Why Innovators Will Win The B2B Payments Game

The problem with B2B payments is that it is much more complex than it needs to be.  When PYMNTS last spoke with NVoicePay’s Karla Friede, she highlighted the many opportunities that digitizing the B2B payments in general can bring to the space. In a recent podcast interview, MPD CEO Karen Webster caught up with Friede to get the specifics on why innovators are benefiting over traditional players, and what the ROI is for businesses who take up alternatives to the status quo.

KW: A couple of weeks ago, we talked about the broad spectrum of B2B payments and the opportunities it presents to innovators like NVoicePay. But why are there opportunities for these innovators, and not for some of the more traditional players in the space that seem better positioned to take advantage of these?

KF: I think it’s actually just the opposite in that a lot of the financial institutions out there are really not well suited in the B2B space and not even close to being able to deliver what is required.

The problem in the B2B space is that it requires real heavy lifting. The key in B2B payments that enables any business to make payments electronically is vendor or supplier enablement. Before businesses send a payment, they need to know where it’s going, what types suppliers accept, who the remittance contact is, and more. That information must be collected and maintained as suppliers change – that’s an incredible amount of work.

If the players in the consumer space could have gone into B2B payments, they would have by now. The opportunity is ten times the size. When you look at offerings like P-cards, for example – that really is not a good product use. Using a practice product to drive thousands of payments makes no sense at all. And as for the FIs that have said they can do ACH, but ask for the vendor’s routing and account number – that just doesn’t work for any enterprise making thousands of payments a month.

What we are seeing is the wreckage from that – the businesses that are making some payments electronically, but they have multiple solutions that haven’t worked.

KW: So it sounds to me that there are two issues – the wrong product and the wrong process. Why are innovators like NVoicePay better situated to offer better products and processes?

KF: I think it’s a couple of things. In fairness to everyone else that’s tried to do B2B payments and failed, it wasn’t until 2008 or 2009 that there was an ability to build a payment infrastructure in the cloud. And by using cloud technology to deliver a payment infrastructure, companies can bring the cost down. They can add more flexibility to that solution – the ability to go out and capture and serve vendor information on an ongoing basis. In fairness, that just wasn’t there previously.

But the other piece of it is that FIs traditionally don’t do technology well. Technology that’s coupled with ongoing service features, touching the customer to deliver service and support, is an area that they haven’t executed well. At this point in the market, for them, it just doesn’t make sense.

What we see in the B2B space is new solutions, cloud-based solutions, that will offer better value and a more complete way to move to electronic payments.

KW: Let’s talk about another concept. Procure-to-pay is what everyone talks about as the methodology for which B2B payments should aspire. But as I observe this, the payment part seems to be missing – it’s really procure-to-something else. Why is that?

KF: I think it’s amazing that so many say P2P when there is no “P” – the payment “P.” It’s really procure-to-invoice. The procurement solutions manage the process of buying goods between supplier and buyer, but at the end of that process, they push the invoice information back on to the accounting system. The business is left with writing checks or sending a payment file to their bank. That’s saying much of the same – it’s complicated, heavy lifting, and requires both technology and service. It’s outside the core of what these companies are good at.

KW: There’s a real advantage to digitizing the invoicing process. What should a business do?

The biggest thing is for them to take another look at what their bank is providing. Businesses no longer have to accept the old or lack of solutions out there. That is no longer acceptable, and companies that are looking for payments, need to ask themselves who does the vendor enablement, how is it done, is it continuous, and how is service handled? Those are key questions, and companies need to ask them and seek a provider. There’s no reason to settle.

KW: What’s the ROI of the alternatives to the status quo, which we may agree is the least efficient process out there?

The ROI will be different based on what processes the businesses have in place, to some degree. But if someone isn’t paying electronically today, their hard dollar costs and costs of time and labor will go down by 75-80 percent. And by having more vendors set up and using a card product, that will increase the rebate they can get. The combination of those things delivers, for every $500 million in AP volume, $50k in real ROI. The numbers work out and scale either way. The benefits are real for companies to really drive out costs and top that off with a rebate – and more important than that, there’s the efficiency of that ongoing vendor enablement.

KW: Let’s talk specifically about the payment piece. What is it that businesses don’t really know they don’t know about aligning payment into the procurement and e-invoicing process?

What they don’t know is that they don’t have to go through their bank – they should not have to put up with a process that is inflexible, that causes them to have to maintain information or look for multiple points of contacts when there is a problem. When companies are looking for payments, they should look for simplicity, flexibility, and service. If those things are not offered by the provider they’re talking to, they should keep looking.

Karla Friede
CEO, NVoicePay

Karla Friede is Chief Executive Officer, co-founder, and member of the Board of Directors at NVoicePay. Friede has 20 years of experience in management, finance, and marketing roles in both large and early stage companies. Along with the founding team, she has grown NVoicePay into a leading B2B Payment Network. Prior to founding NVoicePay, Friede was President and CEO of privately held Zevez Corporation; VP of Marketing for GeoTrust (acquired by Verisign in 2006); Co-founder of The Ascent Group, a strategy consulting firm serving technology firms in the bay area; Director of Marketing at Mentor Graphics, and part of the PBAS team at KPMG.

Friede received an MBA from Harvard Graduate School of Business and a BS in Accounting from University of Idaho.

To listen to the full podcast, click here.