Old B2B payment rails go digital to spur global growth

By adding direct debit from bank accounts as a payment option, YayPay feels it is in a far better position to help the accounts receivable departments of U.S. businesses expand international growth.

In partnering with GoCardLess, a fintech specializing in recurring payments technology, New York-based YayPay is ready to expand its AR automation software through integration with the GoCardless global network that offers a digitized form of direct debit from various countries through a single channel.

Bank debit will help YayPay's software-as-a-service customers get paid faster, improve cash flow and reduce payment costs.

Companies want to invest in AR software for various reasons, based on where they are in the B2B supply chain, said YayPay co-founder Anthony Venus.

"You want to automate AR because it is really all about getting cash in the door as fast as possible because you have to pay for raw materials if you are a manufacturer, and if you are a wholesaler maybe you want to get rid of bad debt because every dollar of bad debt is a killer when margins are so low," Venus said.

It's also a good time to be offering clients multiple B2B or B2C payments options to clients to simplify the process, especially with so many AR department employees working at home during COVID-19.

"I can't imagine a lot of companies are going to go back to the old way of doing AR, in the large call-center type of setting," Venus added.

For London-based GoCardless, which also has an office in San Francisco, its mission has essentially been about taking the complexities out of local debit and faster payments schemes — ACH in the U.S., SEPA across the Eurozone, Faster Payments in Australia — and delivering it through a single API to clients.

The result is businesses having a B2C or B2B option to choose bank debit globally, with authorization on the end customer's bank account and the creation of a pull payment method for B2B payments.

"The basic fundamentals like ACH are pretty antiquated," said AG Gilboy, general manager of North America for GoCardless. "We have digitized everything, with the simple mechanism of value-added products on top. By connecting these bank debit networks into one platform, a merchant in North America can accept a payment from one in New Zealand or Germany."

GoCardless has also flourished on the growing number of businesses that have turned their services into a recurring payment setup. "The way we are consuming so many things, both as businesses and consumers, is subscription-based," Gilboy said. "It's setting up a monthly cadence for payments."

The partnership focuses on helping businesses seeking global reach by collecting invoice payments from customers in other parts of the world.

GoCardless cites research it conducted with YouGov in which 69% of U.S. businesses said they collect international payments, and 72% noted they hope to increase international growth over the next five years. However, 58% of them said the complexity of cross-border payments is holding them back.

About $2 billion a month in payments go through the GoCardless platform as the company continues its quest of "taking old networks and bringing them into the digital age, and it's better than just bank-debit globally because of the services we add into it," Gilboy noted.

"These types of companies manage the ACH transactions better than a standalone," said Peter Michaud, director of consulting at the Strawhecker Group. "I always think of them as like BPOs," or business process outsourcing.

A direct bank debit option has existed for some time, Michaud added. "But ACH, in its pure form, is not the easiest of payment methods, while being great for recurring payments with no data associated with them."

GoCardless and YayPay view the partnership as a way to also help companies reduce all-too-common mistakes in the AP/AR process. Industrywide, mistakes in AR payments have created the need for companies to hire outside services for retrieving overpayments or double payments and spotting invoice and pricing miscues.

"When a customer signs up online, we go to that customer bank and pull the info on the account, and when an invoice is generated we send a signal to pull the money on the due date, accept the payments and reconcile," Gilboy said of the GoCardless process.

"We reduce the number of failures and errors in that way," he added. "The fundamental thing is accepting the money on the due date, because with that the late payments fall from 20 days to maybe three days."

YayPay has built its customer database to 3,000 users and 150 suppliers in less than five years of business.

"Within that business, those suppliers are dealing with millions of buyers and pushing billions of dollars of AR into our system," Venus said. It's mostly a transaction volume business, he added, because a company may be moving just more than $6 million or $7 million a year, but could have many small invoices.