To automate B2B payments, fintechs borrow ideas from the gig economy

B2B transactions are still heavily reliant on checks, and a lot of fintechs hope businesses are ready to break the habit. A fintech called Coupa is part of the parade of innovation, offering a virtual card and a payments-as-concierge approach.

With a strategy similar to Uber's of burying digital payments inside another service, the Silicon Valley company has in short order introduced a suite of transaction management and supply chain offerings along with a virtual payment card under the Coupa Pay brand umbrella.

As is the case with consumer payments, the goal is to make transaction data both a source of automation intelligence, and a way to feed other business functions without a laundry list of vendors to manage.

“If we can master transaction data, we can add on capabilities for payments and provide a seamless route from purchase order to invoice to payment,” said Ravi Thakur, senior vice president of business acceleration for Coupa.

This hub strategy is accompanied by a supply chain finance feature that supports third-party access for financing within Coupa’s workflow. This is designed to replace the multiple integrations for payments and financing. A virtual payment card produces a one-time-use card number for suppliers that automatically reconciles card charges and statements.

Coupa, of San Mateo, Calif., revealed one early user for its new technology, saying Barclaycard will use Coupa Pay initially to issue a virtual card that uses a distinct Barclaycard number. Barclaycard did not respond to a request for comment.

The deployment follows an earlier sourcing optimization rollout in October that provides information on supplier health, financial, judicial, new sentiment, and third party data. This helps businesses vet suppliers. Companies can also use community information to identify which electronic invoicing channels their suppliers use to expedite migration to automated payments.

Coupa is hardly alone in pushing businesses to automate transactions. Lots of companies have tried, and are trying, to digitize supply chain and B2B transactions.

Conext is adding Venmo or Zelle-style elements to its B2B service, which is designed for larger payments than the P2P apps. Santander is offering tracking to help businesses view payments in progress, using visibility as a lure. And there’s some peer pressure, as BillTrust and Visa maintain a list of companies that have embraced automation. Yet nearly half of B2B remains buried in the 20th century, despite the apparent cost and time savings of automation.

The timing of today's fintechs may be better than in the past given the rise of fraud risk that could push businesses to pay for technology that better manages risk for payments, provides more transparency and integrates transactions to other back-office services.

Coupa hopes the appeal of payments embedded with other functions for ease and management improvements will spur movement, as it has in the consumer retail industry.

“If you look at businesses and how they operate, they have ERP, account management, human capital management, CRM,” Thakur said. “There’s a lot of things happening in the consumer space such as electronic wallets and blockchain that are helping people to move money. When you see that in the consumer space, you are going to see it in the business space as well.”

Virtual cards in particular have shown promise as a nudge for business, with payment volume on pace to spike in the next couple of years.

“While virtual cards in payables remains a relatively small portion of overall value with 1.5% or thereabouts, the model works well with digitization, the increasing use of B2B marketplaces in the buying sphere, and working capital solutions demand,” said Steve Murphy, director of Mercator Advisory Group's commerce and enterprise payments advisory service. “So there remains a good upside and opportunity, as you have seen with the ongoing announcements."