Whether you know it or not
Almost $ 150 trillion in global B2B and B2C transactions take place every year, but only a tiny fraction is digital. Many technology companies want their piece of this giant cake. Until recently, however, only payment agents (also known as “Payfacs”), gateways, banks, and credit card companies had access to it.
It changes. Regardless of whether you already know it or not, B2B technology platforms become payment companies. Payfacs are competing to integrate their technology into these platforms, which drive a growing number of transactions. Revenue sharing deals are on the table, and Payfacs are taking advantage of the competitive advantages they can offer customers of these B2B platforms. Functions such as cross-border payments, seamless customer onboarding, fraud protection, market payments and B2B invoicing influence which Payfacs win and which do not with “integrated payments” (the technical language for this area).
B2B companies that leave the choice of gateway to their customers need to be familiar with payment technologies in order to both control the user experience and develop this new business. There is an enormous amount of revenue on the table and it is simply too easy to take this opportunity to alienate customers.
How we got here
A decade ago, the cloud computing revolution led to a wave of B2B technology platforms that promised to “disrupt” any industry. Gyms have fitness management platforms. Hospitals received clinic management platforms. Retailers have trade management platforms. Media companies received subscription management platforms. Many of these fill-in-the-blank management platforms – all independent software providers (ISVs) – helped customers manage their operations and interactions with consumers or other companies.
But ISVs didn’t participate in payments, which was strange because the payments were complementary to their platforms and a lot of money was involved. According to Mastercard, there are about $ 120 trillion in B2B payments worldwide annually, and paper checks still dominate about half of the US $ 25 trillion in payments. EMarketer says retail e-commerce sales are $ 4.2 trillion out of a total of $ 26 trillion in retail, which is approximately 16.1%. It is believed that less than 8% of global trade takes place online.
You’d think B2B software companies would find a way to generate revenue from some of those $ 146 trillion in transactions, but most didn’t. Payment processing is a separate, messy, complicated niche. Payfacs go through an exhausting subscription process to provide a merchant account that includes customer knowledge checks (KYC) and anti-money laundering (AML) checks. If a merchant falls into the standard, the Payfac is next in line to correct the transactions.
If you run a venture backed B2B platform, you already have to worry.
So B2B platforms remained clear. They formed integrations with a basket of Payfacs (Stripe, PayPal, Square, my company BlueSnap etc.) and then let their customers choose which one they want to use. These are many integrations that must be maintained.