The consumer payments ecosystem is thriving with the rapid adoption of everything from QR codes and contactless cards to digital wallets and cryptocurrencies. As a result, money flows freely, and people benefit from having greater convenience and flexibility in the many ways to pay.
The same cannot be said of business-to-business (B2B) payments, which remain fundamentally broken. It’s a world that has spun an increasingly complex web of payment ecosystems, stitched together on an ad-hoc basis to support different types of payments to suppliers and clients. Companies have no real alternative, because all-in-one solutions simply don’t exist.
“We call it ‘the spider web’ in FinTech, because whether you’re a Series A or a more mature company, when you’re looking to solve payment problems for small or mid-sized businesses, you inevitably stitch together these ecosystems,” said Qolo Chief Executive Patricia Montesi in an interview with PYMNTS. “So you end up with this spider web of integrations with bank accounts, treasury management, ledgers and reconciliation.”
Escaping The Web…
Just like a real spider’s web, the FinTech web becomes sticky and tangled, leading to all kinds of inefficiencies and delays in getting paid. Those delays, while previously perhaps more of an annoyance, suddenly became critically important amid the pandemic, as more traditional revenue streams dried up and businesses were starved of the money they needed to keep their engines ticking. PYMNTS’ data shows that 75% of small businesses found themselves mired in cash flow problems, resulting in them having to defer rent or not pay vendors.
See the study: 74% of SMBs Saw Payments Delayed Due to Pandemic
“The pandemic put people in survival mode,” Montesi said. “It was no longer just about having more revenue or saving more money. It was literally about day-to-day survival. And in order to survive, cash flow became king.”
The pandemic killed off a lot of businesses, but those that survived are now emerging into a post-pandemic world where they want more than just the speedier access to capital to which they’ve become accustomed.
…To a Faster Future
These days, Montesi said, businesses desire more comprehensive solutions that not only accelerate and automate the payments flow, but also provide business intelligence that can aid in their decision-making.
“It’s not just about the expense savings from converting checks to something more digital,” Montesi said. “There’s a desire to go beyond the automation side to bring in insights, so not only can you do your payables and receivables, but you can also use the data it generates to gain insights into how to run your organization faster, better and smoother.”
The Total Value Package
Insights alone won’t be enough to fix the B2B payments ecosystem, though, because there’s still the challenge of getting people to adopt those solutions. What’s really needed is a compelling value proposition that also takes into account the user experience around some of the more persistent habits in B2B.
“Our platform still supports checks because a lot of people out there still want them,” Montesi said. “We’ve been talking for decades about the disappearance of checks, but they still exist.”
The challenge for payment providers is to create a strong value proposition that combines business insights with optionality around multiple payment modalities – and perhaps a better user experience to entice smaller business users to move away from those more outdated payment methods.
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“The value proposition has to be compelling and cash flow-driven, not just expense-driven,” Montesi said. “Then if we can unify that into a single ledger, or if we can have a better servicing proposition, we will get the movement and penetration on the business-to-business side.”
One of the juiciest value propositions will be helping companies escape that sticky web of multiple FinTech payment systems that creates so much inefficiency, Montesi believes.
Due to the pandemic-fueled acceleration of digitization, businesses are finally coming around to the idea that it’s possible to collapse all of that and make B2B payments a much more efficient play. Montesi noted that better solutions already exist, citing her own company’s platform that has been purpose-built with omnichannel capabilities that eliminate the need for multiple integrations.
“People are now starting to understand that they don’t have to build or manage that ecosystem,” she said. “The value prop is that they can focus on their business and push that same value prop to other small businesses.”