B2B e-commerce payments remain stuck in the past

“Tradition is tradition,” he said. “B2B [was] built in a certain way with a certain type of people. Today, 82% of business buyers are millennials, so things have to change because they have [a new] way of working and living.”

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Geron said more than 90% of global trade continues to be conducted offline — meaning through invoices and paper processes. Geron said while B2C e-commerce is still a very small portion of overall e-commerce, B2B represents the bulk of opportunity, so businesses like Balance are needed to make these transactions more fluid and seamless. According to Forrester, U.S. B2B e-commerce will reach $9 trillion by the end of 2021, compared to less than $3 trillion for retail.

“If they don’t use it offline, they won’t use it online,” he noted about business credit card use.

Most businesses still prefer to handle invoices, which are not a feasible solution in a digital marketplace. They add time and complexity to a process that should be similar to the consumers’ experience with Amazon in which payments are made instantaneously, Geron said.

Balance is enabling businesses to pay each other “easily and instantly, like it was a card payment the whole time,” he noted.

The company, which is based in New York and Tel Aviv, Israel, charges businesses a small fee, which Geron said is typically about 35% less than traditional credit card fees, to handle transactions. The company ensures the transaction between parties goes quickly and smoothly, which is important in today’s business environment where supply chain disruptions have forced some businesses to seek alternative suppliers. That onboarding process can take months, though, through traditional channels.

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“You can do transactions with third parties you don’t know without facilitating [previous] trust,” Geron said.

The traditional payment in B2B commerce is “milestone based,” Geron said. A shipper gets paid when the item arrives at an agreed upon point in the supply chain — the same with lower-tiered suppliers throughout the supply chain.

“It’s a whole different game,” Geron observed. “Now there are invoices … and an internal payment and approval process that you have to support it. And there are payment terms. On the merchants’ side, you have an entire accounts payable process.”

In the B2C world, businesses engage companies like Stripe to facilitate payments from consumers, who will pay Stripe, which pays the business, often before even receiving the funds from the consumer. Balance is acting in the same way, making the payment to the business before the merchant makes payment.

“Every type of service you are providing needs to be consumer grade,” Geron said. “It sounds like a cliche but it’s important.”

Geron said that transitioning the B2B payment space is “not a nice to have, it needs to happen.”

“I think when you look forward and try to say what will happen next, what’s the next shift and thinking about the potential of what it means to take the economy and moving it into the online space and making it seamless like the Amazon experience, that’s not only fun, but it’s probably the next industrial revolution,” he said.

 Click for more articles by Brian Straight.

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