Traxpay’s payment system transforms B2B transactions

B2B networks are changing tack, in order to deliver effective business payment systems capable of rivalling those that banks use for consumer transactions

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Traxpay's Dynamic Payments Platform was designed specifically for B2B commerce, and allows businesses to move money around in real time

While B2B networks have done a great job of connecting their customers with logistics providers, suppliers and distributors, they now recognise the immense opportunities available to them in providing end-to-end, closed-loop services to keep related transaction revenues on-platform. B2B network providers now have the chance to take advantage of the enterprise data they already have, in order to deliver transparent, convenient, faster and less expensive payments to their customers than a bank ever could.

The market for B2B transactions is estimated to be worth $300trn annually. Two thirds of that is spent on direct procurement, and enterprise resource planning (ERP) companies have done a good job of automating processes for this type of expenditure. The other third, however, is for indirect procurement, in which having a plethora of often-infrequent suppliers who aren’t onboarded to the network is the norm, and this is where the true potential for B2B networks lies. To better understand the scale of the opportunities on offer for B2B network providers and their customers, European CEO spoke with John Bruggeman, CEO of Traxpay.

B2B transactions must change, and their complex nature is no reason to shy away from finding
a solution

What are the main drivers behind this strategic shift for B2B networks?
Enterprises are rightly dissatisfied with the flow of transactions across the supply chain, as they’ve come to expect the same comfort and flexibility that consumer-oriented transactions provide. Today, 60 percent of all B2B transactions are still handled manually, causing up to 25 percent payment mismatches, which generates enormous processing costs, slows business down, and ties up working capital. That’s expensive, not just in monetary terms, but also in opportunity costs, and helps create massive problems for both treasury and procurement professionals.

With the rapid globalisation of commerce, and the adoption of e-commerce in the B2B space, it has become increasingly necessary for trading partners to collaborate flexibly, bridge time zone disparities, accommodate multiple relationships, and streamline their processes to reduce costs. In essence, business is dynamic, and the systems that companies rely on must be as well.

In what way do payments enter into this discussion?
While consumers are clearly spoilt for choice when it comes to payment technology, the story for businesses is markedly different. As a Forbes article recently concluded: “Unfortunately, the business-to-business payment side of the house remains stuck in complexity, relying on manual and error-prone processes.”

Underlying the complexity businesses face when paying one another are the inadequate systems offered by traditional banks, involving costly and time-consuming processes demanding massive amounts of manual input.

It is clear that B2B transactions must change, and their complex nature is no reason to shy away from finding a solution. But, while banks continue to have a ‘wait and see’ attitude or an inability to tackle the problems, FinTech innovators such as Traxpay have been hard at work to provide businesses with the kind of experience their staff are used to outside of office hours.

What evidence are you seeing in the market for this today? Are there any gaps or barriers?
According to a 2014 Ardent Partners study, the average cost to process an invoice is approximately $14.21. With many companies processing in excess of 400,000 invoices in a given year, the cost of this is enormous. Reducing these costs and improving processes is a top priority.

B2B commerce networks emerged to resolve these challenges by facilitating automated interaction and exchange of electronic documents, including purchase orders and invoices, or value-added services such as dynamic discounting. However, since the last mile of the transaction – the execution, clearing and settlement of the payment itself – remains a completely disconnected process, the immediacy, flexibility, transparency and efficiency gains of enterprise networks do not transfer over when it comes to the payment. This hinders CFOs from gaining appropriate visibility and control of these purchases, impacting cash flow, liquidity and working capital.

This misalignment of the banking truth, containing the payment data, and the procurement truth, which encompasses all of the data that has gone into the transaction, causes many problems for CFOs. The solution lies in the ability to bring these two truths together, so that the whole truth of payment and transaction data can be made visible for all. The Traxpay Dynamic Payments Platform gives rise to this ability.

How does Traxpay’s Dynamic Payments Platform work?
Our Dynamic Payments Platform was designed specifically for the needs of modern B2B commerce, and can move real money in real time, delivering the rich data businesses need to get transparency and control over their transactions. It is integrated directly into existing ERP, purchasing and invoicing systems, enabling a complete end-to-end solution for B2B transactions. It really is a new strategic weapon for commerce networks and digital marketplaces. Traders on B2B networks using our solution can change any and every element of a payment transaction at any stage of the process, from the moment a payment instruction is initiated, straight through to final settlement and clearing.

Haven’t all back-office systems been optimised now?
There has been progress, but typical e-payables workflows simply aren’t sufficient to keep pace with the ever-growing need for faster and more flexible B2B payments. Ironically, there is no actual integrated ‘pay’ component in e-payables or P2P processes, as payments are entirely separate and disconnected from these processes. While there are many claims of payments being part of the flow, the reality is that, at best, a static payment instruction file or a link to a payment gateway is sent to a bank. The payment itself still happens at the bank.

What makes dynamic payments the ideal fit for how B2B buyers and suppliers need to be doing business?
Dynamic payments are a fundamentally new category of secure electronic B2B transaction. Unlike static payments, dynamic payments combine the best digital banking, rich electronic data interchange, and modern cloud-based technologies to achieve flexibility and scale. Traxpay’s Dynamic Payments Platform executes, clears, and settles payments in real-time, and directly connects into and monitors the transaction via an adaptive rules-based engine, making use of any type or size of structured or unstructured data and remittance in the process. Dynamic payments integrate directly into existing B2B commerce network platforms and are an integral part of the actual P2P, O2C and ERP process. With this integration comes instant responsiveness to new data, changing business conditions, and event triggers in real-time. All components of the transaction are kept synchronised, so the payment can be executed and settled accordingly.

As there are many e-payables systems already out there, how will companies benefit from dynamic payments?
In the future, as dynamic payment transactions scale, companies will be collecting an ever-growing amount of data – a new type of data they’ve never had before. They’ll see behavioural changes in the supply chain as they unfold. The next step will be putting analytics on top of these massive datasets.

CFOs and CPOs will be empowered to make truly strategic decisions in real time, and will be able to dynamically optimise supplier relationships and terms, resulting in tremendous value to the organisation.