In the first installment of our interview with Traxypay’s John Bruggeman, we explored the background that led him to see an opportunity with Traxpay to target the payments area to extend the reach of purchase-to-pay, order-to-cash, supplier network and related solutions to an expanded set of suppliers. Today, we continue the discussion. Enjoy!
JASON: Why hasn’t payment technology kept up? Tools that support invoicing, procurement, treasury management, commodity management, etc., have rocketed forward in the past decade. What happened to payments?
JOHN: It’s really simple in theory, but I’ll give you a contradictory answer because nothing about payments is actually simple. Payments are complicated. It turns out that moving money from point A to point B is difficult.
There are regulatory requirements. The government gets involved. There are security and encryption requirements that are complex. There are lots of players who are involved in different aspects of the payment and you need to accommodate or get everyone to agree on certain data, authentication and connectivity standards.
Finally, let’s face it – the banks have it pretty good. They are not motivated to innovate or evolve. This is why the innovation is coming from the non-traditional places. Banks are thinking about the problem from a whole different angle – keeping their book of business.
Yet this world is about to change entirely. Look at Basware as an example. Earlier this month, Basware announced multiple products – BaswarePay, Basware Factoring and Basware Discounting. “Pay” is extended payment terms. Factoring is traditional supply side factoring. Basware discounting is a dynamic discounting application.
You would traditionally not see a company like Basware do factoring. But they are challenging the status quo. To be successful, they will have to do dynamic payments to complete the value proposition — this completes the promise for factoring and discounting.
JASON: Why is payment important for these firms that have not targeted it before?
JOHN: For Basware and others in these emerging areas, it will be insufficient to set the process up without completing it and closing the loop through payments. Dynamic payments is the lynchpin for these applications – Basware was the first in this class of enterprise software companies to make these announcements. Basware was just first to market. Others will follow because the market will favor early movers.
E-invoicing alone and connectivity via networks is commoditizing fast. It is a pretty tough industry with pricing per invoice or per transaction declining. But now, by getting involved directly into cash hits a supplier’s account – and then the subsequent transactions, if applicable, are also settled with payments routed and received – they’ll be able to price their services on the basis of the transaction itself. This brings entirely new revenue streams. You can’t do that unless you complete the payment.
JASON: Are banks part of the problem or part of the solution — or both?
JOHN: The challenge is that in a B2B environment, the data is as critical as moving the money. You can’t separate those two things. If you look at the banks and traditional card networks, they are not robust in the areas of enterprise data.
You need to be able to get data in and out of the ERP system. You need to be able to get data in and out of the P2P or O2C system. You need to get data out of CRM. And you also need to get data out of bank. Even the most advanced banks in the world don’t connect well into enterprise systems and get that data.
Think about a simple factoring use case. I need to know invoice status – is it pending or approved? Is it approved to be factored? Is it approved for instant payment? Is it approved to be processed process in a standard fashion? A bank does not have access to this information today dynamically.
Stay tuned as our conversation with John continues.