The story of buyers and suppliers — particularly enterprise-size buyers and SMB suppliers — is a familiar story no matter where in the world one is telling it. The supplier sends the goods and then they wait for payments — generally for a long time. How long they wait varies. As Karen Webster observed in a recent conversation with PayMate Founder and CEO Ajay Adiseshann, the Golden Rule in buyer-supplier relationships is almost always the same:
“He who has the gold, makes the rules.”
And India, where PayMate is based and does business in the B2B space, is not, yet, an exception to that rule. The good news, he noted, is that as a green field developing market, it lacks some of the legacy features that can act as weights to innovation. Paper checks, for example, just aren’t a factor. There are sophisticated payment rails capable of moving money instantly, he noted, and when a buyer wants to pay a supplier that payment will route directly from one bank account to another.
But the current process still comes with a host of lead weights holding it down. It isn’t paper free in many cases, because invoices are still drafted on them. And the payment, he noted, is just that — a payment.
“This is, unfortunately, is just a point-to-point system, there is no reconciliation on this basic platform. It will just send money and is very analog in nature from that standpoint,” Adiseshann noted. And for anyone who ever argued that simply taking the checks out of B2B payments would be magic bullet enough to pick-up the pace of funds flowing between supplier and buyers, India offers a strong argument for thinking again, he noted, since the average lag time between buyers and suppliers is 95 days long.
PayMate, which just announced a $25 million series D round included investment by Visa, among others, to further develop and expand its cloud-based platform designed to enable enterprises and businesses to seamlessly automate and digitize their entire procurement to payment cycle (procure-to-pay), believes it can helps fill in that B2B payments gap.
The key, he noted, is offering a balanced and robust enough solution, that both sides have reason to want to link into it.
Building The Win-Win
There are a lot more small and micro businesses in India than there are enterprise-sized firms, Adiseshann noted, since there are about 15 million SMBs in that nation. But, as is the case everywhere, SMBs are a large but incredibly diverse and diffuse group, signing them onto a platform is difficult, simply because reaching them as a group is difficult. It’s why PayMate starts with pitching its services through the enterprise firms, he noted, because it serves as the strongest channel for recruiting those SMBS.
“The enterprise is our entry point into the SMB universe because trying to directly recruit them is a challenge. When you work directly with the enterprise you can add on more and more layers to relieve the friction for SMBs in their day-to-day business operations while at the same time offering up a real value added for the enterprise.”
That value add for the enterprise, he noted, is particularly crucial because right now the system as formulated is already tipped to their advantage — particularly when it comes to dictating payment terms — and thus already works for them. What the offering must include, he noted, is an entire toolbox of services that automate the entire end-to-end lifecycle of the B2B payment from procurement to reconciliation.
That’s why the PayMate platform, built on top of the fast and secure payments rails in India, can layer on services like vendor management, vendor payments, customer payments , invoicing, supply chain financing options and terms marketplace. Moreover, Adiseshann said, the platform is designed so all those things can happen digitally — no one is required to pick up a phone to hammer out the negotiations.
While enterprise players may have no direct need to speed up the timetable in the world of supplier payments, he noted, they have every reason to want to get the most return on investment (ROI) possible on their cash and have the maximum number of options in how they manage their relationship with their SMB partners.
“For example, you have enterprises with free cash and their most efficient end-point is to create an advanced payment discount. The end small business is more than happy to take a 1- or 2-percent discount for that earlier payment, because that cash flow is their lifeblood. We have a chance to create an interaction between the enterprise and small business that is beneficial to both sides.”
And offering that more positive interaction — and offering it at scale, is what PayMate is now fully focused on with its new Series D funding in hand.
Growing Up — And Out
Updating the traditional buyer-supplier relationship is not exactly an overnight task, he noted, and with 15 million small businesses in India to reach, PayMate has some climbing to do, since as of today it has enrolled about 1,000 of them.
But as the firm turns its attention to scale — both inside India and globally — the power of their latest round and emerging partnership with Visa will be particularly impactful.
“We want to keep adding more value and we want to continue our expansion into other geographies beyond India like the Middle East, Africa and Asia Pacific in the near term.”
Within India, he noted, the push is finding new acquisition channels for those SMBs — and thinking of new ways to go after the long term as it tries to take on the market in a quicker manner.
But the climb is worth it, he noted, because the rewards in the B2B space are so apparent. No matter what side of a buyer-supplier traction one talks to, he noted, the various frictions are beloved by no one.
The solution, though difficult to pull off, is simple to see. Build something where everyone comes through better off from the transaction than they would have in the old system, he noted.
When one does, he noted, there is a real potential to cut that payment cycle down from a few months to a few days or weeks.
“The idea is to take the friction down — and speed up the flow of funds by knocking down all those impediments.”