Why Digitized Back Office And AP Processes Are B2B’s ‘New Normal’

The pandemic will continue to shake up B2B payments, especially for smaller firms — and there’s no turning back.

In an interview with PYMNTS, Steven Boyer, CEO of BluePenguin Payments, said modernizing payments and improving corporate back-office functions is helping to shape a “new normal” for B2B interactions, especially across AP.

In terms of mechanics, BluePenguin’s Aurora platform allows for faster payment (and digital processing) of invoices through multiple cards and multiple networks. This reduces the cost of paying third parties and boosts revenues by sharing interchange-based revenue streams.

The company said last month that it had expanded a partnership with Galileo Financial Technologies, an application programming interface (API) based payments platform.

“In the time of COVID, media outlets are abuzz with astonishment of how fast corporations are moving to digitize everything. The virus has served as the catalyst to add inertia to the long-awaited electronification of vendor payments,” in a $19 trillion market that has seen less than 1 percent of penetration, said Boyer.

The network effect will take over, and behaviors will change — and the wholesale adoption of videoconferencing serves as a precedent.

“None of the reseller partners or direct customers we are speaking to now are going to slow their plans down when there is a vaccine. The movement to electronification is here to stay,” he told PYMNTS, via ePayables.

The pivot toward working from home, he said, has been changing the way back-office B2B functions are being conducted.

The most obvious work from home impact with vendor bill payments is a challenge for companies sending a corporate checkbook home with an employee.

“Think of all of the process and compliance issues that this creates for every business where the individual who is paying vendors is not one of the principals,” he contended.

B2B virtual payments, Boyer added, can serve as a catalyst to examine the entire procurement to payment environment.  Executives can examine and address various points of friction tied to automation and process-related challenges (such as integrating with third-party software offerings).

Online payments platforms, he said, can help address those pain points at scale with faster technology integrations.  He said that the BluePenguin platform (and via restful APIs), Aurora, enables quick onboarding process, and real-time KYC approvals.

He said, too, that beyond PCI certification, Aurora, can encrypt and secure each transaction and job or process handled across the platform.

Looking To Smaller Firms

Drilling down, he noted that other firms focusing on B2B digitization have focused on larger corporates at the Fortune 100 level and above.

“A smaller commercial customer has not traditionally been able to acquire a B2B AP payment service offering. As BluePenguin adds more resellers, we hope to democratize AP B2B in the way that the ADP Payroll card, Greendot, Netspend or Chime cards have done with consumer reloadable cards,” he said.

Asked by PYMNTS how additional revenue streams can be created through shared interchange, Boyer said that “many markets think of B2B payments as acquiring or accounts receivable. In the acquiring category, Interchange is an expense. In the B2B AP category interchange is revenue.”

He explained that  BluePenguin’s services are “issued” though its bank partner, Meta Bank. BluePenguin pays Meta Bank and its issuing processor, Galileo, and the networks (Mastercard and Visa) for the ability to issue across the networks.

After those third-party expenses are deducted, BluePenguin shares the majority of settled interchange with our reseller partners.

“Our reseller partners continue to own the relationship with their customers (not transfer them to us) and they determine how much of the interchange that they wish to share with their customers. In this way, resellers embed our offering in their existing relationships.”  Those relationships, he said, become stickier and more profitable through the digitization of AP processes.