B2B Payments

Sorting Telco's Web Of High-Volume B2B Payments

There is already a significant level of friction that large conglomerates face when sending and receiving payments to and from each other. Between a continued reliance on legacy tools and a rising demand for data capture, integration and analytics, making a single B2B payment faces no shortage of obstacles.

Furthermore, when multinational conglomerates need to make a high volume of payments to each other every day, those obstacles compound.

According to Eran Haggiag, co-founder and executive chairman of blockchain startup Clear, the challenges associated with inefficient high-value, cross-border B2B transactions can cost conglomerates hundreds of billions of dollars — and current payment infrastructure is not equipped to address this burden.

"A payment network like ACH is on the local level," he told PYMNTS in a recent interview, highlighting the struggle for national payment infrastructure to facilitate global transactions. "Utilizing a cross-border service like SWIFT has a few shortcomings. They are all relatively slow, relatively error-prone and costly."

It can be challenging enough for a corporate to gain visibility into a single transaction sent to a supplier, and to ensure that that transaction is affordable and accurate. However, when these businesses are sending hundreds or thousands of payments a day, even a relatively low error rate or global transaction fee can yield massive financial losses, and an extra burden on professionals to manage and reconcile these payments.

The Data Management Hurdle

Haggiag noted that even as newer payment technologies surface to address the challenges of speed, cost and accuracy in cross-border transactions, it's not only about the cash in high-volume B2B payments.

"When you talk about B2B payments, the actual transfer of the money is just a small part of the story," he said.

Indeed, in B2B relationships that require frequent payments between partners, those relationships tend to come with complex agreements on costs, fees, payment schedules and more. Transactions must be reconciled, and invoices must be compared to contracts and internal data from emails and other documents. When this process occurs manually at the end of the month or financial period, the pain of mitigating disputes, managing contract compliance and avoiding errors is so significant that financial losses are almost inevitable.

"This is happening all around the world, across industries, at both small businesses and big enterprises, and it's costing hundreds of billions of dollars," said Haggiag. "The amount of money leaking out of different accounts, and not getting to its destination because of disputes and errors, is significant."

The B2B payment challenge that Clear hopes to address is the movement of not only funds, but of data between businesses, combined with contract management and compliance in a high-volume transaction ecosystem. The company aims to do this by wielding blockchain and smart contract technology that can either operate on top of existing traditional cross-border payments infrastructure or bypass it with distributed ledger technology.

The Telco Use Case

One of the early use cases for Clear's solution was the telecommunications industry, a market in which high-volume B2B payments — and the associated frictions — are common.

Haggiag pointed to international calls, for instance, in which the customer of one telco calls a customer of another telco overseas. There's also the example of one customer traveling internationally, and wielding a partner of their domestic telco provider in another country.

"You're paying your local provider, but you're using the infrastructure of another provider," he explained. "Behind the scenes, your local provider has agreements with that international provider for using [its] services. Because these telcos need to have relationships with basically every provider in the world, they have to manage hundreds of relationships — each with its own complexities of multiple products around SMS, data and now IoT, with conditional agreements around volume."

Not only must these telcos make a high volume of payments to one another, but they must ensure that those transactions reflect those specific contractual agreements. According to Haggiag, complexity in this space — and in other industries' high-volume B2B payment needs — will only grow.

Driving On-Demand Payment

In the telco arena, the shift toward on-demand connectivity reflects end consumers' growing need for telco services when and where they want them. Emerging technologies like virtual reality and 5G are also adding to the burden of higher bandwidth and faster service speeds, all of which will pressure these telcos to accelerate their interoperability capabilities.

However, the telecommunications arena is far from the only industry experiencing this shift.

Supply chains across verticals are growing more complex, while the rise of on-demand everything drives an acceleration of the speed of doing business. At the same time, said Haggiag, corporates are expecting on-demand payment capabilities, meaning they need technologies that can be agile enough to move money, promote compliance and streamline reconciliation on demand, too.

Haggiag pointed to an array of other markets with complex supply chains, including pharmaceuticals, healthcare, the supplier-distributor relationship and media — some examples in which high-volume B2B transactions have historically plagued cash flow for corporates.

Newly funded Clear will be exploring additional use cases, as it prepares its software for enterprise adoption. Haggiag noted that the company is looking into the development of a stablecoin that could facilitate B2B transactions as well, in an effort to address additional challenges in the space.

"This is about allowing an agreement on what amount of money needs to be moved from one company to another in a very complex environment, with a lot of different conditions, and with reliance on different data sources," he said. "The world is becoming more complex."



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