As we steadfastly move towards the eventual ubiquity of digital procurement (and accompanying payments), the B2B marketplace and company specific e-commerce sites are adapting to various buyers’ need for credit, sometimes required during the buying process. If one thinks back to the long-standing consumer credit card model, one of the keys to gaining wider merchant distribution was the consumer ‘propensity to buy’ (or perhaps ‘buy more’) with a piece of plastic credit in their possession, versus cash (or check). That is more or less part of the motivation here as well. The article referenced is from Thomas.Net and the posting is basically about solving for ‘spot buying’ limitations with Texas Instruments offering new payments capabilities at their TI store.
‘Traditional spot buying payment terms can be limiting, as these terms mandate the establishment of a relationship between buyer and supplier and the requisite assessment of the buyer’s credit risk before terms can even be put in place. This can be a lengthy process, and the urgency of spot buys often makes this method very impractical……In the electronic components market, Texas Instruments recognized the dilemma inherent in spot buying and developed a solution to eliminate the friction involved in the process while establishing more practical payment terms’.
The solution is offered through a partnership with Apruve, which is a 2013 startup out of Minneapolis. The model in effect is a payables financing network involving multiple participating funders, seemingly banks at this point. So TI can utilize the platform to offer automated credit decision during the buying process, helping various buyers to both make a decision to close on a buy and choose whatever payment terms are available from the funder, which we assume ties back to the credit decision and past network history. Supplier pricing is listed on the TI site, but we would expect it is negotiable.
‘Partnering with Apruve, the B2B credit network, Texas Instruments’ new payment program allows their customers to purchase on-demand, without getting mired down in the details of a manual payment process for spot buy purchases or having to make immediate payments. Conducted online using proprietary algorithms, the credit score assessment and approval process are simplified and streamlined. The platform allows users to view purchase history, see credit limits, and add or remove members from the purchasing team — all with an entirely paperless process.’
One might realize that P cards (and increasingly virtual cards, which integrate more easily with e-procurement software) supply available credit for spot buys as well, and historically have been associated with lower value indirect spend. The virtual card growth however, with more straight-through processing and potential for lower merchant pricing, is fueling some higher spend per item as well, with capital goods in play. Automation continues to provide more flexibility in the supply chain.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
