The payment industry has undergone significant changes in the last decade, largely the result of FinTechs disrupting legacy systems and technologies. Most of these changes have impacted us as consumers: the way we pay, the fees charged, as well as the experience we have when we make payments and open accounts etc. However, looking at all these innovations in the consumer space, one could wonder why there has not yet been a similar focus on the B2B space? Is B2B the next area ready for disruption?
Huge opportunity for FinTechs
Currently, the B2B payment space is still widely dominated by incumbents. However, banks are beginning to feel increasing pressure by new entrants. Incumbents are historically strong in serving the needs of large customers, however, it is because of this that the SME segment sometimes becomes neglected. This is exactly the pain-point which FinTechs are looking to address.
The latest FinTech entering the European B2B landscape is Fundflow. The US-based FinTech, last week, (9th September 2016) announced the launch of its invoice discounting platform, targeting SMEs in partnership with Wirecard. This will make Germany the first European country where this solution is available. The invoice discounting platform allows companies to sell outstanding invoices to bridge cash flow difficulties. The invoices are then sold to institutional investors. Even though customers have to sell the invoices at a discount, they receive the funds faster, which is a critical factor for SMEs. Partnering with an incumbent was critical to Fundflow, as Wirecard provides not only the banking licence, but also the payment processing infrastructure for Fundflow’s platform.
Increased focus on SMEs and B2B payments
It is not yet clear if Fundflow and similar solutions targeting the B2B and especially the SME space will see a significant uptake in the near future. However it is believed that FinTechs are increasingly looking at the potential opportunities. The likes of iwoca, ezbob (SME Financing providers), or Currency Cloud (Cross-border B2B payment provider) have proven that there is enough ground for FinTechs to grow in the B2B space.
It is important to note that FinTechs are not just turning towards B2B because the consumer space is becoming saturated, but also because banks are seeking innovation in the B2B payment area. Investing in or partnering with a FinTech company is often the preferred way of being able to enhance the customer experience quickly, and this is the case for both consumer and commercial banking. The opportunity is clear: In March alone, investment into B2B FinTechs stood at $12bn (40% year on year increase).