Cross-border B2B payments are becoming an increasingly important area of financial technology innovation as businesses seek faster, less expensive, and more efficient ways to move funds internationally. The collaboration between YayPay and GoCardless illustrates how fintech providers are combining accounts receivable automation with global payment capabilities to help businesses improve cash flow and simplify collections.
The pandemic is adding urgency to this transformation by exposing the limitations of manual financial processes and reinforcing the importance of reliable cash flow. For SMEs in particular, digital platforms that connect payment networks across markets can offer greater global reach while providing an easier alternative to traditional cross-border banking processes.
The focus and innovation around cross-border funds movement was a major theme for 2020 when Mercator Advisory Group put together our Outlook projections back in October ’19. This announcement in PaymentsSource is about a collaboration between YayPay, a 2015 New York-based fintech specializing in receivables software, and GoCardless, the UK-based recurring payments global network.
One of the outcomes of the pandemic lockdown response has been the jolt provided to efforts for overcoming corporate inertia around digitizing financial processes. Now that businesses have been rudely reminded about the importance of cash flow, the conversion from analog seems to be reaching an acceleration point.
‘Companies want to invest in AR software for various reasons, based on where they are in the B2B supply chain, said YayPay co-founder Anthony Venus. “You want to automate AR because it is really all about getting cash in the door as fast as possible because you have to pay for raw materials if you are a manufacturer, and if you are a wholesaler maybe you want to get rid of bad debt because every dollar of bad debt is a killer when margins are so low,” Venus said.’
Fintechs have been gradually encroaching upon bank dominance in cross-border payments, in particular with regard to SMEs who make frequent lower value payments. These SMEs are increasingly seeking ease of experience, lower cost, and greater global reach in this e-commerce world. Banks have to adapt and are now more apt to collaborate with more agile firms that can quickly create specific business case solutions to solve business problems. We covered this in recently released member research. The pandemic has been interrupting a lot of things, but innovation is not one of them.
‘The result is businesses having a B2C or B2B option to choose bank debit globally, with authorization on the end customer’s bank account and the creation of a pull payment method for B2B payments…”The basic fundamentals like ACH are pretty antiquated,” said AG Gilboy, general manager of North America for GoCardless. “We have digitized everything, with the simple mechanism of value-added products on top. By connecting these bank debit networks into one platform, a merchant in North America can accept a payment from one in New Zealand or Germany.”..GoCardless has also flourished on the growing number of businesses that have turned their services into a recurring payment setup. “The way we are consuming so many things, both as businesses and consumers, is subscription-based,” Gilboy said. “It’s setting up a monthly cadence for payments.” ‘
The continued modernization of cross-border B2B payments demonstrates how fintech providers are addressing specific challenges that businesses encounter when collecting money internationally. Combining digital accounts receivable tools with interconnected bank debit networks can help companies automate collections, improve cash flow, and reach customers across multiple markets through a single platform.
Banks will continue to play an important role in international payments, but partnerships with fintech companies can help them respond more quickly to changing business requirements. As e-commerce and recurring payment models expand, businesses are likely to place greater value on cross-border payment solutions that deliver simplicity, lower costs, automation, and broader geographic reach.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
