FinTech Innovation Eases B2C Sellers’ Entrance Into The B2B World
When Home Depot announced last month its plans to acquire HD Supply Holdings, it wasn’t just a sign of expansion for the home improvement retailer. The takeover signaled an evolution of the company’s business model from a traditionally business-to-consumer (B2C) seller, to one that includes business-to-business (B2B) operations.
It was also indicative of a growing trend of B2C merchants expanding into the B2B realm in an effort to take advantage of a surging market. According to Goldman Sachs, the B2B payments space will see volumes topping nearly $200 trillion by 2028, more than five times the volume of B2C payment flows.
“There’s a huge opportunity [in B2B payments] for businesses that have traditionally focused on the consumer,” David Disque, president of Corporate Spending Innovations (CSI), said in an interview with Karen Webster.
While an attractive proposition, the shift into the B2B world can’t happen at the flip of a switch. According to Disque, the technologies are already in place for B2C firms to take the leap into B2B, but businesses must be strategic about the tools they choose to adopt.
The Outsourced FinTech Opportunity
Unlike B2C retail, B2B workflows can be particularly complex, with many organizations requiring the ability to submit a purchase order, receive an invoice and establish custom payment terms with the seller. For a consumer-facing retailer, these workflows can be unfamiliar and add a flood of friction into the sales process.
But as Disque noted, advancements in B2B FinTech have created more options than ever before for a B2B seller looking toward technology to solve some of the biggest pain points associated with selling to corporate customers. Technology today can automate a range of workflows surrounding a B2B payment, including invoicing, payment term management and payment processing.
But these solutions can actually bring their own sense of complexity to the process as buyers and suppliers deploy a slew of various accounts payable (AP) and accounts receivable (AR) platforms that, while able to automate many workflows, don’t always necessarily integrate and connect with each other. Luckily, he said, that’s changing.
“In today’s world, we’re not yet fully standardized,” he said. “You [have many different platforms] providing automation services to different buyers and suppliers. Connectivity is key. The industry is moving in the right direction, and the tools and resources are there to make it happen.”
For example, he said CSI’s platform provides connectivity to many key players in the payments ecosystem, making it easy for businesses to easily make the transition into B2B payments with minimal friction.
Outsourcing key functions like AR can be a valuable strategy for merchants stepping into the B2B world for the first time, so it will be key for organizations like Home Depot to explore these options, he added. Not only is this important to manage workflows unique to the B2B space like AR, but it’s also vital to ensure business clients receive the same positive customer experience as consumers on the B2C side of operations do.
Embracing Existing Payments Infrastructure
While the workflows surrounding the transaction are unique to the B2B space, the mechanism of actually accepting a B2B payment doesn’t necessarily have to look much different than the payment processes merchants already manage when selling to consumers. That’s because the payment rails and infrastructure likely already exist for sellers that accept card, ACH and other electronic payment methods from their individual customers.
“Digital payment rails are already in place, and merchants can facilitate a B2B payment in the same fashion,” said Disque. “The payment rails we’re currently using for consumer payments would be very applicable to what’s happening in B2B.”
The card rails, in particular, offer a way for traditionally B2C merchants to ease their expansion into B2B payments, he said. Again, advancements in FinTech have helped to drive value-added functionality of commercial cards not only for the buyer, but for the merchant as well.
In addition to the opportunity for cards to present rich transaction information, as well as to offer immediate and often guaranteed settlement, innovators like CSI have also built functionality around card transactions that can meet the specific needs of B2B payments. For example, progress in the development of virtual commercial cards means straight-through processing, negating the need for merchants to manually receive faxed or emailed virtual card numbers to process a payment.
Other value-added tools that layer atop card transactions can combat friction even further. For example, Disque pointed to capabilities for FinTech to automatically enforce payment terms and route transactions via the appropriate payment method without manual intervention from the seller.
With B2B commerce rapidly innovating and embracing digitization, the opportunities will continue to grow for traditionally B2C businesses to step into the B2B space and open up a new, lucrative customer base. Yet as Disque advised, these firms must be strategic about the FinTech solutions they adopt to help them ease the business model transition.
“COVID has certainly changed consumer behavior,” he said. “It’s accelerated online shopping, and it’s doing the same thing for businesses. There is more virtual buying and a lot more reliance on virtual workflows, [as well as a sizeable opportunity] for businesses to capitalize on B2B payments.”