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‘The B2B Payments Disruption Has Started,’ Plastiq CTO Tells PYMNTS

For hundreds of years, a traditional karate association in Japan had been delivering its lessons in person, Plastiq Chief Product and Technology Officer Stoyan Kenderov explained. But then COVID-19 hit, and it had to retool overnight and deliver its services online. Today, he said, this ancient karate business has not only adapted, but has expanded, and is now selling an array of products online all around the world. It has turned into a platform business almost overnight.

Kenderov shared that story to illustrate how business growth is being “driven by the re-platforming of commerce.” Throughout the pandemic, he told PYMNTS, things were accelerated, and small businesses started moving to digital experiences. Caught by surprise by COVID-19, they had to retool and become eCommerce businesses.

“Once [they] start accepting payments online, [they]have to figure out whether customers have the right methods of paying and whether they can pay on time,” Kenderov said. “They also need to figure out how to pay their vendors and stretch their cash flow to accommodate this new eCommerce loop, which is the one that is driving the renaissance of payments.”

85% of Vendors Have Concerns With Credit Cards

Credit cards enabled eCommerce to start online, but 85% of suppliers don’t accept them. The cost of acceptance is high, even though the cards offer convenience, credit and a host of rebates and rewards for the buyer — and the promise of immediate payment for products or services to the supplier. “[Plastiq] saw this opportunity and realized there’s this whole other world, very likely a bigger world,” Kenderov said.

The Plastiq solution was designed to align the incentives of buyers and suppliers around card payments. Buyers can use a credit card to make a purchase, even if the supplier wants to receive the payment immediately via ACH directly to their bank account. Businesses on the Plastiq platform can have their choice of payment modality, paying a small processing fee for that choice and for immediate posting of the payment to their supplier’s bank account.

It’s the proverbial “win-win” for both buyer and supplier, Kenderov said. Buyers get terms to pay for what they bought, while suppliers get to shrink terms by being paid immediately according to how they want to be paid. “Those are innovations that didn’t exist 10 years ago,” he noted. “We think the world at large has missed this opportunity to enable all forms of cash and credit between buyers and suppliers to flow back and forth.”

Solving for the B2B Payments Friction Trifecta  

Many of the payments innovations that have transformed the retail sector over the last decade have bypassed the B2B category. Kenderov believes the credit card business model is partly to blame, as is the manual reconciling of payments to invoices for many accounts receivable (AR) operations. For each invoice, the buyer in a B2B transaction must check to verify that the invoice amount is correct, the goods are intact and the purchase was approved.

“This three-part reconciliation problem is a friction point in a B2B world that requires further innovation,” Kenderov explained.

Businesses also face the problem of cash flow, which is the primary reason businesses fail. Unlocking opportunities to expedite payment to suppliers, without buyers feeling as though they are giving up the benefits of credit, is a source of working capital that helps businesses ease cash flow lumpiness.

The B2B payments world is a $125 trillion-plus global opportunity. Although slow to move, it has begun to accelerate thanks to the standardization of APIs, data exchanges and new payments tech that leverages the existing rails that businesses know, use and trust today.

“We see more and more companies being funded in the B2B payment space for a good reason: There are a ton of opportunities,” Kenderov said. “The disruption has started.”

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