Payments Mythbusters: Thanksgiving Edition
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Structural Changes Attract Customers, Investors to Fintech
For decades, customers and investors were at the mercy of traditional financial services companies. Whether you like the companies and their business models or not, if you wanted payment, loan or deposit services, that’s where you had to go from the customer point of view. If you were an investor who wanted to diversify into financial services, the question was similar because there wasn’t much differentiation between the various options.
Today, fintech has revolutionized the playing field in financial services for customers and investors. Customers can choose to take some or all of their business outside of the traditional financial services arena just as investors can favor fintechs over traditional banks, investment companies and other financial services firms.
The pandemic has only speeded the transition to more choice and more democracy within financial services for both consumers and investors as fintechs continue to build muscle.
In a B2B CashFlow Conversations Podcast hosted by Finexio CEO and Founder Ernest Rolfson, Rolfson interviewed Marwan Forzley, CEO and Founder of Veem, a domestic and international B2B payments company.
“It used to be, pre-pandemic, that we would shop in-person first and then online for what we couldn’t find at the local stores,” Forzley said. “Today, we shop online first unless you’re really stuck and can’t wait for something to get shipped — that’s one trend. The second trend is that it used to be you’d start a business, open an office, find people to work there and pay them by direct deposit from a bank. Today, with so many people working remotely, your staff can be from anywhere and you need to be ready to pay them anywhere.”
“There’s also the rise of more types of payments both domestically and overseas,” he continued. “I think crypto [currency] is here to stay despite the dismissiveness of many who believe that it won’t remain because of a lack of intrinsic value.”
“There’s a big takeaway here that many people don’t understand crypto and that it’s not going anywhere,” agreed Rolfson. “It’s very serious and very real.
Rise of fintechs as neobanks
Forzley also spoke on other trends he is seeing. “The rise of neobanks is interesting in that fintechs are offering services and experiences that are encroaching on the territory of banks but are different than banks,” Forzley said. “I think we are going to see more B2C and B2B neobanks. The market is complicated, so it requires massive simplification over a long period of time, which means that a number of players will emerge to make that happen.”
“It sounds like you’re in the right spot,” commented Rolfson. “What are your thoughts on the timing and speed of payments and how that is evolving?
“This is a great topic — thanks for bringing it up,” Forzley replied. “I think the work Finexio is doing in this area is quite valuable for customers. Capital and payments are close cousins. If you ask a customer what else you can do for them, besides payments, they usually ring up lending. I think there is a lot of room in this market, which will be a key area in the future.”
In 2020 Finexio launched FinexioCash™, which allows suppliers to get paid upon invoice approval. The solution was designed specifically to help U.S. mid-market companies and their suppliers unlock much needed cash to survive and thrive in a more volatile world.
“There is a natural connection,” Rolfson said. “I really think of fintech and what Veem and Finexio are doing as being akin to rail and infrastructure providers. This is stuff that banks could and should do because at the end of the day, everyone has a bank account. It is incumbent upon us as fintechs to make these products and services available in one package, because customers are starting to use Veem, Finexio and others without even thinking to call Chase, Bank of America, or other traditional banks. This is becoming more natural behavior.”
“Customers don’t think twice, when they get in an Uber for example, how they are going to pay for it,” Rolfson continued. “Because they can just press a few buttons on their phone. There is an opportunity for Finexio, Veem and other fintechs to bundle these products and services together that are beneficial for the consumer.”
“This is the reason why fintech exists,” Forzley said. “We provide what is not being offered by traditional providers like banks.”
More choice for investors
For investors, the rise of neobanks and fintechs are filling the gaps left open by banks and creating their own niches, offering abundant investing opportunity. A number of prominent fintechs are expected to go public in 2022, including Stripe, Instacart, Klarna, and Chime. This is following a banner 2021 in which Robinhood, Blend, Freshworks, Remitly, NerdWallet, Expensify, Nubank, Coinbase, Billtrust, Metromile and SoFi all went public.
Going forward, both investors and consumers in both B2B and B2C are likely to benefit from more choice and innovation.
Be sure to check out this episode of our ‘B2B Cashflow Conversations’ podcast with Marwan Forzley, Founder & CEO of Veem.
Five “Secrets” Every CFO Should Know
Accounts payable has traditionally been an integral part of the business, providing a necessary function in the financial cycle. However, it is now being recognized as not just a cost center but also an opportunity to grow profits and scale your business.
In order to achieve business growth, it’s important for CFOs to focus on finding and funding solutions that will drive long-term growth. To help you understand how your AP department can lead your company to better cash flow management and drive more value, we’re revealing five “secrets” all CFOs should know.
“Secret” #1: Leverage Technology to your Advantage
Technology has revolutionized the accounts payable process, making it faster and more efficient. Automated invoice management systems can help you quickly identify and pay invoices, while supplier payment portals allow you to make payments online without having to go through a middleman. Streamlining these processes will not only free up to 84% of your AP staff’s time, but you’ll reduce costs by eliminating manual, paper-based payment processes.
“Secret” #2: Partner with suppliers to make payments faster and more convenient.
This will improve supplier relations while freeing up cash and reducing the time it takes for funds to be received. Suppliers are motivated to get their money faster and more conveniently, so it’s a great place to start. Suppliers want a say in how they get paid and will adopt a solution that provides a payment method that is fast and easy for them. As an added benefit, you can drive value back to your business with early payment discounts and cash-back benefits from rebates and incentives.
“Secret” #3: Forecast Cash Flow and Allocate Resources Accordingly
In order to make sound decisions about where to allocate its resources, a company needs to have an accurate view of its current and future cash flow position. Accounts payable can help the broader business by forecasting cash flow and providing insights into how different decisions will impact the company’s financial position.
“Secret” #4: Control Costs by Implementing Supplier Payment Best Practices
Best practices for supplier payments can help a business save money on administrative and processing costs. This includes negotiating better payment terms with suppliers, taking advantage of discounts for early payment, and using electronic payments whenever possible.
“Secret” #5: Focus on Cash Flow, Not Just Efficiencies
Cash flow is one of the most important drivers for business growth. Accounts payable can lead the way by expanding its responsibility and becoming better stewards of cash flow for their company. That starts with rethinking how paying suppliers can maximize revenue while cutting costs at every turn.
Hopefully these secrets have provided some insight into why your AP department should be focused on driving long-term sustainable revenue growth, not just controlling expenses more efficiently.
Want to learn more? We’ve got you covered! Check out our latest webinar on-demand to learn more about turning your AP department into a value driver for your business.
Embedded Software Allows for “Seamless” Payments Experience
As growth in the payments industry continues to accelerate, software integrations increasingly focus on simplifying the user payment experience. Payments providers that successfully facilitate a smooth end-to-end experience are capturing market share as customers on both sides of payments transactions prioritize efficiency and execution.
In a recent B2B Cashflow Conversations podcast episode with Finexio CEO and founder Ernest Rolfson, Dan Geraty, founder of Clearent, discussed the rapid evolution of the payments space and how organizations such as Clearent and Finexio can improve the payments experience.
“I think it’s interesting that as the industry invests in itself, there is much more emphasis on the experiential factor, the wow factor,” said Rolfson. “How does Clearent fit into the picture of simplifying payments and improving the user experience?
Geraty responded that within the B2B space, Clearent partners with software developers to enable payments as part of their value proposition, which improves the user experience while creating an additional revenue stream. “These partnerships are also good for customers, because they provide a much more seamless payment experience,” he noted.
“Back in 2017, we came across a company called Spot that specialized in dry cleaning store management software, which doesn’t seem super sexy,” he added. “The idea is that everyone pays for dry cleaning with a credit card, so that the intersection of payments and software created a stickier solution. The founders were ready to retire, so we acquired Spot, moving their customers to Clearent for payments. There were revenue synergies associated with this acquisition as well as improvements that we were able to make for the business and the customer experience.”
Clearent continued to acquire other companies in attractive verticals and earlier this year, merged with TSG to create Xplor. TSG is a global provider of business management software and integrated payments operating in the U.K., Australia and New Zealand that follows a similar strategy to Clearent.
“Together, we’ve created a global platform,” Geraty said. “We will continue to acquire software companies in verticals that we really like in addition to partnering with software companies where we can improve the payment experience.”
“How does acquiring and partnering with software companies help create more efficient and effective payment experiences?” Rolfson asked. “I would imagine that when you started, you didn’t necessarily imagine that you would be owning vertical specific software businesses.”
In reply, Geraty confessed that he definitely did not anticipate this twist. “But you could see it happen back when OpenEdge was bought by Global Payments,” he noted. (OpenEdge, a payments processing platform, was acquired by Global Payments in 2015). “They were doing a lot of integrations with software companies and growing like a weed as a result. We couldn’t help but take notice because in the merchant acquiring space, attrition is a major challenge unless you’ve got a real hook.”
“And software is the hook,” he continued. “It’s even more of a hook when you own it.”
“How is what you are doing different than the Stripe model, for example?” Rolfson asked. “It seems like it’s in the trend area of having credit card processing available to developers so they can embed it in their software.”
“Stripe is a terrific company that is making it really simple for companies to integrate payments into their software solution,” Geraty replied. “What we find is that Stripe is a bit of a one-size-fits-all solution. Software developers may start with Stripe, but as the software company matures, they seek a different solution with more support for themselves, more support for their customers and different pricing options.”
“Essentially, what you are saying is that everyone has a place in the industry or a specific focus?” Rolfson commented.
“Yes,” Geraty responded. “The global payments market is so huge there is plenty of room for everyone.”
Rolfson commented that this echoes some of the trends he sees at Finexio. “CFOs are not going to be buying outbound payment processing or outsourced check printing or having their back-office staff making payments over the phone with a credit card anymore. Instead, they are buying procurement software or AP software to run their businesses.”
This means that organizations can access payments expertise through embedded software, avoiding the complex and confusing aspects of engaging with payments separately, Rolfson continued. “It’s very elegant to get the payments in software development,” he added.
Both Geraty and Rolfson concluded that when payments are seamless and essentially disappear, organizations can focus on their core competencies. Leveraging companies such as Clearent and Finexio to this end means that payments can operate as a utility, so to speak, while organizations concentrate on delighting their customers and growing their businesses.
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