Making Business Payments Smart

Death to the status quo. That’s what Karla Friede, CEO of Nvoicepay, says is the mindset now of corporate buyers and suppliers who understand that with smart payment solutions come a massive return to their bottom line. That implies that  B2B payments suppliers have a responsibility to get these businesses to think “strategically” about payments and to invest in the areas that normally take a back seat when it comes to innovation. MPD CEO Karen Webster caught up with Friede to get her views on how and where she sees this happening and why she believes that 2015 could prove to be the most impactful year B2B payments has had so far.

KW: Let’s start with some of the basics. I know we talked about the trends that are really developing and influencing what’s happening in the procurement and sourcing area of enterprise payments and procurement. I’m curious to get your perspective as we move further into 2015. How does that actually influence the way payments are made today? 

KF: I think some of the changes that we see happening in the procurement space and sourcing space are going to come to payments. From my perspective, in the last couple of years, the procurement and sourcing space has gone through an amazing amount of change as we see new players coming into the space. These players offer cloud-based solutions that simplify the process, and enable not just the largest enterprise to have the resources to invest, and then invest in the consulting required to implement some of those solutions, but also the mid-market companies to have those resources. They can afford the lower cost that cloud-enabled technology solutions provide, as well as take advantage of the simplicity, making it fit in to their environments and their distributors’ environments.

So in procurement and sourcing, companies like Coupa have done an amazing job in offering a simple, reasonably priced solution for enterprises to adopt and increase their efficiency in the procurement process.

That same thing will happen in payments. Procurement is upstream from payments, and payments has long been a forgotten technology space – systems in accounts payable, in order to make payments, have been bound by manual processes. There hasn’t been the same kind of technology solutions to enable the simplicity, low cost and ease of use that we find in procurement. That’s starting to happen as people wake up to the fact that the standard that’s been set in the market, and the lack of efficient solutions, is not okay anymore.

Part of that is brought on by the consumer side, where we see people look at their phone and see how easy it is to make a payment anywhere, then ask why they can’t do that in business. The convergence of the cloud solutions in procurement and the idea of the simplicity of payments today are both impacting the payments space.

KW: I agree with you that there are lots of things that make this possible, more efficient and simple. But isn’t it the case the payables isn’t really considered core strategically to the mission of a company, therefore it gets pushed aside when companies think about innovation?

KF: Well, part of that is true. AP tends to be the last spot in the building where you invest, but it’s also been that solutions haven’t made AP’s job any easier. So if you look at what banks have provided – it’s really a dumb pipe connecting AP departments to the bank – those things haven’t done anything to increase the efficiency or simplify the role in AP.

If you look at accounts payable now, and compare it to procurement 10 years ago, procurement 10 years ago was this new idea that could be strategic, it didn’t have to be a drudgery task. And by doing it better, that could bring significant value back to the organizations.

It’s the same thing with payments. It doesn’t have to be manual, archaic processes. By looking at solutions available, businesses can add significantly to their bottom line. This is about, as it always is, the return and the opportunity. Payments has now risen to the level of being strategic because of the huge impact it can make in terms of the cost savings and, to some extent, revenue generating if companies decide to use a card product in the process. So payments are rising to the level of more strategic decisions as organizations understand the incredible impact they have.

KW: So how do you define the impact, if you’re sitting across from the CFO or the executive who runs payables? How do you persuade them that a business case is legitimate and something that they should move forward with? 

KF: It’s actually pretty easy. You can start by looking at what they’re doing today, and everybody recognizes the high cost of writing paper checks. Two, they recognize that trying to keep track and separating files out to send p-cards file or ACH file to the bank, paper checks are ridiculously time-consuming. Everyone agrees on that. So it’s about showing them a return that reduces their accounts payable cost by 75 percent, and dramatically increases the card-based rebates they receive. The numbers are dramatic. That isn’t a hard thing to sell – it’s getting the opportunity to show them the return that’s possible is a big part of the problem.

Let me define what I think of strategic payments. That’s because, just like any new idea, people will ask, “What’s so strategic about payments?” I think it’s a way to distinguish just the flat file that has no intelligence in it from modern payment solutions. So for payments to be strategic, I consider them to have three pieces.

One is the ability to optimize each payment made. By optimizing, I mean paying the right supplier, with the right payment method, at the right time, optimizes those payments and enables customers to reach the greatest return.

The second thing is the idea of supplier services. Without supplier services to handle the questions from suppliers to manage the payment communication between suppliers, it’s just not possible to get to a minimal-effort, efficient solution.

The third thing in terms of strategic payment solutions is having an opportunity to earn a rebate back as part of the process, and not a separate process. When you include the next-gen technology, the single-use card programs, as part of that, they generate a rebate back to the company, and suddenly you have this dramatic impact because of these smart payment solutions generating a big return to the bottom line. I think that’s what it’s about, at the end of the day.

KW: How much of this is being pushed by suppliers, if at all? Obviously those that are buying and receiving the payments, do suppliers have a role in helping push strategic payments innovation?

KF: Suppliers have a huge role in the process. Ensuring that they are receiving value and have a solution that works for them is critical for the solution to work. It needs to be simple for the customer and the supplier, suppliers need to have visibility into what’s been paid, and they need to get their money fast. It’s also absolutely critical that, as you’re transitioning a market to an electronic payment, there are few barriers in front of the supplier for making this transition. I don’t believe in the models that are charging suppliers to receive electronic payment. I think they’re unnecessarily burdening the supplier while you’re trying to bring those suppliers on board and have them involved in the process. So suppliers are a huge part of the equation for any solution that’s really going to be efficient.

KW: So there are a lot of solutions now that are chipping away at some of these pain points. The three things that you laid out are important components, but how do you actually differentiate and distill what it is against all of the solutions out there that say the same sort of thing? 

KF: I don’t think that there are a lot of solutions out there that truly do this. I think you see incumbent players threatened by the new cloud-based technology solution providers, and you see them starting to use the language whether or not the solution delivers on that or not. I think for the customer looking at payment solutions, it’s incredibly important to get a demo of how the solution works to see it for themselves. What consumers or businesses will find is that many of the traditional players can’t produce a demo because they don’t have cloud-based software – they have a file processing system. So it’s one of those things where talk is easy, and delivery is not, especially in payments.

It’s much harder to deliver an efficient solution, so in payments – they’re complicated. It’s a lot of heavy lifting due to the sheer volume of payments and vendors, and the dynamic nature of information. It’s changing all of the time. If a company or solution provider cannot handle the dynamic change, it’s not a good solution.

KW: We talked a lot over the last several months about the evolution of the space and readiness of the market to accept the things you described strategic payments deliver. Is 2015 going to be different?

KF: I do think so. I think it’s either going to be late 2015 or early 2016. I think we see the market beginning to percolate, and the intense amount of interest in payments on the consumer and mobile side is really leaking over into the B2B side. There’s a willingness to think that e-payments should be the standard – simplicity should be the standard.

I believe the market is awakening. It’s a giant market, and I think we’ll see it pick up speed at the end of 2015.

Karla Friede
CEO & Co-Founder, 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 ePayment Solutions firm. 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.

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