B2B Payments Content

Source-to-Pay, B2B payment valuations in an inflationary world

For those of us that knew inflation — and I believe that is anyone that is 60+ — we can probably recall stories of our parents or grandparents never throwing away anything. My dad never threw away tinsel to put on the annual Christmas tree and my mother never threw away aluminum foil. I mean you never forget lines for gasoline during the OPEC 1970s era.

For most of us in the working world, we have lived in deflationary times — the last 40 years.  David Foster Wallace’s story, “This is Water,” is appropriate for today’s management. The story involves two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says “Morning, boys. How’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, “What the hell is water?”

That is us today with inflation. What is inflation? Aren’t CPI metrics just “constructed” realities to support narratives from the Central Bankers but don’t necessarily reflect what we see and feel on the ground? Inflation expectations cannot be controlled. And for the last 40 years, we have experienced deflationary pressure (could have something to do with globalization, but there are many factors).

So how does all this relate to valuations and profitability when it comes to source-to-pay vendors, who predominately sell some form of SaaS solution to help you buy and pay for things better or a payment solution, tying global gateways, settlement, APIs, etc.?

Fleetcor’s corporate B2B payments portfolio

Before Fleetcor starting getting into the world of corporate B2B Payments, their payment solutions primarily focused on cards, and specifically commercial spend categories, including fuel, lodging, tolls and general corporate payments, as well as gift card solutions (stored value cards and e-cards). Fleetcor grew primarily by acquisitions, completing over 80 acquisitions of companies and commercial account portfolios since 2002.

Fuel cards (46% of revenue) are charge cards that customers can distribute to vehicle drivers to purchase fuel and other transportation-related products and services and provides their biggest revenue source. But recently Fleetcor has turned their attention to corporate payments (18% of revenue). They believe that banks’ dominance of B2B cross-border payments, estimated at upwards of 95% transactions, has lots of room for Fintech plays.

Fleetcor has been on an acquisition spree to build up their corporate B2B Payments capabilities.

The stickiness of cards for B2B payments (or why card companies get 10X valuations)

Virtual card payment growth is booming and many source-to-pay companies are partnering with banks to develop them or investing in capabilities or built a company on the value proposition of converting cheques to cards (see AvidXchange and AvidPay).

But why would any supplier take a card on payment terms? One industry card veteran said this is a classic example of financing the receivable and then allowing a card payment, a lose/lose proposition.

Exploring the supply chain finance and P2P implications based on Greensill’s restructuring

Earlier today, the WSJ reported that Greensill Capital could face restructuring or liquidation. For those not involved in the esoteric world of trade financing (and supply chain finance, or “SCF,” in particular), it can be difficult to understand the structures that Greensill and its peers are involved with. So let’s first define supply chain finance (and offshoots of it) for those which are just coming up to speed before exploring the supply chain finance and procure-to-pay (P2P) implications of Greensill’s potential restructuring.

PayPal’s flywheel forces merchants’ hands for B2B, B2C payments

paypal

With its monstrous success, PayPal has developed a network effect with excessive fees and policy practices, despite increasing competition in the cross-border and digital wallet space — with competitors like Veem (see coverage here), XTRM (see coverage here) or TransferWise.

Read about four areas of concern.

Implications of the Wirecard fraud case on B2B payments

I speak to many executives in the B2B payment industry, and the conversation usually turns to the Wirecard fraud case at some point. Typically, the first question is: How could more than $2 billion go missing and the business run for years before it goes bust?

Wirecard was the darling German fintech. What went wrong?

The state of dynamic discounting in B2B payments

There is no argument that the demand for early payment on invoices is as strong as ever — that is to say, if you have invoices to generate. In the coronavirus era, many businesses have lost significant revenue. For example, businesses serving the U.S. hotel & food-services industry have shed 40% of jobs from January to May, and received only 8% of the government’s small business loans.

Many see early pay via dynamic discounting as a win-win — help suppliers get cash, and buyers manage cash at much better yields than alternatives.

For suppliers, it’s easy to present the advantages to make a yes/no decision — get paid early with a known discount, predictable cash flow and don’t worry about onboarding hurdles that most supply chain finance programs are burdened with.

But let’s explore the supply-side for a second. There are a number of factors at play in a COVID-19 world, some favorable and some not-so-favorable, that make one pause for consideration.