B2B Payments

Dwolla CEO: The Paper Check-less Business Payments Sea Change

Watchers of the B2B payments space already know how overwhelming the power of inertia can be. The great digitization that was supposed to drive out reams of paper has long been promised, but somehow never quite shows up. Paper checks always seem to stick around for another year, as digital progress crawls forward by inches. But that was before COVID-19 showed up and changed the calculation, Dwolla CEO Brady Harris told Karen Webster in a recent fireside chat.

Once it became clear that the pandemic wasn’t a temporary hiccup that companies could survive by hunkering down for a month or two, there came a push toward lasting change – a push that was finally strong enough to overcome the inertia.

“I think one of the most interesting things in terms of how [the pandemic] has revolutionized and accelerated all things digital payments is that companies historically are really slow or hesitant to adopt new payment modalities,” Harris said. “An accountant who's been in business for 40 years has an attitude that ‘we've always taken checks and cash and it works well for us.’ This new reality stopped both from working well, and forced [companies] to adopt some of these new technologies.”

And adopt them quite quickly. As COVID’s impact began to spread across the entire U.S. economy, “the floodgates opened” for Dwolla in terms of new customers coming to the platform, Harris said.

He added that gross payment volume “took off like a rocket” as existing customers began more seriously tapping into digital payments tools that had until March seemed peripheral to their businesses.

And Harris told Webster that these changes are neither a flash in the pan nor a temporary reaction to an extraordinary situation, so much as a sea change in the entire B2B payments ecosystem. He expects the shift to only intensify as paper falls away and businesses really begin digging into other options.

“I think [companies] have realized they can run their businesses more efficiently using digital payments,” Harris said. “If I were a betting man, my money would be on seeing this continue to pick up steam. I think it's here to stay.”

Building What The Market Needs Now

Necessity is the mother of invention, and Harris said the past six months have revealed to many merchants that their funds need to flow faster – and digital payments make that happen, while paper doesn’t.

Harris added that for some merchants, the issue is also about staying competitive in an industrial space that’s moving away from paper, as B2B customers are demanding digital options. A firm that wants to stay in the game simply must provide those.

“It could be consumer-driven in some cases. In other instances, existing payment modalities are becoming obsolete,” Harris said. “And in a lot of cases, businesses just need those funds faster, as everyone's fiscally constrained right now. The specific reasons and needs are often very industry-specific, but the theme of ‘we need funds flow in a faster modality’ repeats across all of them.”

What Comes Next?

Harris said the jump to ACH payments that Dwolla specializes in has the advantage of being familiar to companies. After all, an ACH and a check are the same thing, operationally – minus the inconvenient, inefficient paper or the fees associated with using cards.

But now that the flywheel is spinning on digital B2B payments, he added, what comes next is, in a word, “more.” As businesses drop their attachment to how things used to be, that will open up more space to build on how things will be.

Harris sees greater digitization, along with payments speeding up toward real-time. He also expects a realignment of the payments ecosystem in terms of who’s included.

“I believe we are rethinking the entire B2B payments roadmap for 2021 and beyond,” he said. “Consumers are going to require that digital payment solutions become more simplified, and speeds will increase. Money will move at a pace that supports digital transformations.”

For Dwolla, that means the immediate future involves tuning up its offerings to make integrations faster, with easy enhancements to its API. That will make it easier for end users to jump on and start transacting.

Harris said that the B2B payments system needs built-in “plumbing” to undergird it in terms of what businesses across various industries will require.

But that’s a construction project that will require FinTechs – which often view each other as competitors – to work more collaboratively, so those integrations are seamless and the market can progress. Between the evolution of corporate cards, the push to debit and the rapidly evolving world of real-time payments, there’s lots of room to innovate – and an increasing number of players looking to step onto the stage.

That’s setting up 2021 to be pretty exciting for all, noted Harris. “I think B2B is going to become an increasingly hot segment,” he said. “And in my mind, those FinTech and payment providers that can provide the easiest access to their products [and] can simplify the user experience will be in a great position to take advantage of that.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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