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The Traxpay B2B Dynamic Payments platform was created to fulfill the need for faster, safer, smarter B2B payments, a market worth $300 trillion annually. The modular, SAP-certified, cloud-based platform enables Dynamic Payments that are able to adapt in real-time to the complex and constantly changing parameters which define B2B trade. Enterprise transactions are multi-faceted by nature, and due to changing conditions and business relationships, a payment may need to be split, combined, rerouted, canceled, partially refunded, factored, put into escrow, executed on condition, paid on delivery, discounted, or in some other way dynamically altered during the course of the transaction. Unlike legacy payment methods which are static, Traxpay’s Dynamic Payments embeds the payment process directly into B2B commerce network operator platforms (P2P, O2C, ERP, etc.) and connects all associated transaction data and remittance information to the payment. Dynamic Payments utilizes this rich data in combination with an event-driven workflow engine that constantly monitors for any changes to the who, what, when, where, why, or how of the payment, and executes and settles the payment accordingly - instantly, anytime, and 24/7/365.
B2B E-Commerce: A gigantic market opportunity fueled by Technology and Payments
While B2C e-commerce has been growing at a steady pace over the past 15 years, B2B e-commerce is now the market segment experiencing the biggest growth. At over $500 billion in estimated total sales, the market is an increasing target for innovators, developers, and retailers.
B2B e-commerce was projected by Forrester Research to have been worth close to $559 billion in 2013. Some analysts report that the B2B e-commerce market is ten times that of B2C e-commerce, and procuring via online channels for B2B is rapidly becoming the norm. Nevertheless there is still enormous potential with the overall B2B commerce market estimated by a 2014 BCG report to be worth $300 trillion.
E-commerce is a key driver of the future of commerce worldwide. With more than 40% penetration (approximately 3B people) of the world’s population using the Internet today, up from less than 1% in 1995, it is safe to say that today most every company in the world has access to the Internet. Of course, developed nations figure more prominently in the statistics, such as Asia and the Americas but access and usage of the Internet and e-commerce will continue to become more evenly distributed over time.
With access, these companies also have the ability to buy or supply via the web. Also, because e-commerce in the B2C world has had a fifteen-year track record of success, and is truly part of the fabric of our everyday lives (and it is these same people that work “in business”), there is more acceptance and readiness for buyers and suppliers in the B2B segment to conduct commerce this way as well.
The global commerce potential is massive, but there is a looming issue in the area of payments. Traditional payments, be it via banks, credit cards, or other electronic means, have simply fallen short when it comes to B2B payments (fraud, loss, data, real-time, push payments, etc.). With the influx of electronic payments and the increased recognition that cross-border payments must become faster, safer, and smarter to support what is now global commerce, businesses are looking for payment solutions that address the needs of modern business.
B2B Commerce Networks: Necessary But Not Sufficient
Corporate employees and supply chain partners are not immune from the desire for instant gratification they are used to in the B2C world. There is a greater desire for flexibility, transparency, and responsiveness than ever before. However, the rapid growth and increasing geographic dispersion of supply chains has led to complications that hinder instantaneous interactions.
For example, it has become increasingly necessary for trading partners to collaborate outside of traditional office hours, bridge time zone disparities, and overcome the gaps created by lack of proximity, inconsistent processes, and dynamically changing business requirements. Moreover, B2B transactions involve multiple relationships within each corporation, complicated processes, and a long value chain.
On the buyer side, the Purchase-to-Pay (P2P) process includes discovery, sourcing, procurement, contract management, electronic purchase order generation, invoice receipt, approval flows, document matching, discount management, and finally, payment. Similarly, the supplier-equivalent set of Order-to-Cash (O2C) processes includes catalog generation, order management, fulfillment, e-invoice generation, discount management, and payment reconciliation. Each company is also subject to complex business rules on each side of the transaction, whereby both parties need to generate and track documents that capture promotions, discounts, and dynamic business conditions.
According to a 2014 Ardent Partners study, the average cost to process an invoice today is approximately $14.21. With many companies processing in excess of 400,000 invoices in a given year, the overall cost of this function is enormous.
The inadequate, slow and costly B2B payment processes that businesses have traditionally employed have a direct impact on the bottom line. Static, non-dynamic payments are a bottleneck in B2B transactions and, according to a 2013 Basware study, are costing businesses billions in losses.
B2B commerce networks have emerged to resolve these challenges. Today, B2B commerce network providers represent a group of solutions, usually provided as a service, that facilitate automated interaction and exchange of electronic documents, including purchase orders and invoices. Some even extend to dynamic discounting, factoring, e-payables, and myriad supply chain financing capabilities. Particularly in the past few years, significant gains have been made by these software vendors to bring intelligence, automation, and transparency to the P2P and O2C flows across the supply chain. Some of the more progressive B2B companies have also embraced the latest social, mobile, and cloud technologies to meet their fast-evolving business needs.
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.