So much of the attention and conversation around the payments industry is typically focused on B2C and C2C payments. That makes sense. However, what probably gets lost in the noise is that payments around B2B commerce also contain multi-billion dollar volume opportunities. One European player in the space indicates that the total volume may be as large as $377 trillion.
If you think about it, behind every payment made by a consumer to a business, there are one or more payments that the business makes to other businesses (suppliers / vendors). To be able to sell a plane ticket to a customer, the travel agent has pre-paid and bought that capacity from an airline. A kirana (local mom and pop shop in India) store pays (adjusted for margin) to local distributors, who in turn pay larger regional or national distributors or the FMCG companies themselves. Point is that in any vertical – travel, ecommerce, FMCG, education, etc. – there are multi-layered B2B payments adding up to billions of dollars of volume.
Now, B2B payments have very real pain points which aren’t just about convenience, and are critical to the day-to-day operations and growth of large and small businesses employing millions. Let me try summarize a few:
Complexity – Imagine a larger player that receives daily / weekly payments from a large number of smaller senders. Now layer on the fact that these may come in the form of cheques, cash, credit and debit cards, bank transfers (NEFT, RTGS, etc.). Managing this complexity of many-to-one payments is not easy, and not generally facilitated by banking platforms. A large business recipient (e.g. an airline or hotel chain) might receive payments from a fragmented network of small agents, and needs simpler ways of monitoring transfers or storing hundreds / thousands of cards or other instruments on file in a secure, pre-authenticated fashion.
Cost – Related to the reasons mentioned above, a large recipient often has to invest in a whole array of staffing and operational costs at the backend, often to manually verify, settle and reconcile thousands of payments every day. For players large and small, payment transaction costs are already high, partly because of the lack of common platforms connecting payors and payees. Value is also lost with delayed receipt of payments. Let’s remember, for a small business, managing working capital and cash flow is everything.
Speed and Convenience – With a majority of payments still being paper-based, small businesses waste a LOT of time and effort dealing with inefficient processes, cheques, manual RTGS forms, etc. Cash and cheques involve more time and risk, and even bank transfers are inefficient for frequent users. Businesses end up relying on error-prone, offline processes that require people running round, and/or with too many systems that don’t reconcile. They also suffer from time lags in getting credit for payments made. In some cases (e.g. in the airline business), it has historically taken as many as 4 DAYS for agents to get credit for payments made!
Credit - Small businesses can boost their growth significantly if they can use credit to make payments, but this is not commonly possible. Many large payment recipients do not accept credit card payments from small vendors due to a host of security and management overhead challenges involved.
Despite the vast markets for B2B payments, innovation through technology has been limited. There has been a glaring lack of a single interface for multiple types of payments w.r.t. multiple payees and payors, with a simple UX that addresses the issues of cost, complexity, convenience and credit.
And that's where PayMate comes in.
PayMate started working on this problem in 2013, beginning with the $29Bn travel industry in India. Ajay and the team studied these issues very closely and developed PayMate Xpress (PMX) – a single platform to manage multiple payment relationships and multiple payment options. Today, PMX combines nationwide coverage across any bank and any operator, with a simple, efficient, trusted mechanism for “real-time payments”.
Over 10,000 small businesses are on PayMate’s platform, and seeing value through the advantages of better cash flow management, gain in efficiency and real-time visibility and reconciliation. Within 2 years, PayMate has ramped its B2B payments business from zero to an annualized run-rate of $750 million in processing volume. PayMate’s vision is already creating a win-win for payors and payees, small and large, as well as other ecosystem partnerships like acquiring banks, card issuers, etc. It’s a classic example of potentially huge network effects, as they bring many partners on common platforms.
The new journey has just begun, and we are so proud to be supporting the PayMate team as they take a stab at fixing an old ecosystem and giving it new wings.
PayMate provides simpler, faster payment solutions. Historically the company had powered mobile banking solutions in partnership with 32 banks, major operators and a large network of 13,000+ merchants. Over time it has sharpened its focus towards the travel sector and is bringing together India's largest airlines, hotels and travel companies by providing a platform for them to accept payments.
if the deal goes through, it may be the biggest signal yet that the Indian technology ecosystem is evolving to its next phase. It will pave the way for the emergence of a future consolidator in India’s technology market.
A company’s product enables its business model and the business model defines the parameters of the product. Neither is permanent in nature; changes in one impact the other and in the best cases they play off each other.