Over the past decade, there has been an increasing digitalisation of B2B payments and processes, and fintechs have significantly contributed to this digital transformation. Even though paper cheques are still widely used for B2B payments in some markets like the US, there has been a strong shift towards more innovative and, most importantly, digital solutions facilitating B2B processes and payments.
Fintechs have targeted specific pain points to create innovative and digital value propositions that bring significant benefits to both SMEs and corporates. This article analyses how fintechs are changing B2B payments across different use cases and have become key enablers to boost B2B payment growth.
Edgar, Dunn & Company (EDC) has conducted detailed research related to B2B payments based on 100+ interviews with the whole B2B payment value chain – and we have identified SMEs and corporates face six key pain points related to B2B payments and processes:
Manual B2B processes and payments
Cashflow management and payment delays
Complexity of ecosystem in B2B processes and payments
Lack of integration capability with existing systems
No clear visibility on direct and indirect costs
Difficulty to change current internal processes.
Fintechs have addressed these pain points and targeted specific use cases with innovative and differentiating value propositions. This article focuses on six use cases and how fintechs address specific needs:
B2B travel
Commercial cards
B2B cross-border remittances
B2B marketplaces
Working capital optimisation
Supplier acceptance enablement.
B2B travel is complex, with many stakeholders involved in the value chain, including Global Distribution Systems (GDSs – e.g. Amadeus, Sabre, Travel) and travel intermediaries with Online Travel Agencies (OTAs – e.g. Booking.com, Expedia) and Travel Management Companies (TMCs – e.g. BCD Travel, CWT).
Fintechs such as Ixaris, ModulR, Nium, and WEX have leveraged the use of virtual cards to create global and multi-currency solutions and facilitate the transfer of funds between travel intermediaries and travel providers (mainly hotels and airlines), capturing billions of dollars with a relevant value proposition.
‘Traditional’ commercial cards – both for corporates and SMEs – have lacked innovation and differentiation. Fintechs such as Capital On Tap, N26, Lili, Qonto, and TripActions have added relevant services to address specific needs of companies such as integration with expense management and accounting software, working capital optimisation, lending and travel management services.
Rather than targeting the whole market, these fintechs have targeted specific niche segments, and they provide differentiating services. This has proven to be very successful, especially among SMEs requiring self-service digital tools that can support their growth.
B2B cross-border remittances represent another use case with significant pain points, including transaction costs and lack of transparency regarding settlement time. Moving away from international bank transfers, fintechs such as Currency Cloud, Rapyd, TransferGo, Wise, and WorldRemit have created a differentiating value proposition based on simplicity and transparency regarding costs and settlement times.
EDC expects B2B cross-border remittances to grow significantly in the coming years, powered by fintechs’ ability to address the needs of SMEs and corporates and facilitate B2B processes such as invoice processing.
B2B ecommerce has benefited from the pandemic to grow significantly in line with the digitalisation of companies. Within B2B ecommerce, B2B marketplaces have materialised as an efficient way to facilitate B2B commerce and connect companies (e.g. wholesalers and end-customers). Fintechs such as Lemonway, Mangopay, Thunes Collections (formerly Limonetik), and Trevipay are examples of solutions facilitating B2B processes (e.g. invoice processing) and B2B payment methods beyond card payments.
Similar to B2C marketplaces a few years ago, EDC expects B2B marketplaces to grow significantly in the coming years as companies realise the benefits and additional revenue that can be generated by B2B marketplaces.
A key pain point for companies, amplified by the pandemic, is cash flow management. Fintechs such as Coupa, C2FO, Demica, Plastiq, and Tradeshift have addressed this pain point by providing new solutions to optimise working capital and finance supply chain.
Payments term optimisation, dynamic discounting, and trade receivable securitisation are examples of how both corporates and SMEs can benefit from flexible solutions to address their needs and support their growth.
A major pain point in B2B payments has been the limited acceptance network of commercial cards, leaving companies unable to use them. A new range of players such as Bill Hop, Boost B2B, and CSI/Edenred focuses on working with issuers and buyers using commercial cards to convince suppliers to accept these – thus, expanding the acceptance network of commercial cards.
With a balanced and relevant value proposition for both buyers and suppliers, fintechs have become the cornerstone to support the future growth of B2B payments.
Fintechs have understood the pain points of SMEs and corporates and how they can provide specific solutions to address particular needs. This will be further amplified by the development of open banking provided by fintechs such as Bottomline, Trustlayer, Volt, and Yappily to facilitate cash management and initiation of payments.
By simplifying and digitalising B2B processes and payments, EDC expects fintechs to continue developing relevant value propositions and addressing the very needs of both SMEs and corporates. Fintechs have contributed – and will continue to contribute – to the growth of B2B payments.
Greg Toussaint is a Director at Edgar, Dunn & Company (EDC). He leads EDC’s B2B Payments practice globally. He has more than 15 years of consulting payments experience with EDC in business strategy for clients in Asia, Europe, the Middle East, and the Americas. Greg has worked in EDC’s London, Sydney, and Paris offices and has gained extensive knowledge of both retail and B2B payments, including card products, instant payments, and alternative forms of payments, while working with a wide range of organisations in payments.
Edgar, Dunn & Company (EDC) is an independent global payments consultancy. The company is widely regarded as a trusted adviser, providing a full range of strategy consulting services, expertise, and market insights. EDC expertise includes M&A due diligence, legal and regulatory support across the payments ecosystem, fintech, mobile payments, digitalisation of retail and corporate payments, and financial services.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now