The war is on in the B2B payments and last month at its annual user conference, AribaLIVE, Ariba, an SAP company fired off a big shot. As has become customary, Ariba uses the event to bring together its customers, partners, and staff, as well as industry thought leaders and media to share best practices and ideas. Ariba also uses the event to share its vision and product strategy and make several announcements. This year was no different as Ariba announced at the event that one of its customers had participated in a pilot program and utilized its new payment solution, AribaPay, to receive its first payment. AribaPay, a solution developed and delivered by Ariba and Discover Financial Services (Ticker: DFS), was announced at last year’s AribaLIVE; we covered that announcement here.
We’ve also spent the last few years focused on covering the larger B2B payments market as it continues to build momentum. The typical AP group is well aware of the fact that their invoice and payment processing takes too long and costs too much but it was not until recently that they began to include payments in their transformation strategies. While paper rules the day in invoicing, Ardent Partners’ research has shown that electronic payments (ePayments) are slowly but surely winning the battle against paper checks with a market penetration of ePayments growing in 2013 such that 53% of all payments are being made electronically. Additional analysis shows that while almost all companies still use paper checks, only 8% increased their usage of paper checks over the past two years. Despite this trend, challenges persist and Ariba and Discover believe that their solution will face down those challenges in a revolutionary way.
Drew Hofler, Ariba’s Financial Solutions Marketing Director led a session at AribaLIVE with its pilot customer Arlington Computer Products. I was able to sit in on that presentation entitled Solving B2B Payments!: Eliminate Checks, Reduce Risk, & Save Money with AribaPay – what follows are some highlights:
Hofler began the presentation by introducing his co-presenters and then introducing AribaPay as a new/revolutionary B2B payment platform that will enable trading partners to exchange funds and remittance information via Ariba’s partnership with Discover Network. Hofler was quick to note that while the solution will leverage the Discover Network, it is not a commercial card product and as a result, does not offer either a financing element nor the interchange fees associated with cards.
In Hofler’s view the solution is well-served and supported by a combination of Ariba’s success and experience in enabling P2P transactions and information sharing across that process with Discover’s experience and scalable infrastructure used to settle transactions and that its robust “track and trace” capabilities (that enable both parties to monitor payments) and uniquely rich remittance information are among the solution’s compelling features
While described and generally viewed as a buy-side solution (with benefits for suppliers), AribaPay’s first transaction was driven by one of the suppliers on its network, Arlington Computer Products, which participated in a six-month pilot program and deployed the solution just a few days before AribaLive. Tom Turkot, Vice President of Client Solutions at Arlington Computer Products (ACP), hopes that by automating some of their manual accounting processes, AribaPay will add not only tactical value to the B2B payment process, but also strategic value across the company. ACP was not looking to eliminate people or to save on labor costs explained Turkot, but rather, it was looking to “reapportion their time into more analytical parts and get a better understanding of how we’re relating with our customers.”
How it will work (at a high-level): We’ll return with a more detailed review of the solution in the future, but at a high-level, (1) the buyer sends a payment instruction to Ariba (2) Ariba receives it and matches it with all the information they have in teh Ariba system that has led up to the payment (3) Ariba then sends a complete payment instruction to Discover. During these first three steps, the Ariba system in parallel communicates to the supplier that payment has been initiated and provides the supplier with “rich” remittance. (4) Discover will debit the buyer’s bank account with a wire transfer and issue funds to the supplier’s bank account(s) via ACH. (5) The supplier receives the payment and uses the remittance advice to reconcile the payment.
AribaPay is will be available in the U.S. market this quarter and on a global scale in the coming months.
The B2B payments war has begun.
RELATED ARTICLES
AribaPay: Ariba and Discover Partner to Create a New B2B Payment Solution
New and Improved B2B Settlement Network – Paymode-X 2.0 from Bottomline Technologies
Three Must Know Stats about Electronic Payments
2014: The Year of The B2B Network
MasterCard and Basware – Bringing to Market a New B2B Payment Capability
