More businesses are converting to electronic documents and management tools to streamline operations and cut costs, but those upgrades often skip the last part of that journey — how to accept B2B payments in a digital economy.
This is particularly true of those in financial commercial services, a sector still relying heavily on paper checks, ACH and wire services to receive and move money.
"Many companies have converted to digital aspects and the cloud for business operations, but the money movement part hasn't changed all that much," said Jeremy Almond, CEO and co-founder of PayStand, a B2B payment platform provider. "The legacy systems have been holding back those companies from fully embracing the digital age."
In looking to put a dent in the $18 trillion in paper checks it says North American businesses handle annually and the $550 billion in processing and delay costs they endure, PayStand is launching an Automated Receivables platform that converts the collections and payment experience of a business into a digital process.
Automated Receivables delivers PayStand its own B2B payment and collections process in a manner similar to how current P2P services operate on the consumer side. The platform embeds payment functions directly into all email communications with customers, giving those customers the ability to immediately make a payment through a click within the reminder message.
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It also doesn't want businesses paying extra fees to deliver complex payment terms to a customer.
"We have two strong beliefs — that these companies need to embrace automation and there should be no fees involved," Almond said. "The notion that fees are basically baked into most of the payments infrastructure works on the consumer side, but does not work for complicated commercial transactions."
Interchange doesn't make sense on transactions when a company invoices a customer $100,000 on a net 30 days scale, Almond added. "We think the legacy model is holding back commercial financing in general and we believe that should be a no-fee-based model."
Because PayStand operates as a card network processor and is able to handle ACH payments, it can convert most any type of payment into digital when operating the Automated Receivables engine for a customer.
PayStand and companies like it represent a fintech movement that narrows the focus on conversion to digital B2B payments that would be easier to digest than the "enterprise hub" concept that was coming into vogue about six years ago, said Maria Arminio, president of payments management consulting firm Avenue B Consulting Inc.
"The enterprise hub wave, seeking to convince companies to undergo major change all at once to accept all payment types on a single platform, was a failure," Arminio said. "It was too much of an undertaking, sort of a Big Bang type of approach to change your payment acceptance, and it never got traction."
It is more common now for companies of all sizes to seek APIs and technology on the fintech side "to fill the gaps on those solutions where things aren't working," she added. "We will see that on the B2B front as much or more than B2C."
Part of PayStand's mission is to also convince the companies making payments to the PayStand client that they can easily convert to digital payments methods and eliminate paper checks or the delays of ACH and wires.
"It's an important part in the digital journey to find a better way to make payments," Almond said. "It's sort of like Netflix when they first started, telling people they had a digital TV experience they wanted to deliver, but not everyone had the delivery mechanisms for that."
PayStand views its Automated Receivables as the mechanism to help its customers and, in turn, those who send payments to their customers, to move into a more modern payments setting.
The company mostly works with customers that handle "a ton of paper for high-volume payments" such as insurance companies, manufacturers and professional services, Almond said. "These companies are already vested in improving their operating systems and core records systems, and want to come in and create a great experience for that last mile of closing the contracts and setting up digital payments."
In what seems as if it will be a long-term battle to get companies to give up paper checks and handle only digital transactions, some providers rightly hang their hat on converting
While there is no arguing the benefits of getting a payment faster, PayStand is reluctant to promote itself as a company sailing along with the real-time payments trends.
It is shortsighted to put a B2B payment into that silo as a key selling point, Almond said.
"We think the cash cycle extends beyond the real-time transaction, because you have to look at that cycle in its bigger and broader point of view," he added. "You can be real-time all you want, but if the person pays you two weeks late, you are still two weeks late."
