- 1 - Payment Opportunities From B2B E-commerce McGuffog, April 2001 ©2001 Sixhills Consulting Ltd & Author Payment Opportunities From B2B E-commerce One of the most frequently asked questions in the B2B e-commerce arena is a fairly simple one: “What do we do about payments?” However, the usual answer – “nothing” – often comes as a surprise, even to experienced industry insiders. Factually, today most payments for B2B transactions get made exactly as they used to before e-commerce came along – The seller sends an invoice, and in time the buyer sends a cheque (or perhaps its electronic equivalent, an EFT payment) to settle the invoice, just as in an non B2B e-commerce environment. Estimates are that at least 90% of e-commerce transactions today get settled in just that way, and an equally traditional payment mechanism also predating e-commerce, the credit card, usually masquerading under the slightly more up-to-date title of purchasing card, settles most of the remaining 10%. But it would be wrong to assume from the current relative unimportance of payments in B2B e-commerce that payments will never be important: quite the contrary. Today payments are relatively unimportant simply because they work relatively better than the rest of the B2B e-commerce environment. Simply put, if a B2B solution provider wants to distinguish themselves from the competition today, then there are other easier ways to do so than via payments capabilities, for example the provision of sourcing services or spend category specific software modules. But as B2B e-commerce grows more mature, differentiation among providers on basic services will become more difficult, and the provision of value added services such as payments more important, perhaps important enough to become a core part of the service offing required from B2B vendors. Indeed, there are signs – for example, the recent agreement between Ariba and ABN/Amro that the more forward thinking plays are already beginning to position themselves in this space. The problem in answering the question of payments opportunities in a B2B e-commerce environment beyond the level of the “do nothing answer” is however complex, especially for banks and B2B marketplaces or trading hubs. The complexity comes about because there are actually several ways that a “non-traditional” approach to payments could add significant value to buyers, sellers, and operators of B2B e-commerce systems. However, each of these methods implies different infrastructure, and requires selling the solution to a different group of potential customers. Over time, its is highly likely that one or two of these methods will achieve dominance, but there are few early signs available as to which ones. This leaves potential providers in the classic “innovator’s dilemma” – whether to improve current mechanisms incrementally, or whether to do something bold.
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