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B2B payments: Are digital wallets for business here to stay?

Digital wallets have been popular in the consumer world for some time, enabling shopping online (e.g., PayPal), instant money transfer (e.g., Venmo) and payment at retail (e.g., Apple Pay). The aim is to store your credit and debit card numbers in the cloud and access them from your phone or laptop.

Over the last year, there has been a huge investment by the payments community to create digital wallets for business customers. PayPal, of course, has been in this space for some time. But emerging B2B payment companies see wallets as a revenue opportunity. When money goes into a wallet, there may be additional foreign exchange (FX) conversions and transfers to customer-owned bank accounts.

Are intercompany payments the next frontier for B2B payments?

As companies become bigger, they establish legal entities in other jurisdictions, which can include distribution centers, sales offices, buying offices and so forth. Intercompany "due to" and "due from" balances are created through the natural course of business between these entities as they buy and sell to each other. Intercompany invoices must be settled in a timely fashion in accordance with intercompany payment terms and/or service agreements.

While intercompany payment data is not tracked, the U.S. Census Bureau and U.S. Department of Commerce collect information that reveals related-party trade accounts — in 2016, the nation’s international related-party trade accounted for 42.4% ($1,537.4 billion) of total goods.

Some source-to-pay suites have made tremendous strides in adding payment functionality to their toolkit (including digital payments, virtual card payments, cross-border payments, etc.), such as Coupa Pay and Tipalti. Additionally, many B2B payment solutions can manage sending money to subsidiaries to fund their local operations in local currency.

Are treasurers ready for real-time B2B payments?

supplier network

What is the value proposition for a corporate treasurer to make a real-time payment to a supplier in the B2B world? When real-time payments (RTP) began three years ago via The Clearing House organization, the move was considered a disruptor. But let's take a look now.

What do banks’ latest B2B commercial payments results mean for fintechs?

A number of top-tier banks recently announced first quarter financial results, and if you glean the comments, the commercial payment news in the coronavirus era was not good.

The results show that no one involved in B2B payments is immune. While painful, these top-tier banks are able to withstand the lost interchange and foreign exchange (FX) revenue.

The frightful thing is that the worst is yet to come in the form of bankruptcies, Chapter 11 filings and slowing global trade. The rapid number of business bankruptcies happening, from Neiman Marcus to J. Crew to Gold’s Gym and many more industries, such as travel-related firms, retailers and restaurant chains, will significantly, and negatively, impact B2B payment volumes.

Will supply chain finance and p-cards collide as B2B payment techniques?

From the banks’ perspective, supply chain finance (SCF) is an uncommitted credit facility to a large company to purchase invoices from their suppliers. There are many issues around this simple statement, from the complexity of onboarding non-customer suppliers to the accounting treatment concerns that are now reeling heads.

With any finance technique, money needs to change hands and a payment is made to some supplier, either domestically or offshore. With SCF, the payment happens to be done early, by a third party that transfers funds electronically to the supplier’s bank account.

Can government save the supply chain finance market?

Supply chain finance (SCF) is a relatively small market compared to its more short-term liquidity cousin, commercial paper (CP). Yet, the SCF market is going through turbulent times and may need to be rescued with some form of guarantees. The CP market is extremely important to company liquidity and was frozen before the Fed put together a $1 trillion backstop. Essentially, CP broker-dealers would not buy paper because they were unsure companies would be able to pay it off at maturity within 90 days or less. The Fed announced a special credit facility to purchase corporate paper from issuers that have been having a difficult time finding buyers on the open market.

As such, that leaves us the supply chain finance market, where arguably there are anywhere from $50 billion to $75 billion in outstandings at any one time compared to $1 trillion or more for commercial paper.

As coronavirus idles service economy, ‘merchant cash advances’ can help e-commerce vendors

procurement

The coronavirus outbreak is shutting down our service economy. Besides the usual suspects — restaurants, bars, gyms, etc. — we have a whole host of products and services where demand is collapsing.

It’s tough sledding when demand is vastly reduced or just plain stops.

One area where we won’t see declines is around digital commerce. As widely reported, Amazon announced plans to hire 100,000 warehouse workers. Many of the sellers on these platforms will be in need of cash to survive or to meet demand, and thus keep workers paid, including employees and gig workers.

While merchant cash advances (MCAs) may not be the cheapest form of generating quick cash flow, they are fast and are not a loan, but a sale of future receivables.

Can you benchmark FX rates for cross-border B2B payments?

I’ve always found that the one area where banks gouge the consumer and small businesses is with foreign exchange rates. FX is one of those opaque transactions where it’s “this is the rate we offer, take it or leave it” for most of us. And if you compare the rates the banks provide from what you Google, you know you are proverbially hosed.

So when asked who provides the best FX rates out of all the fintech players, the answer is who knows. But let's take a closer look at the situation.

B2B payment companies should be prepared to raise your anti-money laundering game

New players are innovating the way cross-border B2B payments are made and are bringing new business models that bundle these payments with other activities, such as foreign exchange conversions, wallets, invoicing, virtual accounts, etc. But with the growth in cross-border B2B payment companies, I thought it interesting that these new players are entering a space that is getting increasing scrutiny for illicit money movement by traditional means — trade misinvoicing.

What is trade misinvoicing? Simply put, moving money across borders by deliberately misreporting the value, volume, and/or type of commodity. Many anti-money laundering efforts (AML) exist to stop the practice.