Our interview series with Traxypay’s John Bruggeman continues today as we begin to get into the nitty-gritty detail of what comprises dynamic payments – and how dynamic payments differ from traditional static bank and card payments. Also see the first and second installments of the interview as well. Enjoy!
JASON: Where do traditional (bank and card) payment models come up short?
JOHN: With traditional payments, you can’t get a real-time snapshot into a data field from an e-invoicing, procurement, trade financing/discounting or ERP application (not to mention many others). That is why the traditional approach for payments is obsolete.
It simply does not work anymore unless you want payments to have the same latency as they did in the 1980s (yes, current payment models are that old). What we need to do is prioritize connecting into the enterprise to get data.
Fundamentally, we also need enterprise software capability – if you think of payments just as payments, you’re going to get in trouble in this new world and you might as well work with a bank that has not transitioned outside the Stone (mainframe) Age. If you think of payments (to be effective) as requiring dynamic financial object information that contains ERP information, order to cash details, CRM data, bank data, buyer, supplier and contract information, then you’re ready for what this new era will bring.
Consider all the various use cases of being able to not just approve a payment that goes into a mysterious bank network only to arrive in a supplier’s account at an arbitrary time (and that can’t be revoked) but the ability to have dynamic routing, approval and even payments that are conditional (and automatic) based on different sets of activities in the supply chain – that could trigger different cash flows to various parties, counter-parties and even third parties. This is here (and possible) today.
JASON: How do cards and existing payment networks/rails fit into all of this?
JOHN: Card’s aren’t important to me. Plastic is plastic. I don’t think about it as a card. The card is not interesting. The interesting piece is network the card moves across. Take MasterCard. They’re in over 200 countries. They have connected 22,000 banks. They have developed products that move the money very effectively and efficiently across the network, albeit at a price.
The alternatives are not pretty – if you don’t use one of the big five global banks, you’re looking at a corresponding bank network to facilitate payment in many countries. These networks are a pieced together amalgamation of banks. This correspondent bank network is expensive and slow and hard to control.
Now, if you look at a credit card network, it is a global network. Getting a payment from a buyer in Paris to a supplier in Vietnam can go across a global network efficiently and cost effectively vs. correspondent bank network with lots of tariffs along the way. It’s the “toll to the troll” as some say.
So the credit card providers are not just offering cards – they are network providers at the core. As I think about card networks as a true network (or “rails” in their language) and if don’t need “benefits” of an acquirer or issuer, I can still ride across the rails, potentially with different pricing. These can match better what happens and is necessary in B2B vs. B2C. That’s how I think about the cards – and the network potential.
With card companies, I’m finding an openness to pursue different models. Today, they don’t participate in B2B beyond traditional card-based products, and if you look at the numbers, 95%+ of card activity is B2C. Even B2B is disguised B2C – it’s T&E mostly.
Stay tuned as our interview series continues.