After covering B2C alternative payment systems in a two-part column over last month (Annual Review of Alternative Payment Systems, Part I and Part II), I heard from many B2B payment providers asking for equal time. Here, then is a classification of some of the B2B payment options that exist. As with the B2C providers, there's too much material for one column, so you'll have to watch this space for the second part of this column.
Conspicuously absent from this column will be eBilling (EBPP: Electronic Billing Presentment and Payment) providers because there are so many of them. You can read my take on eBilling in What Do eBilling Users Really Want?
Models of B2B Payments
In the B2B payment universe, there are three types of payment systems: those that replace the traditional role of the bank or finance company, those that work with banks and finance companies to provide a service that banks and finance companies can offer to their own customers, and those that use the ACH system (but not necessarily by offering EBPP) to process payments. In the first category, you find companies like Actrade and TradeCard. In the second category, you find solutions like Orbian, iPin, and Virtual Purchase Card. In the third category are E Check 2000 and others.
What to Look for in a B2B Payment System
B2B payment systems can help expedite both transactions conducted on exchanges and those conducted between existing trading partners. Regardless of the model of the payment system, you should expect to see some degree of each of the following qualities in a B2B payment system:
- Provides assessment of creditworthiness of buyer to seller (or guarantees the payment by the buyer to the seller)
- Provides some guarantee to buyer that goods will be of the quality specified and will be delivered (escrow-type service)
- Permits sellers to conduct business with unknown parties without fear of repudiation or fraud
- Provides faster collection of funds, usually at some discount rate, to the seller; may also extend the payment window of the buyer at some additional cost
- Removes expense, hassle, and security risks associated with paper changing hands after the initial accounts are set up
- Provides reporting of delivery of goods, approval, invoicing, payment, collections, etc.
If your customers are primarily businesses, then you probably are well versed in the problems that these systems intend to solve. Many solutions exist and I have limited space with which to cover them, therefore I've attempted to examine a few in each category. By all means, do your own research and get recommendations. As with B2C solutions - and EBPP solutions - there are probably more today than the market will ultimately support. The "best" solutions will not necessarily prevail (life is not fair). The solutions with the most committed partners will stand the best chance. Expect the field to narrow within the next year, with those that have already achieved critical mass and those backed by major players in the technology and financial sectors faring best.
Actrade: In a Category by Itself
The granddaddy of online B2B payment systems is the oft-awarded Actrade. Actrade is in a category by itself. While it's a finance company, it has a different twist on the finance company model because participants in its program issue (purchase) E-TADs to vendors (electronically generated checks drawn on accounts with Actrade), who can then sell the E-TADs back to Actrade for cash. Actrade handles the credit risk for the vendors. After the initial paperwork is signed, everything is handled digitally, with secure certificates residing on the issuer's computer to guarantee authenticity. Any business in an online exchange that does business with unproven trading partners or any business that has long collection cycles will find that Actrade's E-TADs fit the bill.
Actrade is poised for growth. I don't usually report on management changes in this space, but Alex W. "Pete" Hart, recently joined Actrade's board of directors. Mr. Hart was president and CEO of MasterCard International from 1988 to 1994. It wasn't unusual to see offline business executives taking prominent positions with dot-coms or dot-com service providers in 1999, but now that the shine is off the dot-com (and B2B) apple, it says something about the future of Actrade that it can attract talent and experience like that to its board.
Part II
In Part II of this column, I'll cover a few more solutions, including: TradeCard, Virtual Purchase Card, Orbian, eFinance, E Check 2000, PitneyEscrow, eRevenue, VCHEQ, Wallet21, and EzReceivables.
Note to Readers: Remember what I said about testing? Well I had a memory lapse and failed adequately to test the form on my site where I asked you to leave me your e-mail address if you wanted to receive sample copies of messages from the seven vendors mentioned in E-mail You Can't Ignore. If you submitted your e-mail address before about 2 p.m. EDT on Monday, June 18, please re-submit it. I'll scrub the file to make sure no one is listed more than once. Click here to submit your address.
Alexis D. Gutzman is an author, speaker, and consultant on e-business and e-commerce topics. Her most recent book, The E-commerce Arsenal: 12 Technologies You Need to Prevail in the Digital Arena, was named one of the 30 best business books of this year. For more information on her upcoming speaking engagements, please contact her directly at agutzman@internet.com.
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