B2B payments always seems to be a step or two behind B2C payments innovation, on several fronts. It’s often struggling to make progress, weighed down by paper documents, slow payment times and a lack of digitization — and this has led many B2B payments innovators to use the B2C landscape as a standard for improvement.
In Russia, adoption of electronic B2B payments is severely limited, said Oksana Korobkina, head of eCommerce at Russian ePayments outfit Yandex.Money. However, that doesn’t mean expectations for improvement and innovation are limited, too.
Instead, Korobkina told PYMNTS in a recent interview that the industry should set its sights higher than even the B2C payments space to provide companies with the necessary efficiency and speed they need to get business done. With that goal in mind, she noted, Yandex.Money expects to see the line between B2B and B2C payments disappear.
“The experience of the customer is going to be very similar — it shouldn’t be worse in the B2B industry, for sure,” she said. “It should be at least the same, but even better, because the volumes of B2B payments are much bigger than B2c.”
Today, ePayments in Russia has taken off with vigor. A recent report from Russia’s largest state-owned bank, Sberbank, published last October, found that cashless payments in consumer spending jumped to 39 percent in 2017 — up from just 4 percent less than a decade prior.
The introduction of ePayments functionality may have been quick in the country, but it didn’t happen overnight. Korobkina said it took at least 15 years for consumers to begin to change their behavior and trust ePayment tools, and a similar hesitancy is expected among corporate adopters of electronic payments.
To move things along, Yandex.Money and Sberbank recently announced the launch of a new B2B payments platform that enables companies to send funds within minutes to their suppliers. The solution, if it can gain traction, would represent a major “leapfrog” moment for the country’s B2B payments industry, which continues to rely on paperwork and lengthy collaboration with banks to move money between businesses.
“Russia is a country that, right now, doesn’t treat B2B payments equal to B2C payments in terms of ease-of-use,” said Korobkina, the top manager and owner of the new B2B payments product. “Right now, basically all B2B payments are offline.”
With businesses having to either physically visit a bank branch or conduct online banking, complete paperwork and wait three days to receive a payment before any orders can be fulfilled, the industry is undeniably ripe for disruption. Added to the mix is the friction associated with paperwork, reconciliation and tax records after a vendor receives payment and a buyer receives their order. There is no question that digitization can address many pain points of the market today. What is less clear, however, is which technologies and payment rails will be able to tackle those issues.
According to Korobkina, while commercial card solutions are beginning to take off in the U.S., less than 1 percent of all B2B payments volume in Russia is made by card, thanks to confusing and burdensome processes associated with clearing and expense management. Put simply, “businesses in Russia don’t understand how to use it,” she said.
Rather than push an existing consumer payment technology onto corporates, Yandex.Money and Sberbank have developed new infrastructure from the ground up, allowing companies to add a digital button to their own websites and receive payments via Sberbank’s Business Online platform. Reports in Telecompaper said at the time the solution was announced that Sberbank supplied more than 2 million companies with settlement accounts, providing the type of reach and scale necessary for any new payment tool to gain traction.
It’s not the first innovation in digital B2B payments for the country, however. Last year, Visa announced that Sberbank signed up for Visa B2B Connect, which deploys blockchain to facilitate B2B payments.
Another key shift ahead for Russian B2B payments is the nation’s move from SWIFT‘s interbank communications platform. With the central bank now working on a replacement, the Russian Association of Corporate Treasurers has also signed up for the government’s Masterchain initiative, which promotes collaboration between top Russian banks and Russia’s FinTech association to create a payments messaging system to facilitate cross-border payments.
Momentum from these initiatives shows promise, with early adopters of Sberbank and Yanex.Money’s B2B payments solution from the travel industry and B2B eCommerce spaces. Both of these areas are not only eager to adopt ePayments, but are pushing for faster B2B transaction times, said Korobkina — adding that B2B eCommerce is a particularly bright spot for ePayments adoption because of the pressure for sellers to accelerate warehouse turnover. These companies cannot wait three days to receive payment before they send orders out, she said.
Korobkina also noted that small businesses making payments to larger vendors are among the early adopters of the tool, pointing to business owners’ consumer-like payment habits and needs, stemming from the fact that business owners and their payers are often one in the same.
However, meeting businesses’ consumer-like payment needs also means that payment service providers will need to have the same patience they had when disrupting B2C payments in Russia. Korobkina said she, “of course,” expects some challenges in introducing a new B2B payments solution to market.
“We had to create a new IT solution together with corporate bank infrastructure,” stated Korobkina. “It’s not only about infrastructure because we have to change the way of thinking of B2B businesses. Teaching them to pay another way is super hard.”