This referenced article appears in Digital Commerce 360 and in a nice, summary form captures the large opportunity awaiting those businesses who embrace e-commerce. The article is written by a member of one of the alternative lending fintechs who are involved in the provision of liquidity to buyers and suppliers. We recently covered the space in a report titled B2B Marketplaces: Disruption Presents Opportunity. The overall point there being that a massive spending tool shift is occurring based on the convergence of systems and processes servicing the B2B e-commerce space.
‘Buying online has become more speedy, simple, and seamless than ever over the past decade. We are all used to a one-click world in which we order on Amazon.com and a package arrives on our doorstep the next day. We hardly consider the mechanics of how we pay for everything from Uber rides to Netflix movies to Walmart groceries: Credit-based transactions are swift and efficient; products are sent; we get what we need—end of story…..Historically, this has not been the case in the world of B2B e-commerce, which requires more highly complex transactions than in the consumer world. Unlike clicking “Buy” on Amazon, for example, purchasing or selling B2B goods and services often involves multiple decision-makers, high-value deals, and a finely targeted customer base.’
We couldn’t agree more. The gist of the article goes on to discuss the underlying need for instantly available credit in order to make the B2B commerce space more real-time in execution. The historical use of credit and other cards works but is limited to those organizations on the buyer side who qualify, which becomes an ever decreasing pool based on business size, while on the supplier side one must be willing to accept the ad-valorem cost of acceptance. These costs are widely variable and lower than what most suppliers perceive (especially when compared to the end-to-end costs of other payments types), but nonetheless remain a gating factor. So the author points out growing methods of applying fast decision-making for credit using latest gen tech.
‘Now, B2B payments can eliminate the wait as well through AI-powered ecommerce payments technology, which can offer near-instant credit decisions within the workflows of other platforms, marketplaces, portals, and applications. For example, a “net 60” payment option can be made available during the online checkout process….Now that nontraditional lenders—which are actually data-driven technology companies—can leverage AI and machine learning to tame the torrents of data around business transactions, the traditionally slow, cumbersome B2B payment ecosystem can now evolve. It helps that small-business banking transactions are more likely to exist in the cloud, which allows credit underwriting to rely on increasingly “open” banking with more accessible data.’
This is one of the reason why banks of all sizes have been working with fintechs in collaboration efforts to reach all available markets for liquidity products in the fast growing B2B e-commerce space.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group