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Lack of Payout Innovation Limits Growth

Almost all of the mass payouts organizations believe that their AP accounts payable systems’ inability to handle scale is inhibiting their growth. These types of companies are not the only ones feeling the pains of slow innovation in the accounts payable technology space. When bills are not paid on time or mass payouts require manual intervention to complete, companies lose time, money, and market share.

Mass payout companies make a large proportion of small dollar value payments every month. Some example categories of these organization are:

  • Transportation, logistics and shipping
  • Online marketplace
  • Gig economy
  • Virtual events management

 

These types of companies are experiencing slow growth that is inhibited by their accounts payable systems. On a strategic level, less than 25% of these types of companies are planning any type of innovation in the next twelve months, which means they are leaving money on the table.

Consumer expectations are transferring into business commerce, meaning that corporations have to create a payments system that provides bespoke yet instant payment experiences. This shift in the B2B ecommerce space is monumental, albeit challenging considering that payments in this industry are a lot more complicated compared to processes on the consumer side. It involves additional steps tailored around back-end reconciliation, underwriting, and settlement. These traditional processes within the B2B payments and transaction world need to be digitized and automated on a global scale.

 

Transforming distribution channels and going global

Buyers from around the world are searching for a frictionless payment experience. While it is one thing to develop great B2B payment experiences in your core market, these experiences need to be replicated on a global scale. Distribution channels are also changing since sellers are constantly looking to increase their margins by getting closer to their buyers. While eCommerce sites to directly sell to the end customer are seeing increased adoption, many of these platforms lack custom payments experience for business buyers.

In order to develop good customer experience in B2B eCommerce, sellers need to begin with the fundamental understanding that credit cards aren’t always the best financing option. For larger transactions and frequent recurring purchases, trade credit is a lot more desirable. If businesses can have 45- or 60-day net terms to pay, they’re likely to increase their order values and buy more often. Businesses also want to pay with purchase orders and be invoiced. Most accounts payable workflows require rich data that comes with the invoice so that their finance departments can seamlessly reconcile the payment with their back-end business software.

In line with the shift to global eCommerce, organizations should also aim to process this on a global scale. For instance, if you have a buyer from Germany or France, while you run a US business, you will still need to create an invoice in their language, and their currency, ensuring that you meet their requirements. Sellers that meet demands of these shifts provide an opportunity to add customers, create brand stickiness, and engender loyalty, whilst building a competitive advantage over other establishments that lack innovative approaches around B2B payment experiences.

Understanding an improved payment experience

  1. Initially, there needs to be a review and reconciliation of invoices. When invoicing processes aren’t automated, SMBs and corporates lose visibility into cash flow, as well as control over liquidity. Manual invoice entry can cause errors that lead to more time spent correcting incomplete payments.
  2. Availability of payment choices is key for all types of business, providing alternatives to high-cost credit options or fee-heavy payment methods (i.e. Real-time payments, same-day ACH) to improve cash flow.
  3. Finally, businesses need more flexible, multichannel payment acceptance tools. Companies benefit from modern payment acceptance that enables them to easily capture payments in-person, online via pay buttons or embedded checkout, in an ordering portal, or from a sharable payment link that they can add to paper and digital invoices.

Modern tools allow flexibility so that businesses can pass on the credit card processing cost — or any portion of it as negotiated — to willing consumers. Coupled with AP/AR integration with other systems, both buyers and sellers can have a holistic view of cash flow across all payments channels. Such a solution takes shape as an embedded finance offering within platforms and marketplaces, enabling multiple ways to pay any supplier via any payment method. As these types of embedded offerings emerge in the global marketplace, we will see significant growth across payments channels and industry verticals.

AUTHOR

Angela Murphy, Ph.D.

Vice President, Business Development, Photon Commerce

Dr. Angela Murphy has experience in artificial intelligence, financial technology, and the global payments industry, building on her skills as a storyteller and rhetorician. She engages at the intersection of strategy and insight to drive results for her clients. In her current role at Photon Commerce, she helps run a team that uses artificial intelligence and machine learning to solve complex problems in the payments industry. Dr. Murphy received her Ph.D. from the University of Kansas, and currently resides in Kansas City with her husband, Brock, and German Shepherd rescue, Roscoe.