FinTechs are keeping an eye on emerging technologies at the beginning of the year — and predicting how they will impact business-to-business (B2B) payments in 2020. AvidXchange CEO and Co-Founder Michael Praeger, in one case, told PYMNTS that “AI [artificial intelligence] and machine learning have already made huge waves in the payments space, but I think we’ve yet to see their full impact, particularly as it relates to real time and cross-border payments.” And he said the opportunity surrounding cross-border real-time payments (RTP) will have the most significant impact on end-users due to the “potential implications” for changing how the FinTech conducts business.
Praeger noted there is still attention surrounding blockchain, but it hasn’t been the game-changer that many people in the industry had expected. “There’s still a lack of consensus around things like the right platform and the right interface that are keeping it from becoming more mainstream,” he said. “But, that’s not to say its impact will be lessened once those questions are resolved.” He did point out that cross-border B2B payments enabled by blockchain are forecast to reach $191 billion by the close of the year, reflecting rising demand for B2B transactions on a global level.
AvidXchange’s goal is to have 100 percent ePayment adoption with “payments delivered on time, securely and with discrete data.” As it stands, approximately 51 percent of the FinTech’s suppliers are ePayment enabled, which means they have chosen to receive payments electronically through the FinTech’s network. But with 60 percent of B2B payments in the industry still made via paper check — 80 percent for small and medium-sized businesses (SMBs) — however, he notes, “there is still a great opportunity to further push ePayment adoption.”
Praeger said it was forecast that the industry would see a decline in merger and acquisition activity in 2019. That trend didn’t come to fruition with deals such as FleetCor’s acquisition of Nvoicepay and Fiserv’s purchase of First Data. And Praeger says veteran players in the FinTech space will continue to grow this year. With money movement and regulatory hurdles, however, the firm is seeing fewer entrants into B2B payments each year. As a result, Praeger believes M&A activity will be similar to what was seen last year.
A point arises, however, when firms have to choose the self-funding route and raise the needed capital or collaborate as well as partner with larger players that have the backing to make acquisitions part of their strategy for long-term growth. Praeger said, “If FinTechs choose the self-gen route, they face building services organizations from scratch and the complexities of regulatory licensing. When choosing the latter, a partnership or M&A scenario, FinTechs can partner with established entities that have the right architecture in place.”
FinTech and Bank Collaborations
Praeger also noted that AvidXchange has seen more FinTechs and banks begin to work with the idea that “when they partner instead of competing, really great things can happen, and it can be a mutually beneficial relationship.” He believes that “these relationships will continue to be explored by more FinTech companies and established financial institutions to work together toward a common goal of moving money and doing so quickly and securely.”