The companies making 2022 a busy year for B2B payments tech

August 9, 2022 11:54 AM

Business payments have been the caboose on the innovation train, with many companies sticking to paper modes such as checks, partly out of inertia and partly to stretch payment times out as much as possible.

But the digital wave of the past two years is boosting demand for consumer-style digitization in business payments, as is economic pressure to use digital processing as means to more closely manage cash positions.

The tech trend and the sheer size of the business payments market are providing opportunities that are too good for payment companies to pass up.

"The B2B space is a massive market," said Cameron Bready, president and chief operating officer of Global Payments, noting the value of global B2B payments. Statista estimates global business payments volume to be $51 trillion in 2022 with a projected volume of $54 trillion in 2023.

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"When you're in the business of payments and are trying to find a large addressable market, B2B is an obvious place to be paying attention," Bready said.

Here are some examples of payment companies that have made moves to gain a share of the business payments market during 2022.

Cameron Bready, president and chief operating officer of Global Payments

Global Payments

The Atlanta payments technology company last week agreed to acquire EVO Payments, another Atlanta-based company, for $4 billion. It's the latest of several moves Global Payments made in an effort to hone its business payments strategy.

Global Payments also sold off the consumer-facing portion of its Netspend business, retaining Netspend's B2B portfolio. Netspend's core business is prepaid cards, and it became part of Global Payments following the company's 2019 merger with Netspend's parent company, TSYS. Additionally, Silver Lake Partners is investing $1.5 billion in Global Payments and will receive a seat on Global Payments' board.

When EVO Payments, which specializes in business transaction processing, becomes part of Global Payments when the deal closes in early 2023, the combined companies will have 1,500 financial institution clients and 4.5 million merchant clients.

The two firms will combine and co-develop technology, including links to most major enterprise resource planning systems and other back end technology that drives business management.

"This allows a firm's team members to spend more time on value-added activities versus collecting payments manually and entering data into accounts payable systems or the general ledger," Bready said.

Global Payments also recently partnered with Google to jointly develop technology for small businesses, using Google Workspace, Google My Business and Google Ads for Global Payments' clients, with Global Payments acting as a merchant acquirer for Google.

"If you think about the B2B payment market more broadly, the vast amount is still driven by checks and ACH transactions," Bready said, adding emerging innovations such as real-time payments are among several options to add speed to payment processing. "Our job is to digitize more of the payment stream. As long as it's not a paper check we can benefit from that."

Guy Calaf/Bloomberg

BNY Mellon

BNY Mellon this year launched a project that uses the bank's membership in the Marco Polo trade finance consortium to develop financial services and digital payments and supply chains.

The Marco Polo Network uses a distributed ledger to support trade finance and payments for businesses that require cross-border B2B transactions. Through Marco Polo, BNY will provide financing to clients and support visibility into the status of purchase orders and invoices. That's an important capability for businesses that are trying to manage liquidity by timing outgoing payments based on available funds.

BNY Mellon contends that banks in the past typically built their own platforms to manage international B2B payments, but the fast-moving pace of today's transaction technology is driving more collaboration.

"B2B payment tech has been growing hugely," said Gilles Ubaghs, a strategic advisor at Aite-Novarica. "Spend management and all of the bells and whistles have been expanding."

Smith Collection/Gado/Photographer: Smith Collection/G

Rapyd

Rapyd earlier this year acquired Neat, a Hong-Kong-based company that enables cross-border trade finance. This will allow the digital payments gateway Rapyd to improve its ability to sell payment technology to micro-nationals, or small businesses that rely on international markets for customers and suppliers.

In an earlier interview, Joel Yarbrough, vice president of Asia Pacific and managing director at Rapyd Ventures, said the high cost, lack of networks and clunky user experience for these small merchants creates an opening for business payment technology.

Large companies with complex supply chains dominated the migration toward digital business payments until the past few years, when the pandemic and supply chain challenges pushed more businesses to digital payments, according to Ubaghs. "Even if you look at small businesses, many of them are using Shopify and Square, and these are sophisticated cloud-based systems," he said.

Capital One

Capital One Business this spring partnered with B2B payments platform Melio to allow small-business cardholders to pay vendors and suppliers with a credit card, even if the supplier does not accept credit cards.

Since a large percentage of businesses still use paper checks, the strategy is a workaround to boost overall payment speed while waiting for more business to automate accounts receivable.

In this case, a restaurant may support digital payments for diners and for its own business payments, but an equipment or food wholesaler may not. The restaurant pays with a credit card, while Capital One sends a check or transfer to the supplier.

Mastercard

The card brand's recently-released Track Instant Pay, which uses machine learning to evaluate and approve supplier invoices with all necessary information to execute the transaction. This is designed to reduce payment cycle times from a month to a day in most cases.

Like many updates in business payments, Mastercard is trying to speed processing in an effort to shorten the time between when the invoice is sent and the payment is received.

Mastercard is also hoping to sell businesses on the benefits of not manually matching invoices with purchase orders, a process that by itself can often add weeks to payments.

Mesh Payments

Travel expenses and staff procurement have also caught the attention of fintechs and card companies.

Mesh in March partnered with Visa to launch a numberless business card that allows users to link virtual cards to physical cards. The technology is designed to help firms manage staff payments for travel, procurement and other employee expenses.

The virtual cards allow managers to disable cards, create control over spending and swap a virtual card remotely. Similar to supply chain payments, the businesses face a challenge of closely matching funding to a need. In this case, it's optimizing expenses for business trips, or employee spending on supplies purchased online or remotely on behalf of the company.

TripActions

Another fintech company, TripActions, in March launched an automated itemization product that uses artificial intelligence and machine learning to automatically assign line items on a receipt to expense categories, then apply company policy to each item.

It's designed to remove the need for employees to fill out expense reports manually and for employers to vet spending item-by-item.

TripActions supports a use case similar to Mesh by using emerging payment technology that's often applied to consumer payments, and expanding its use to business payments.

Goldman Sachs

Goldman Sachs' Transaction Banking business (TxB) has partnered with The Interface Financial Group, a technology firm that provides supply-chain financing, as part of a strategy to make it easier for businesses to pay multiple suppliers.

The partners are using an application programming interface that links businesses to suppliers without having to manually establish and verify relationships with each one. This is another time-consuming factor that is often given as a reason why many businesses still use checks.

Goldman Sachs linked the collaboration to a business-to-business version of embedded banking, or the trend toward consumers using a single banking relationship to access products from multiple third parties, including those that offer non-financial products.

Huntington Bank

As part of a bank-wide overhaul of its payments operation, Huntington Bank in May acquired Digital Payments Torana, a San Francisco-based company that expedites processing for disbursements.

The bank is attempting to counter the fintechs that are challenging traditional financial services in the business-to-consumer payments market by adding payment options for commercial clients.

Huntington also unified its payments business into a single unit that focuses on consumer payments, business transactions, commercial payments and treasury management.

Citizens

Citizens is diving into real-time payments for business transactions, rolling out a request for pay option via its accessOptima treasury management system.

Request for Pay, or real-time bill presentment, is paired with The Clearing House's RTP Rail, which supports near-instant processing. The combination allows more precise timing for billing and payment.

The use cases for RfP have mostly focused on consumer payments such as utilities, though Citizens says there is potential in business transactions for use cases such as pay on delivery.

"The focus for a lot of this type of innovation has been on the consumer side," Ubaghs says. "B2B has been underserved and now there's a scramble to play catch up."