The COVID-19 pandemic consolidated e-commerce into everyone’s daily habits in 2020 and as we look to the future, B2B e-commerce is fast becoming the next frontier for founders and investors.
Businesses have moved online, and the emergence of B2B markets and e-commerce infrastructure is driving a new wave of growth that is estimated to reach $ 3.6 trillion in gross merchandise value (GMV) annually by 2024.
But an important component is missing from the stack: check, which has the opportunity to be the ultimate facilitator for B2B e-commerce more broadly.
The challenge of B2B e-commerce
Historically, B2B e-commerce has been held back by deep-rooted behaviors and a lack of cloud-based infrastructure. While the market is evolving rapidly, there are nuances in B2B shopping that make the purchase path more complex than in consumer e-commerce. Broadly speaking, these restrictions fall into three categories:
Payments: PayPal unlocked the early days of consumer e-commerce, and Stripe’s ease of integrating card payments has fueled the last decade. But in B2B, the challenge has always been that sellers don’t want to pay a 3% surcharge, so much so that they prefer to suffer the pain of physical checks and accounts payable. In 2018, 60% of B2B payment flows were made through checks, and the persistence of non-digital payments has been a major bottleneck for e-commerce.
Permissions: Most B2B transactions go through contracting and acquisition, which requires multiple parties to sign each transaction. This creates friction on the way to purchase, as the seller cannot know if the buyer is authorized. Rather than being able to push to buy, buyers often need to fill out a form for a seller to get in touch. This can slow down the transaction from seconds to weeks.
Credit: Most B2B transactions are completed with some form of credit, be it working capital loans, factoring, or in the form of days due. Credit applications are usually completed on paper forms (or at best hosted PDF files) that review armies of people in internal credit departments. For context, there are more than 1,000 John Deere employees with “credit” in their job descriptions. This costs a lot and results in confidential information being shared on paper documents, further slowing down the transaction.
The net result of these limitations is the inability to make instant purchases online, as we are used to as consumers. It is a combination of financial technology problems that require a platform rather than a series of point solutions.
Why pay is the answer?
While the term “payment” may not seem particularly novel, modern payment is a distinctly new category in fintech that combines digital payments, identity, fraud, credit, and much more. It creates a powerful network, the kind that can not only build trust, but also enable one-click transactions at scale.