do they protect you against fraud?
- How are they protected in the event of a disaster?
- And, most importantly, how many payments are sent electronically with their solution? If it’s 20%, that’s a payment hobby, not a solution, and buyers today can do better.
B2B payments is a huge market, and one that has undergone very little innovation in decades. It’s exciting to see so many new solutions coming on the market and to experience the growing interest from partners and customers. Customers now have more options. It’s no longer just about the way you move money from point A to point B. Now, it’s about using technology to optimize the entire process. Decision criteria have expanded beyond transaction costs and rebates. Fintechs are redefining supplier enablement, fraud protection and payment support.