I recently had the privilege of writing a piece for AFP on my thoughts about the future of payments. I noted that while technology is moving forward at a record pace, our payments systems—the very engine of commerce around the world—seem to be lagging in specific areas. As a result, we continue to perform many functions in the same way we did 10 years ago.
In 2010, businesses wrote 7 billion checks (nearly 60% of all B2B payments), valued at $22 trillion to other businesses because they could not find an efficient way to pay their partners electronically. The number is staggering, so let me repeat: 7 billion PAPER checks are still being used by businesses in our electronic world today. In the process, they exposed themselves to the typical time delays, higher costs, and fraud risks associated with paper payments. The picture is even more dismal globally where 80% of U.S. cross-border B2B payments are made by very expensive wire transfer solutions.
So what is amiss here? Most experts agree that significantly diverse format and standard solutions are at the heart of the problem. B2B payment solutions are complicated by the presence of many different ERP system developers and many different industries with unique needs in managing payments and payments information. Reconciling a myriad of different standards is akin to mixing up several jigsaw puzzles, putting them in one box, and challenging someone to compose a single picture from the diverse pieces. It has been tried on numerous occasions, but as yet no universal standard has emerged over the past 15-20 years that Electronic Data Interchange (EDI) has come onto the scene.
What the industry needs is a transaction processing engine that could stand in the middle and serve a “many-to-many” environment of buyers and suppliers, taking in transactions in various formats, translating them to a standard (such as ISO 20022) for exchange, and then mapping them back into the format of the second party. If both parties used the same ERP solution, no mapping would be required.
That’s where Traxpay comes in. I have been an outspoken proponent for this approach and believe the timing and technology are right for companies globally to adopt a secure transactions platform. The Traxpay engine is designed to operate around the clock and around the globe by bypassing traditional banking sponsored payment solutions that have both temporal and geographical restrictions. This means that a purchaser in the U.S. using an SAP system could pay a supplier in Germany using Oracle at 5 a.m. Eastern time before the U.S. markets and payments systems even open for business. And, the risk of transactions is removed by timely prefunding that ensures all funds are good at the time a transaction is completed.
Traxpay has it right. By ignoring the issues associated with current B2B payments models and starting from scratch, they have modeled what could and should be possible for companies large and small.