B2B Payments

How The Age Of Bots, Fake News Taints The Buyer-Supplier Relationship

Know Your Customer (KYC) regulations are tightening, but due diligence goes both ways in the buyer-supplier relationship, leading to a rise in Know Your Supplier efforts, too.

The risks for buyers and suppliers when doing business with each other are vast. For buyers, ensuring the financial health of a supplier and having confidence that products will be delivered on time and with quality are of paramount importance. For suppliers, the focus turns to agreements that their corporate customers will pay invoices on time. Both sides must consider Anti-Money Laundering (AML) compliance and other regulatory risks in their business relationships, too.

Risk mitigation is only one component of an immensely complex process that results in the right buyers and suppliers connecting with each other. Those complexities, though, are opening up opportunities for technology firms to ease friction.

One of those companies is Koble, which operates a platform on which buyers and suppliers can connect and do business. It’s a two-way channel on which buyers can post requests for information and suppliers can promote their offerings, designed like a social media platform to kick off the procure-to-pay process.

This isn’t a simple game of speed dating, though. Koble Founder and CEO Fabrice Saporito told PYMNTS that the strategic supplier sourcing and customer vetting processes can quickly go awry, expose companies to risks from noncompliance and beyond.

“The upfront risk is really just the sheer waste of time and massive opportunity cost trying to sort through prospects without a targeted way to filter them,” Saporito said of the struggle buyers and suppliers face when blindly entering into new relationships. “Long-term, you risk entering into a relationship that may not be the best fit for both parties.”

Today’s era of “fake news and bots” has given rise to trust issues about digital identities. One of the largest risks a company can face when sourcing buyer or supplier partners is discovering that that partner is not what it says it is, resulting in loads of other risk exposures like KYC violations, lost payments, lost sales and more.

Reliance on digital portals has allowed companies to participate in global supply chains, but that can often limit visibility for executives. For instance, only 6 percent of chief procurement officers surveyed by Deloitte for a 2018 report said they have full transparency of their supply chains, and most CPOs struggle to gain visibility beyond their Tier 1 suppliers.

“This has major implications for organizations across all industries, particularly for meeting regulatory and corporate social responsibility requirements, and for the identification and mitigation of supply chain risks,” said Brian Umbenhauer, Deloitte principal and global head of sourcing and procurement, in a statement.

When it comes to supplier sourcing, Saporito said that simply finding the right vendor is often a headache.

“If you search on Google, you will get millions of returns in a fraction of seconds, and you’re not really sure where to start or stop,” he said. “This is especially true when the Fortune 500 look for global suppliers in markets across the world that they don’t have a lot of insight into.”

Corporate buyers must sift through “noise and disinformation” to work with the right partners, he added, making for an incredibly inefficient process.

As the supplier risk mitigation and strategic sourcing fields continue to develop, KYC has put a spotlight on the importance of suppliers’ adequate customer vetting processes, too. Saporito said that vendors will face similar problems of noise and disinformation when seeking new clients, but for smaller vendors, a lack of resources can be especially troublesome.

“Digital marketing across social networks, that weren’t designed from the ground up for B2B networking and sales, come across looking like spam,” he said. “These SME suppliers also have little time and [few] resources to build a digital presence that will be effective in attracting the interest of corporate buyers.”

Financials on both ends of the equation are key, too. A corporate buyer needs to know if a supplier would suddenly go bust, unable to fulfill an order.

“The biggest question … is generally from the buyer side: ‘Will the supplier still be around in a year?'” Saporito said.

On the other hand, suppliers have to know their customers won’t skip out on the bill and contribute to the growing problem of late payments. Issues like these are why third-party platforms like Koble are popping up to handle the vetting process for members in the supply chain.

Koble is taking a consumer-like approach to these points of friction. The company likens its online portal to Facebook, a social media experience to connect and communicate with corporate customers. The company also recently introduced a review tool that allows buyer and suppliers to review their business partners a feature Saporito described as “Yelp-like.”

This week, Koble announced a new collaboration to expand into Asia with Axiata Business Services, which will link its own corporate customers to Koble’s B2B matchmaking services. According to Saporito, cross-border deal-making has increased demand for such third-party services. He explained that concerns over the reputation of buyers and suppliers will become an “even bigger question from corporations in the U.S.” as they begin to look toward Asia for new business deals.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.