By now, most daily consumers of this channel who have an interest in B2B transactions will already know that there has been a leap in appreciation for digital financial processes since the pandemic hit. WFH caused a reassessment of manual workflows, which cuts across all business sizes but is a particular issue with smaller SMEs.
Therefore, we have seen a large amount of activity with fintechs that have built nice solutions during the past 5-10 years, and are now finding more of an audience that is paying attention. One of these is a 2016 startup out of Sydney, Australia called Finstro, which touts a holistic cash flow management platform. The company is offering up some new solutions and expanding into the U.S., where the B2B payments market spend is in the $30 trillion range (expenditures for goods and services).
“However, Finstro CEO, Brad Prout, notes that the past 15 months have seen a growing shift towards B2B digital payments in the U.S., and this has created a window of opportunity for Finstro’s well-tested business model to expand…’Since early 2020 businesses of all sizes had to give AR and AP management more attention as they navigated through the impact of the COVID pandemic. The adoption of digital processes in the order-to-cash cycles can create workflow efficiencies and reduce working capital to the benefit of both suppliers and their business customers. We expect to see these disruptive trends continue in U.S. B2B markets, and suppliers who adopt technology-driven solutions will have a competitive advantage when providing business customers with more flexible trade credit terms,’ said Prout.“
So while the piece discusses this state of digital payments, we would note that this ‘trend’ is nothing new, and is not at the very early stages, although lots of opportunities exist since infrastructure needs to be replaced in addition to the adoption trends. This is why banks are somewhat out of position and have been (and will continue) relying upon collaboration with the more effective fintech solutions.
While the trend is not new, nor are many of the solutions, the recognition of their value and tendency towards more strategic uses has been more evident since the crisis hit 16 months ago. So we will continue to see more investments in the space, including IPOs, SPACs, and so so forth, as companies try to capitalize on the growth possibilities over the next five years.
“Furthermore, according to a 2020 survey by the Association for Financial Professionals (AFP), suppliers and businesses large and small are already realizing the benefits of electronic payments. Sixty percent (60%) of respondents said they are either very likely or somewhat likely to convert the majority of their B2B payments to suppliers from check to electronic payments….’Without doubt we are at the early stages of a revolution in B2B trade when it comes to capital flows between suppliers and buyers, and this will mean huge opportunities for businesses of all sizes and in all industries,’ said Prout. ‘We are confident that our proven technology, global infrastructure, and experienced leadership team will be at the forefront of this shift in the U.S. market, and we look forward to leveraging our deep experience to enable businesses to improve the way they trade and grow.‘”
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group