• The Dawn of Dynamic Payments: A Three-Part Series  

The Dawn of Dynamic Payments: A Three-Part Series

Regular visitors to the Traxpay.com website have noticed a radical difference recently. The site is now focused on a groundbreaking new platform that is revolutionizing B2B commerce. It’s called Dynamic Payments, and it’s forever changing—and vastly improving—business-as-usual for B2B supply chains and digital marketplaces.

But what exactly is Dynamic Payments, why is it so urgently needed, and why is Traxpay in the prime position to deliver on the requirements? This three-part series explores those questions.

Part 1: The Fatal Flaw of Today’s B2B Commerce Networks

No enterprise should be satisfied with the flow of transactions across the supply chain today. Why? Because unlike consumer-oriented transactions, B2B transactions are too slow, too inefficient, too opaque, too unpredictable, and—most importantly—too expensive. They cost supply chain partners money and business opportunities.

Let’s go to the numbers. Recent research shows that more than 60% of B2B payments are still handled manually, causing up to 25% payment mismatches; 78% of companies cannot forecast short-term cash flow accurately; and over 30% of B2B invoices are paid after the due date or not at all.[1] The problems are even worse for small businesses. In the 2014 Discover Small Business Watch report from Rasmussen, 46% of small businesses reported significant cash flow issues and 80% of CFOs were unable to predict cash flows within a reasonable margin of error.

Equally important, current B2B transaction systems do not evolve quickly to reflect new realities. For example, all of the recent trends in technology—mobile computing, collaboration applications, high-speed connectivity, and so on—reflect a growing desire for instant gratification. And with the rapid globalization of commerce, it has become increasingly necessary for trading partners to bridge time zone disparities, accommodate multiple relationships and processes, and facilitate collaboration.

But today’s B2B transaction systems aren’t helping—they’re standing in the way.

The B2B commerce network emerged to resolve some of these challenges. And let’s be clear: B2B commerce networks have gone a long way toward improving the flow of financial transactions. Today, B2B commerce networks can facilitate interactions and exchange of electronic documents, including purchase orders and invoices. Now the big conversation in this domain is how these networks can extend services to include things like payments, “pay now” capabilities, dynamic discounting, factoring, e-payables, and supply chain financing capabilities. That’s what buyers and suppliers are looking for.

But here’s the problem. Today’s B2B commerce networks still don’t handle the last mile of the transaction. The execution, clearing, and settlement of the payment itself is a completely disconnected process. And that means, ironically, that there is no actual integrated “pay” component in e-payables. There is no fully automated commerce in B2B commerce networks. Payments are entirely separate and disconnected.

While some B2B commerce network service providers may claim that “payments” is part of their offering, the reality is that they’re providing a static payment instruction file to a bank or a link to a payment gateway, and that file gives buyers and suppliers absolutely no transparency into the “how, what, where, and when” of their transactions. There is no real payment in the process, so there is no real transparency or control over the payment, and its impact on cash flow, liquidity, or working capital.

That’s a serious problem. That’s a problem that buyers and suppliers urgently want urgently fixed. And that’s the problem that Traxpay is addressing with the Dynamic Payments platform.

In Part 2 of this blog series, we’ll explore what it really means for a payment to be “dynamic” as opposed to “static,” and how Traxpay Dynamic Payments enables B2B commerce networks to go the last mile and actually execute the transaction. Then, in Part 3, we’ll examine why Traxpay—and not a bank or a technology behemoth—is best qualified to deliver on the demands and lead the Dynamic Payments revolution.

[1] Source: The Hackett Group (as reported in the Purchase to Pay Manifesto from Basware).

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