SMBs are going global as they look across borders for new business, but they must convince prospective buyers that transacting with them will be easy and convenient, says Kivanc Onan, Alibaba’s head of payments and financial products strategy for North America B2B. In the Back-Office Optimization Playbook, Onan explains how eCommerce marketplaces help SMBs offer compelling payment terms that foster trust and win them over.
The pandemic has triggered a massive surge in eCommerce businesses looking to expand internationally.
Consumers began tightening their belts after the pandemic was declared in mid-March, and the resulting economic downturn and widespread cash flow shortages had businesses directing their focus abroad to find new customers and business partners.
These businesses initially had to overcome several logistical challenges before they could go global, however. Many had never transferred funds across borders and lacked the payments infrastructure necessary to send or receive cross-border payments at scale, magnifying the friction points associated with cross-border payments processes.
“All of these [friction points] become a bit more amplified … in the cross-border businesses because — especially for new folks who are just entering that cross-border commerce — it is often something they are not familiar with and that their current systems do not necessarily support,” said Kivanc Onan, head of payments and financial products strategy of North America B2B for major technology company Alibaba.
eCommerce firms with global ambitions often choose to enlist third-party help to facilitate the cross-border payments that can fuel their growth. Onan explained in an interview with PYMNTS how the pandemic has changed the global B2B ecosystem and how Alibaba is aiming to meet eCommerce businesses’ shifting payments needs.
Small Businesses Venture Into The Global eCommerce Space
The pandemic has put a spotlight on many of the logistical difficulties that international businesses have faced when sending and receiving funds across borders. These include the slow speeds that have historically plagued the cross-border payments space, as well as reconciliation issues and high costs, to name a few examples.
These frictions are even more pronounced for the small- to medium-sized businesses (SMBs) that make up the core of Alibaba’s platform sellers.
“If you’re a small business… selling to a small business elsewhere, that infrastructure does not exist,” Onan said.
There is also the fundamental issue of trust that can hinder businesses’ global expansions. Businesses that have never sold overseas or used international suppliers may be hesitant to work with unfamiliar partners abroad because they do not know whether they can be trusted to deliver on their contract terms. eCommerce SMB suppliers might therefore refuse to fulfill orders until they are compensated.
“Before I ship the goods to you [as an SMB], I make sure that I get paid because I don’t know if you’re ever going to pay, and I don’t know your credit file in terms of being able to access how much credit [in] short-term lending I could give you,” he said.
The lack of trust between international merchants could not only make businesses less likely to transact across borders but also slow the speed of cross-border commerce.
Onan said he believes platform providers like Alibaba can help small eCommerce businesses overcome these logistical hurdles by playing the role of international business facilitator. Businesses looking to expand abroad can source potential suppliers and vendors through Alibaba, which takes on the responsibility for vetting companies and ensuring that its platform supports only trustworthy businesses. This reduces the risk merchants face when transacting with unknown partners abroad and propels commerce forward.
“Before, [eCommerce SMBs] were a bit more reluctant to go global, and now that [they] have opened up and accelerated their online channels, [they are seeing] growth opportunities elsewhere,” he said.
Onan also pointed out that Alibaba has seen 120 percent growth in the number of businesses using its platform since the pandemic began as well as 70 percent growth in the volume of transactions being made on the platform, suggesting that cross-border commerce has played a major role driving that growth.
Facilitating cross-border B2B commerce has always been a central part of Alibaba’s business model, but Onan said that the pandemic has made the delivery of these types of services more urgent.
“[The pandemic] has accelerated some of the programs we were planning to launch, and then … the portfolio of the payment methods [included in those programs] are different [than] originally planned,” he said.
The company has responded to the pandemic by fast-tracking several programs that had been in the works for years. One of the rollouts that Alibaba has accelerated is that of the Payment Terms program. Payment Terms allows platform sellers to pay up to 60 days after they have received invoices from their suppliers, giving them financial breathing room to adjust in case of cash flow shortages.
“What it hopes to achieve is that these disparate businesses [will be able to pay 60 to 90 days after the fact, and] we want that to be able to happen on a cross-border basis across the globe,” he said.
Another program Alibaba recently introduced is a digital trade show series, which allows suppliers and vendors around to globe to converse rather than taking international flights and attending on-site industry trade shows. Alibaba has conducted three such trade shows this year, focused on supplements and nutrition, food and beverages and beauty and personal care, respectively. Onan also confirmed that Alibaba will continue to conduct these virtual trade shows for the foreseeable future — even after the pandemic has subsided.
Alibaba’s effort to enhance its B2B services to meet its platform sellers’ shifting needs offers a case study in how cross-border payment providers are adjusting their operations in the face of the global health crisis. It also shows that for many businesses, the need for cross-border payment facilitators is critical to staying afloat and will continue to be so after the pandemic has passed.
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