B2B Payments

Payment Rail Innovation Tops B2B's Year Of Disruption

B2B business to business

This year, B2B payments technology made strides toward speed, transparency and efficiency as service providers took advantage of a massive market opportunity: corporates' payment demands are growing more sophisticated, yet they continue to rely on checks and legacy tools.

Commercial card technology was a particularly bright spot of 2019, with industry giants including Visa, Mastercard and JPMorgan embracing the ability for commercial and virtual cards to step into the accounts payable department.

But the B2B payments arena also jumped at the opportunity to explore beyond the card rails, developing new networks and technologies to tackle the biggest pain points of B2B payments, including cross-border transacting and the need to accelerate payment speeds.

Below, PYMNTS explores the biggest B2B payments stories of 2019.

Beyond Legacy Payment Rails

Payments innovation this past year not only embraced overlay technologies to enhance existing payment rails like cards and ACH. Innovators also embraced the possibility of developing entirely new payment rails and networks in order to tackle the biggest B2B payment friction points.

One firm embracing the opportunity to bypass existing infrastructure in favor of entirely new ones is blockchain company Ripple, which this year announced a collaboration with MoneyGram to power cross-border B2B payments.

In an interview with PYMNTS, Ripple Senior Vice President of Business and Corporate Development Kahina Van Dyke explained why building new infrastructure from the ground up can be an effective way to combat friction in the legacy correspondent banking system that lacks transparency and is plagued by slow transaction speeds and high FX costs.

One of the largest B2B payments stories of the year was Visa’s launch of Visa B2B Connect, its cross-border B2B payments technology that tackles the friction of legacy, non-transparency global payments, while accelerating speed for corporate users.

The launch of Visa B2B Connect in June followed a successful 18-month pilot that expands Visa's presence beyond its own credit card rails. The technology deploys distributed ledger and the open source Hyperledger Fabric framework hosted by The Linux Foundation to take a digital-first approach to global corporate payments.

“We did not build this infrastructure by adding to the traditional card network infrastructure, as we knew it,” Visa Head of Global Business Solutions Kevin Phalen told Karen Webster ahead of Visa B2B Connect's launch. “We knew that for what we were building for, and what we were solving for, we needed to really build a brand new network from scratch.”

B2B Finds Faster Payments Value

While real-time payments are typically viewed as a value-add for consumer and peer-to-peer payments, 2019 was the year that corporates began to acknowledge value in faster payment networks, too.

In an interview with Karen Webster in July, Mastercard Senior Vice President of Product Management and New Payments Andrea Gilman discussed why faster payments must proliferate into the B2B payments realm. The true value, she explained, lies beyond the mere speed of a transaction, into the opportunity for these faster payment services to carry valuable transaction data along with funds, as well as elevated security. Those will be critical value-add opportunities for B2B, she noted.

Credit Card Giants Stake Their B2B Bets

With significant investments in corporate payment solutions like its B2B Hub (launched in 2017), Mastercard says B2B is an increasingly important piece of its market strategy, according to CEO Ajay Banga.

“We are continuing to see momentum in our core commercial card business,” he said during an investors call in February, pointing to the company's expansion in the fleet card, accounts payable and expense management applications through collaborations with U.S. Bank, MYOB and others.

Visa and Mastercard continued to turn their attention toward the B2B payments arena in 2019 as commercial cards strengthened their footprint beyond employee expense and into accounts payable and strategic spend management. But they weren't the only leaders in the credit card arena to press further into the commercial payments market.

This past February, American Express launched a partnership with Bill.com to power accounts payable transactions within the Bill.com platform. Together, the companies introduced American Express Vendor Pay by Bill.com, a joint solution that enables Bill.com users to pay their suppliers using American Express Business or Corporate Card virtual card technology, in addition to the existing ACH and check payment functionality within Bill.com.

In a statement at the time, American Express Global Commercial Services Executive Vice President E-Bai Koo said commercial and virtual card technology can support streamlined vendor payment processes, critical for growing companies that face rising invoice volume and supplier payment complexity.

JPMorgan, too, embraced the opportunity of collaboration to strengthen its commercial card reach this year. In January the financial institution announced a partnership with Coupa Pay to issue single-use virtual cards into the Coupa Virtual Cards for Purchase Orders offering to pay suppliers and automate reconciliation of the PO with payment. Virtual cards, JPMorgan said at the time, promote visibility and greater control and analytics power in procurement spend.

Cross Border's Enticing Complexities

With solutions like Visa B2B Connect shining a spotlight on the opportunities to address B2B payments friction when transactions occur across borders, service providers in the industry also turned to other areas of innovation potential in the global business payments arena.

The cross-border B2B payments market is worth an estimated $38 trillion, much of which continues to occur via paper checks and wires attached to paper or PDF documents. In 2019, service providers including Visa, Mastercard, Ripple and SWIFT's gpi continued to position themselves to reserve their share of a major revenue opportunity: in 2018, cross-border B2B transactions generated an estimated $125 billion in revenues, a value expected to climb for 2019 and beyond.

In a previous conversation with PYMNTS, SatoshiPay CEO Meinhard Benn explained that the demand for frictionless, fast global corporate payments is already here — and it's up to solution providers to introduce new ways to achieve it.

As 2019 comes to a close, while B2B payments technology has made significant strides, challenges and service gaps remain, leaving a wide open opportunity for innovators and service providers.

“Many of these businesses use traditional payment networks based on legacy infrastructure that are not meeting the requirements of globalization, such as speedy execution, guaranteed arrival and transparent competitive fees,” Benn said.

——————————

PYMNTS TV LIVE OCTOBER SERIES: B2B PAYMENTS 2021 – WHAT WILL YOU CHANGE? 

Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border. Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

TRENDING RIGHT NOW