Business-facing FinTechs have trailed behind innovation-targeting consumers – so looking back a decade ago, at the mere early rumbles of an eventual FinTech boom, it’s perhaps unsurprising that B2B FinTech was hardly a blip on the radar.
Yet when Tipalti Co-founder and CEO Chen Amit stepped into the ecosystem to tackle accounts payable (AP) friction, he was frankly surprised that there hadn't already been a solution designed to address the multitude of pain points businesses faced back in 2010 – and continue to face today.
Solving for the friction of global mass payments for corporates “seemed a little bit obvious to me,” Amit told Karen Webster in PYMNTS' recent Founder’s Series podcast. “I thought this might be a solution for one or two customers – I couldn't understand why there wasn't already a solution for this.”
Amit, along with Co-founder Oren Zeev, had initially designed Tipalti’s supplier payments automation solution for a friend’s ad-tech firm that brought its payment woes to their attention. Amit explained that he quickly identified overlapping AP challenges across businesses of different verticals, particularly for firms with online-first business models like those in the online advertising or game monetization spaces.
These businesses have high volumes of often global, unstandardized and invoice-less transactions with proprietary methods for gauging how much they should pay their business partners and suppliers. At the same time, more traditional transactions, like procuring office supplies and paying vendors, remained a persistent and painfully obvious challenge across these digital arenas.
Yet as Tipalti’s scope expanded, solving for that pain point became more difficult than initially believed.
A Challenging Remedy for Obvious Pain Points
“After some time, I understood the challenges are greater than I thought,” Amit recalled, highlighting regulatory compliance as a particularly lofty, and unexpected, burden of facilitating cross-border B2B payments.
With regulators across each global market requiring different sets of data in different formats, corporates face a significant barrier to streamlining payments in the form of supplier onboarding to ensure tax, anti-money laundering (AML) and other regulatory requirements.
“Each regulator requires different information, and corporates need to know all of the questions they need to ask a supplier in order for a payment to succeed,” Amit said. “If you make a $10 payment, a $10,000 payment or a $10 million payment, there are differences, different payment methods, different sensitivities you need to solve for.”
That, coupled with a corporate’s own regulatory compliance requirements, supplier management and communication, and tax and bookkeeping needs, turns AP into a burden wrought with manual work, even today.
Overcoming this challenge meant developing technology to automate many of these tasks and reallocating much of this supplier onboarding workload to the vendors themselves, while also collaborating directly with banks and regulators around the world to secure the proper licenses – a process Amit described as “a roller coaster,” particularly several years ago, when financial institutions (FIs) were less likely to embrace FinTech collaboration.
Finding the Sweet Spots
The costs of the licensing and compliance burden mean it’s a rarity that new B2B FinTechs target this particular pain point, said Amit. He acknowledged that, if he’d known what he knows now about the complexities of solving for global AP friction, he may not have embarked on this journey.
But with a decade now under its belt, Tipalti has identified new opportunities and “sweet spots” in the industry, with the middle market presenting a particularly large opportunity to solve for AP friction.
Smaller businesses have other priorities beyond making high investments in automated supplier payment and compliance technologies. On the other end of the spectrum, large enterprises have the resources and staff levels required to solve for various pain points throughout AP, from invoice processing to FX management.
In the middle are the businesses that are struggling with limited resources, but have the demand to optimize AP.
“Accounts payable and finance departments in the middle market want to invest in growth, in products, in service, in people – they don't want to invest in suppliers, or supplier-related processes,” said Amit.
Yet this market segment continues to demand solutions to optimize their global payments, with new opportunities and use cases emerging for FinTechs like Tipalti. Amit highlighted, for example, recent demand for technology that can streamline how a single multinational business manages its subsidiary payments across borders.
“These businesses have to work with half a dozen banks around the world to transfer money,” he said. “It’s very cumbersome and inefficient work.”
At the broader level, solving for AP friction today is all about bringing together the power of software and payments to empower chief financial officers and controllers to bring more value to their businesses beyond the tedium of data entry.
“It all boils down to the risks and the effort – where the CFOs and controllers want to spend their time,” noted Amit. “How can they be more valuable to an organization than onboarding suppliers, verifying tax IDs, cutting checks and paying suppliers?”