The pace of payments innovation continues to accelerate, and corporate payments are no longer an exception to this trend.
But to understand where B2B payments innovation is going, Jay Dearborn, president of corporate payments at WEX, said the industry must first take a look in the rearview mirror.
“To understand what’s on the horizon for B2B payments over the next five years, you have to first look back at the past five years,” he told PYMNTS in a recent Masterclass video interview.
What the past five years have demonstrated, he said, is the value of bank-FinTech collaboration in both promoting innovation in B2B payments solutions and encouraging adoption of those tools.
So, what does that say about the next five years? More of the same, Dearborn said, although the pace of innovation will be much faster.
Banks’ Unwavering Role
Although FinTechs have been instrumental in promoting innovation in B2B payments, traditional financial institutions remain an essential component of that collaborative strategy — and that status is sticking around, said Dearborn.
“With the FIs, they have been around for more than 100 years,” he noted. “This is the incumbent banking system, and they aren’t going anywhere soon. They’re learning how to partner with technology.”
They may be the incumbents, but they’re also operating, in many cases, with legacy infrastructure that isn’t capable of supporting the kind of speed, transparency, visibility and efficiency now demanded by corporate payers and other players in the B2B payments ecosystem.
Forging a Different Path
Corporates, too, are struggling with their legacy infrastructures, which is one of the many reasons why Dearborn said B2B payments innovation cannot follow the same path that the business-to-consumer (B2C) payments space has taken.
Indeed, Dearborn said, comparing the B2C and B2B payments spaces “isn’t useful for us as an industry” due to just how different the two ecosystems are.
A consumer today is often able to address their payments needs by downloading an app or changing a payment or financial service provider — a process that can be done in a day. Thanks to corporates’ complex, often outdated systems, as well as the magnitude of friction in business payment processes, the industry is juggling challenges that cannot be solved with the simple download of an app the way they can be for a consumer.
Corporate payments friction is a multi-layered beast, which first begins with tackling the friction of bridging the gap between legacy infrastructure and emerging technologies. But it doesn’t end there — corporates’ complex workflows must also be taken into account by emerging B2B payment solutions, and once that’s addressed, then service providers have to address the challenge faced by the actual people using new tools.
“There are people who actually have to engage with both the technology and the workflow, and these things are difficult to solve,” he said. “But we as an industry have been working on this for the past decade or more, and are continuing to gain momentum.”
FinTech’s Collaboration Strategy
Key to gaining momentum is tackling a multi-layered challenge from multiple angles.
FinTechs are at an advantage over incumbent banks because they can dedicate their resources and energy to addressing one particular challenge in B2B payments with new products and services. And to promote adoption of those new tools, their position also means FinTechs can allocate resources to tackling the problem of working on top of, or entirely around, legacy infrastructure to ease adoption challenges.
Dearborn said WEX takes three approaches to adoption.
One is to work with corporates directly, allowing business customers to adopt WEX’s accounts payable (AP) and vendor payment solutions based on their unique challenges related to existing infrastructure and systems.
Second, WEX works with banks in the spirit of bank-FinTech collaboration that has been so instrumental in B2B payments innovation. Partnership is at the core of WEX’s business model, and they work with financial institutions to solve challenges and create a solid payment foundation by using agile development and continuous improvement methods.
WEX’s strategy provides FIs’ with a solution that overcomes their challenges of legacy infrastructure by white labeling its technology to fit seamlessly into banks’ existing operations.
Finally, Dearborn explained, WEX also works with third parties, which can imbed WEX’s “payments in a box” offering. It’s another way WEX is able to offer flexible and scalable solutions, while integrating B2B payments capabilities directly into the service providers corporates already use.
While companies like WEX can support B2B payments progress by collaborating with banks, corporates, FinTechs and third-party service providers, businesses themselves have a role to play in their own adoption of commercial payments technology.
Identifying the opportunity in commercial cards, for example, can mean digitizing supplier payment processes while at the same time taking advantage of rebates, said Dearborn.
Most importantly, he said, businesses must recognize that when they begin their B2B payments digitization journeys, they don’t have to go it alone. Indeed, corporates must embrace the same spirit of collaboration that service providers have.
“If you were running a business today in 2019 — soon to be 2020 — and you have not digitized your AP file or AR file, there is an opportunity for you. There are simpler ways of doing things,” Dearborn said. “If there’s a business out there that hasn’t digitized its payments, now is the time to do it. There are partners all over the ecosystem looking to help you.”