I’ve been covering the AP/P2P/Payment space for quite some time now and while there may have been a lack of innovation in this space in years past, over the last few years we’ve seen a much higher rate of innovation in this particular technology space. These innovations appear in the form of new technologies such as mobile capture, advancements in eInvoicing technology and improvements in ERP integration (e.g., pre-built adapters). There have also been new approaches to things like capturing early payment discounts, supply chain finance and B2B payments.
However, I think that one of the most impactful technologies has been the B2B (or business) network. A network of connected businesses isn’t exactly an innovation, the value lies in what these connected businesses are able to accomplish via the network and I believe that in the years to come they will be able to accomplish more and more. Additionally, many of the innovations I mention above are best used within a network infrastructure. I define a B2B network (includes supplier or payment networks) as a web-based platform that enables interconnected buyers and sellers to trade, communicate and collaborate with each other.
As I’ve talked about before, networks have been around for a while and have drastically evolved since they were first introduced in the late nineties. The success of cloud-based technology and the desire for enterprises to transact, communicate and collaborate digitally (rather than manually) has really driven the growth of these networks and as we move further into the digital age, networks are likely to play a more central role.
In 2014, we expect to see existing B2B networks like Ariba, Basware, Hubwoo, Tradeshift, and Paymode-X to aggressively grow in size and reach. As more enterprises make the move to eInvoices and ePayments, the volume of transactions going through these networks will continue to grow. Businesses that are part of a network or multiple networks will also begin to extend their usage of networks (for e.g., conduct more of the P2P process through the network).
What will 2014 Bring?
Innovation in B2B Payments – The US has generally lagged behind Europe in the adoption of electronic payments, however, things are going to be shaken up in 2014. Now, checks are still going to dominate in 2014 but the offerings that will be introduced next year (within a network environment) will set a new course towards ePayments. I’ve already covered some of the announcements that I believe will result in significant innovations and make an impact on the way businesses make payments (AribaPay & Basware/MasterCard).
Increased Focus on the Supplier – Networks that don’t already provide significant value to suppliers will begin doing so and those that fail to do so are at risk. While it was necessary to focus on buying organizations to create the B2B network market, suppliers are now as much a part of this as buyers. As more and more suppliers join networks to transact and interact with their customers they will begin to expect solutions that are focused on their needs as much as the needs of buying organizations. This may include various order processing capabilities, accounts receivable functionality, a new channel for sales and marketing, logistics, etc.
Rise in Demand for Dynamic Discounting – While dynamic discounting is talked about quite often, it is only recently (last few years) that enterprises have begun to fully realize the benefits. Successful dynamic discounting programs yield benefits for both the buyer (lowering cost of goods) and the supplier (accelerated payment). However, success also depends on the level of connectivity to suppliers and this is where B2B networks come in. In my discussions with various AP and finance leaders I found that dynamic discounting technology is being seriously considered by many organizations, as such I expect higher demand for solutions with this functionality in 2014.
Supply Chain Finance Goes Mainstream – With the increased usage and growth of B2B networks, the rise in demand for dynamic discounting and the automation of the AP process in general (read shorter invoice cycle times), solution providers and financial institutions alike are putting a lot of effort and resource behind supply chain finance (SCF) offerings. While capturing more early payment discounts is highly desirable it requires cash on-hand. Not all organizations are sitting on piles of cash and this is precisely where SCF comes in. Through SCF, financial institutions offer short-term credit to buying organizations against the security of an unpaid (but approved) invoice. B2B networks offer enhanced visibility throughout the invoicing process and a high level of accuracy and real-time data around the invoices and payments. It is only with access to this level data that SCF can be successful on a wide scale and for businesses of all sizes.
The returns on capturing early payment discounts are significant enough where hedge funds and other non-traditional funding sources are interested and we are likely to see more technology providers partner with these types of funding sources, a prime example is CapitalAid and Tradeshift.
All in all, 2014 is going to be an exciting year for this industry with the promise of new opportunities and new innovations.
