Fixing the Three Major Problems in B2B Payments

Just a few weeks ago, PYMNTS hosted its annual B2B conference in New York City, featuring top players and innovators in the B2B payments space who gathered together to talk B2B innovations, what’s broken in B2B payments, and global trends and regulations.

Following the keynote speech on the impact of B2B payments on global economies and more, PYMNTS sat down on-site with John Bruggeman, CEO of Traxpay, to get his perspective on some of the issues that came up during keynote. But first, Bruggeman began explained what makes Traxpay particularly stand out – in contrast to every other static B2B payments company, he said,Traxpay is dynamic.

“We can change the who, what, when, where and how of a payment at anytime, from the moment a payment instruction is created and initiated to the moment it’s fully settled and reconciled,” said Bruggeman. “As far as I can tell, we’re the only company in the world that can change any or all of those dimensions of a payment at any time during its life.”

One of the topics brought up during the speech was the importance of the marriage of data and payments. In order to determine which of those variables – the who, the what, the where, the when, the why, and the how – change and why, they really have to look at the data, noted Bruggeman. The data creates a rule, and that rule tells them what to do with the payment.

“Traxpay may change who the payment goes to based on a change in terms of a contract, or we may change the amount based on the time the payment is made, or we may change the route of the payment based on the cost,” he said. “But we use data and rules to determine when and how to change those variables of a payment.”

THE THREE MAJOR ISSUES IN B2B PAYMENTS

During the keynote, one attendee had an interesting opinion on how she saw regulation as “driving a gulf” between the capabilities that we might see in B2C payments or APIs, and what could potentially be realized in B2B real-time payments between businesses. Bruggeman, however, offered his own perspective on this.

“I love the way the regulatory challenge was described – how it’s holding B2B payments back from achieving the same level of use and use of access as B2C has attained. But I think it’s oversimplified to say that once we’ve solved regulatory, we’re all done,” he said.

There are really three issues to be address, with regulatory being one of them, he added. Different jurisdictions and governments have different rules and ways to view the flow of a payment, and companies need to deal with that. That is clear.

However, there are technology changes to be addressed. In the B2B space, data matters, he said. That data lives in back office information systems – in ERP, purchase-to-pay systems, order-to-cash systems, electronic invoicing systems, and more. There are all kinds of data that requires a deep understanding of and access to it.

The third issue is the business model. Bruggeman noted that the business models in B2C are really straightforward, well-known and well-understood by the consumer. But in B2B, different supply chains have different rules and different business models.

“If you don’t have the flexibility and the ability to deliver to different business models, that’s also an obstacle,” he said. “So I think it’s really the combination of regulation, technology, and business models that we will have to address before we can achieve widespread adoption.”

REENGINEERING THE SUPPLY CHAIN WITH INNOVATION

Bruggeman noted during the keynote that the B2B space is on the precipice of a significant change. Both technology and innovation, he said, have always been applied to the top end of the supply chain – the tier one suppliers, and maybe some of the tier twos. The big buyer has put a lot of technology in place, and the banks have focused their attention on the top end of the supply chain.

Meanwhile, he said, the tail end of the supply chain has been largely dismissed. That’s because the cost to deploy technology, and the ability of those companies to accept that technology, has not been readily available.

“The innovations I’m talking about take the same kinds of abilities and advantages that the top tier suppliers have and push then deeper into the supply chain,” said Bruggeman.

One of the biggest challenges in any supply chain, according to Bruggeman, is access to fast, good-priced, easy working capital.

“That’s been really hard because the supply chain data has been separate from the payment data. If we bring those two together, suppliers will have real-time access to payments and data. We’ll then see all kinds of new compensation models or financial products offered to give the backend of the chain the same benefits as the front end.”

Bruggeman indicated that buyers will push more of their business deeper into the supply change because of the quality of products or delivery, or the terms and conditions they get. The top end of the supply chain will be forced to perform better, or they’ll be dis-intermediated. At the same time, the back end will get advantages they never before had.

“We’ll see a democratization of the supply chain, and that will serve to benefit everyone in the space,” he said.

John Bruggeman
CEO, Traxpay

Mr. Bruggeman’s extensive experience with enterprise software companies complements the banking and payment expertise of Traxpay’s executive team. Most recently John was chief marketing officer at Cadence, where he was responsible for corporate, product, and strategic marketing activities. Before joining Cadence, he was chief marketing officer at Wind River, where he oversaw product planning and management, corporate marketing, and field marketing. Prior to joining Wind River, John was vice president of marketing at Mercury Interactive; before that he was vice president of strategic planning at Netscape. John has also held a variety of marketing positions at Alventive, America Online, Lucent, and Octel Communications. He holds a Bachelor of Science degree in statistics and computer science from San Jose State University and a Master of Science degree in mathematics from the University of Connecticut.