The B2B payments universe is exploding — what it means for procurement

While procurement professionals may consider B2B payments a “dark art” that only concerns the finance industry, there’s no doubt that B2B payments are seeping into the procurement space as part of the source-to-pay (S2P) cycle. To provide an overview of the lay of the land, Spend Matters hosted a webinar to discuss the huge opportunity of B2B payments on procurement.

Jason Busch, Spend Matters’ founder and due diligence practice director, and David Gustin, a Spend Matters’ contributor who focuses on payments technology, hosted the webinar and shared their thoughts on the importance of B2B payments on the future of procurement.

“The best way to look at B2B payments today is at the center of a very large opportunity,” Busch said. “If you look at Goldman Sachs data, we get to a number … a trillion-dollar opportunity overall. Why is this so significant? From an investor perspective … there’s a lot of excitement for classic, enterprise spaces.”

B2B payments include many different internal and external parties. There are three ways to frame the B2B payments market:

  • Practical: B2B payments are the intersection of the S2P and order-to-cash (O2C) processes. It begins with good data, quality sourcing, contracting, transactional buying and ends with invoice-to-pay.
  • Cash management: B2B payments are an extension of banking solutions and cash execution. This part of B2B payments has three capabilities (connectivity, cash position and payments).
  • Its own animal: At the end of the day, it’s still the banks' domain. While new players are coming onto the scene, the B2B payments universe is bigger than S2P, O2C and treasury management.

Money transfer truly presides over its own domain today, a domain involving cash, information and risk. And while banks traditionally owned the market, smaller payments vendors and providers have emerged to help companies — especially smaller ones — with their B2B payments offerings.

Banks and payments solution providers each serve their own markets.

But Spend Matters' David Gustin believes that while banks are still the masters at account relationship management, vendors bring better UI, interface experience and customer service. Basically, the vendors fill product gaps that the smaller banks can’t.

As the market expands, and banks face an unstable economic future, he foresees the various players working more collaboratively, rather than vying for market share.

But as vendors increasingly gain a slice of the B2B pie, they’re also forming their own specialties in the market, which is especially helpful in the direct spend market. Busch and Gustin explained some of the different segments and some of the key non-bank players in the market. (Click the image below to see the market segments and the key payments providers. Click the link to read about the market as a whole.)

Categorization of various non-bank B2B payments vendors for procurement

Read why Busch and Gustin see B2B payments as the last mile for companies on both sides of the buying and selling equation.

Gustin said that even a few years ago, very few S2P vendors had different types of payment offerings. Now, there has been a growth in the market with much greater investment from S2P players.

Segments that are becoming stronger forces in the B2B payments market include third-party infrastructure (which helps fill product gaps for companies that offer services), payment service providers (which has a lot of innovation happening) and cross-border payments (which accounts for about $24 trillion globally).

“This really helps a lot of small companies who may only need to pay gig workers or contractors or landlords overseas, but only do so in a very small volume,” Gustin said.

At the end of the day, the B2B market is not a simple market. It’s actually very complex.

So, how should procurement begin to think about a payment strategy?

“It’s dependent on the organization, the industry and its needs,” Busch said. And he asks you to consider: “Is payments an opportunity for you? Is payments a hassle for you? If it’s a hassle for you, the closer you can get to a single "prime" contractor (e.g., vendor, bank, payment hub provider) and putting as much onto a single cart as possible, even if that’s not the right strategy overall in terms of optimization of payments (via multiple partners), perhaps the better you'll be in the short term. Where to start depends on: what you value and where procurement sits in the industry, geography, size and the existing systems environment.”

A recording of the webinar is now available online. Please register to listen to a more in-depth explanation of the B2B payments market, one that is only likely to grow as more people utilize its opportunity.  

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