To Ignite B2B eCommerce, Think Credit As A (Bundled) Service

B2B as eCommerce bastion of innovation? Not so farfetched, as traditional banks grapple with shifting business models, and Amazon disintermediates middlemen. In the latest Topic TBD, MSTS President Brandon Spear says smaller firms offering value add from bundled B2B functions, from credit to invoicing, can spark real change in the B2B arena.

The consumer may be what makes for sizzle and sparks in the payments realm, grabbing headlines and headspace. But within B2B eCommerce, there are pockets ready for ignition.

In the latest Topic TBD, PYMNTS’ Karen Webster spoke with Brandon Spear, president of MSTS, to get a sense of the challenges and opportunities tied to credit and payments amid a market that is three times the size of B2C. B2B eCommerce is primed for explosive growth, complete with sellers who are looking for better ways to find buyers, and buyers who want to find new places to go shopping.

Spear said there is a link between the B2B and B2C worlds, where the latter is helping define the former as firms want to bring the ease and simplicity of conducting transactions in the consumer world to B2B activities.

“There are some titanic forces driving the needs for sellers to have a closer relationship with their buyside customers,” said Spear. “It’s not simple [the complexity], but it’s a problem I think that people are focused on solving now and through the next couple of years.”

The complexity is such that exchanges – which existed in years past on the notion that pricing and availability of goods were transparent to buyers – never really got off the ground. There have been thousands of such exchanges, only a handful of which survived. As Spear noted, successful exchanges transformed into vertical marketplaces, solving process problems for industries. The focus, then, was less on commoditizing what the sellers were selling (or commoditizing the purchasing) and more on standardizing the process of wringing out costs from both sides.

“The value equation has to be more around how do you create the process efficiency that you can lower the cost of doing business with one another and still let sellers differentiate on quality, on service, on after-market service … and take out the cost of RFPs, of producing an invoice, of reconciliation [and other business processes],” said Spear.

Looking at the current landscape, Spear said technology has advanced to such an extent that it is easier to think about much smaller market niches and solve process problems with specific solutions. In the past, companies set their sights on innovation with an eye toward whether their industries were potentially global in scale. Technology has made it possible to mass-customize such solutions, said Spear.

Consider the manufacturer who wants to construct an eCommerce strategy, while at the same time does not want to disrupt their dealer network or distribution – but needs to be able to reach their end customer with payment terms and uniform pricing across a given country, for example.

Technology solutions have evolved in that space, said the executive, that let manufacturers grow at scale to create eCommerce environments and avoid channel conflict, while opening the door to provide aftermarket services for the products they sell.

Thus: A change in the relationship up and down supply chains. But amid the boon of technology lies a double-edged sword, as Webster noted – for example, in retail, there is the chance to go direct and to cut out the middleman, whether that middleman is a store or a mall.

Regardless of industry, the challenge and dilemma for those middlemen, said Spear, is that “if you are in a distribution model where you are not adding a lot of value to the distribution process, where you are not doing any installation, you are not doing any aftermarket service – those business models are under threat.”

Yet, he said, some distributors do offer value add, in that they provide credit and collection and underwriting payment terms given to customers – responsibilities that would shift back to the manufacturer (in this case) in the event of disintermediation.

Many B2B players (the parent manufacturers or original equipment manufacturers) are not ready to take on those additional tasks, as Spear said. But as automation takes root and makes new inroads into payments – and businesses can tap into non-traditional sources of data, such as from social media – those activities are not out of reach.

All of this means distributors must find new ways to add value if traditional B2B practices are going to be rendered obsolete.

Where obsolescence looms, reinvention beckons.

“There is an interesting window of opportunity for service providers to help and be able to package and bundle those solutions together,” said Spear.

Bundling is a concept especially germane to payments, he continued, a capability that MSTS’s customers find a challenge, as either they have that capability today and are struggling to scale it, or they do not have it at all across credit, underwriting, customer support and the like. FinTech firms and service providers are queuing up to help service that need, he said.

“There is an emerging category that we like to call credit as a service,” said Spear, where payment functions are bundled and delivered in a B2B capacity.

Delivering those services to a B2B supplier or seller helps firms increase the brand equity they can build with their customer base. And ultimately, if done well, the goal is to grab a larger share of their wallet, said Spear.

Automation is key, as the faster you can couple your network with your customers’ network, the stickier the relationships become and the more aligned the processes become, creating – as a B2B buyer – a barrier to exit.

In an age of greater visibility and transparency – where the information flow is greater than ever – Spear said power rests with the suppliers to ensure that business processes align, that invoices match and that payments get done.

Amid B2B, here’s another B: blockchain.

“I love the idea of blockchain,” Spear said, while cautioning that although blockchain may be in the hot cycle of technology adoption, and while some believe it can be the solution to any problem, it lends itself very well to data sets that are not dynamic.

As an example, he said that if used as a platform for processing hundreds of millions of transactions per year, blockchain is impractical – because the cost of computing the blocks in the chain is unrealistic to the value added to the transactions.

A more realistic application for blockchain would be keeping title information for vehicles or title information for real estate, as those transactions are relatively infrequent – and the change in the data is not that high. Blockchain, Spear said, can be viewed as “a future contract depository … that stores the relationship between you, as a seller, and the buyer.”

Omnichannel is viable here. Spear noted that there is a tremendous push to sell everything online, and within the B2B space, there is still demand to go into a store and make an in-person purchase, as a firm may not be able to wait for a delivery the next day.

An omnichannel experience – complete with a line of credit and a loyalty program that works the same across an eCommerce site as it does in-store – is a crucial component of a strong customer experience.

A unique customer may expect a unique price, said Spear, which is relatively easy to facilitate online across an eCommerce site – and not so simple in a physical setting where there is inventory, and point-of-sale devices, all of it hard-coded.

Commerce done globally requires scale, of course. Spear said that “historically, this whole space has been dominated by the banks,” which are well-regulated, of course, with rigid definitions in place governing what they can and cannot do.

But in some countries, regulation has been seeking to define how – and where – FinTech players fit in when it comes to the banking arena. The business model, then, is the key to igniting B2B eCommerce on a grander scale.

To manage scale online, Spear said that in B2B, multi-national players in every jurisdiction must have a different set of laws and a different level of complexity, with opportunity in place to create national or super regional networks of countries. “It is a real minefield today when you go outside of the United States to create a uniform process,” he said.