Business-to-business payments are ripe for disruption and there are plenty of startups innovating in the space today. These newcomers, after being thwarted by corporate red tape, are finding a more welcoming audience from small businesses. 

Typically the larger companies, which handle payments through an enterprise resource planning system, drive payment choice, but "what they see is gutting their systems, retraining employees and redesigning their processes," said Jay Bhattacharya, CEO of Zipmark. "It's a switching issue more than anything else…since the advantages are self-evident."

Because of the complexity involved in larger business operations, Bhattacharya thinks adoption of B2B solutions will be driven by "the Ubers and Airbnbs and Etsys" that work with many smaller merchants that are extremely sensitive to cash flow.

Zipmark, which offers businesses an application programming interface (API) for accepting digital checks, has hundreds of customers, including several small marketplaces. One of those marketplaces is CrowdTap, which connects brands with consumers who create social media content promoting the brand.

"As these [marketplace] companies emerge, typically payments isn't the first thing on their plate…getting suppliers to the platform is," Bhattacharya said. "But as soon as they get a modicum of success, payments become an issue."

And with Zipmark's recent acquisition of WorkingPoint, a billing and accounting solutions provider, the vendor can now offer its services to small businesses and scale with them, said Bhattacharya.

Before the acquisition, Zipmark was selling its products directly to larger businesses that send upwards of 10,000 bills per month and had developers within the ranks, said Bhattacharya. By combining the Zipmark API into the WorkingPoint solution, small businesses can streamline their payments without the technical know-how required to integrate the API on their own.

Business-to-business payments are said to not be as “sexy” as consumer payments, which is partly the reason why it took so long for startups to want to pursue the B2B market. In 2012, during the TechCrunch Disrupt conference in San Francisco, Sequoia Capital partner Jim Goetz marveled at the lack of attention being paid to business products, especially when companies are spending $500 billion with legacy enterprise companies.

And within the business space, payment technology looks like an even better market. B2B commerce is projected to hit $1 trillion this year, about four times the size of the B2C market, according to Forrester Research Inc.

In early 2013, several accelerators and incubators launched with an eye on B2B payments. These include the Plug and Play Tech Center and The Alchemist Accelerator, which tap specifically into the business-focused startup market.

In April 2013, Michael Noble, who previously helped build the P2P file sharing program Limewire in the late 90s, founded Apruve, a B2B payments platform provider.

"For merchants getting paid is super easy…consumers just pull out a credit card, push a button to checkout with PayPal or tap to use Apple Pay," said Noble. "It doesn't work like that in B2B; about 70% of B2B transactions involve two or more decision makers."

Many shopping carts get abandoned, either because the employee doesn't control the preferred payment method or the employee hasn't the expense approved yet, he said.

Apruve inserts a checkout button that allows employees to checkout without paying. The user merely clicks and inputs the email address of the person in charge of purchasing, then Apruve generates a purchase request to be sent to the person.

With this model, the company is also trying to decrease the amount of receivables that are left unpaid. In the U.S., Mexico and Brazil, more than half the value of B2B receivables 90 days or more overdue were written off as uncollectable, according to research published by Atradius in September. Apruve sends businesses several notifications as bill payments approach.

The shopping cart is held in a pending state until the payment is made through the Apruve platform with a credit card or paper check.

"The vast majority of our businesses are still using credit cards," said Noble. Businesses will pay the 2% to 5% interchange fees on high-value transactions because that payment is guaranteed, he said.

If businesses pay with a paper check, the check is sent directly to Apruve, which then pays recipients on a rolling seven-day basis. Apruve has a streamlined method for identifying the check and linking it to a particular transaction. For merchants, dealing with checks is difficult because they're sometimes sent without being tied to a user or order.

Apruve just launched ACH payments on its platform. "ACH is definitely a more cost-effective alternative and you're seeing a lot of people moving more payments in that direction," Noble said.

Apruve works with 23 merchants, most in the education space. "You think the red tape in business is bad? It's horrible in schools…because they're public institutions and there's a lot of scrutiny around spending," Noble said.

Apruve received a $350,000 seed round in January, and there's more venture capital flowing into the industry. B2B payments provider TraxPay received $15 million in funding in September around the same time it partnered with MasterCard in an effort to expand into the global arena. Tipalti, a provider of a cloud pay-outs automation management platform, secured $13 million in October.

Worldwide, six billion B2B checks are written yearly with the average check size about $1,400, totaling $8.4 trillion in check volume annually, according to the 2013 Federal Reserve Payments Study.

These kinds of B2B platforms that digitize the procurement process and the payment are especially important in the U.S. where overall check volume is $21 billion, which is about four times the size of Europe's check volume, said Noble.

"Especially in B2B where you have traditional catalog companies, like Granger…these companies are projected to do close to 50% of their revenue online next year," said Noble. "Companies are realizing there are efficiencies to be gained within B2B commerce…and consumer insights to be gained, but the payment process is still a big opportunity."

And some of these startups are even leveraging blockchain technology to allow frictionless, inexpensive B2B commerce. Using blockchain as a new settlement rail has come out of the rise of Bitcoin; a blockchain is a distributed public ledger that keeps time-stamped track of all transactions that go over a network.

Align Commerce is one such company, which allows its private beta clients to make and receive payments in their own local currency, but the transactions are routed over a cryptocurrency blockchain rail on the back end. This model is similar to how Ripple Labs operates.

Align Commerce works with online retailers, law and consulting firms, exporters and importers and business process outsourcers. 

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