Why B2B Marketplaces are a Gamechanger for Treasurers

Business-to-business marketplaces are on the rise in almost every business sector. As the shift to digital sales requires a new payment strategy and innovative technology, corporate treasurers must take the initiative and put themselves in the driving seat to capitalise on this trend.

While shopping online has been popular among consumers for several years, digital sales are still in their infancy in the business-to-business (B2B) space. This will change dramatically over the next few years, however. Research and Markets, an aptly named market research institute, predicts that by 2030, the global e-commerce market will reach $66.9tr.^[1] – with the B2B sector accounting for more than three-quarters of the digital sales market equalling $51.2tr.^[2].

Companies are not only extending their sales channels, they are also building digital ecosystems around their original product offering. Automobile companies expand their offering horizontally with mobility solutions such as car sharing; machine builders are ramping up their software development and aftersales business by leveraging data on Internet of Things (IoT) platforms; and in the healthcare sector, manufacturers of diagnostic equipment create vertical marketplaces to monetise new goods and services at scale through a convenient integration of smaller medical suppliers.

While buyers on these platforms benefit from greater choice, faster delivery and cost reduction, sellers gain access to a larger number of clients at a lower risk. Given these advantages, global sales conducted via B2B marketplaces are expected to quadruple from $1 tr. in 2020 to $4 tr. in 2025^[3].

Yet being part of a marketplace is not enough. Several multinational companies with strong brand recognition or market leadership in specific niche markets aim to become digital marketplace operators themselves. This would enable them to generate new revenue streams from fees on transaction volumes and capture upside through ‘as-a-service’ recurring revenue. Furthermore, marketplaces provide a great opportunity for manufacturers to sell directly to the customer thereby circumventing resellers and increasing their margins. Owning the interface to the client is becoming even more important as sales channels are shifting from physical to digital.

Driving transformation

For corporate treasurers, B2B marketplaces are a gamechanger because operating digital platforms requires a totally new payment strategy. Payment acceptance plays a key role in the end-to-end user experience, so companies should ensure that they accept a wide range of payment methods and currencies without cutting back on efficiency, security, and risk management. From a treasurers’ perspective, supporting digital sales therefore goes beyond just the front-end checkout process. It requires embedding and monetising payment and lending services using innovative payment technology to enable the growth of the business.

However, treasury is not always directly involved in projects to enable embedded payments in new digital business models. The initiatives often originate from the sales department or the business development function, with treasurers sitting in the back seat. Banks can help to empower treasurers to become drivers of business model transformation.

Treasurers’ checklist

There are four key factors that treasurers should address when it comes to B2B marketplaces. First, they must tackle the lack of integration between their e-commerce platform, payment service providers (PSPs), the treasury management system (TMS) and enterprise resource planning (ERP) systems as fragmentation can lead to problems with accounts receivable management and reconciliation, cause delays in payment refund, and ultimately frustrate the customer.

Second, treasurers should ensure that legal requirements are met across payment partners. This, for example, includes know-your-customer (KYC) checks, fraud protection and guaranteeing the traceability of flows. While the onboarding of merchants is cumbersome, as it requires KYC checks and data collection, buyers need to be screened according to credit risk processes.

Third, with B2B marketplaces growing cross-border, the foreign exchange (FX) exposure generated from digital sales activities will increase. Therefore, treasurers should consider incorporating platform cash flows into their hedging policy.

Last, but not least, treasurers should examine counterparty risks when choosing their payment partners. While fintech solutions are often quick to be implemented and convenient for the end user, they usually lack global reach and FX capabilities. Once companies start to sell internationally via digital platforms, banks are usually better positioned than fintechs. Furthermore, given the fast pace of change in the payments landscape, it is uncertain whether some startups will even exist in three years’ time.

Enabling the payment orchestration

Summing up, the goal of the treasury department should be to create a seamless payment experience for all stakeholders. For buyers, marketplace operators need to accept relevant B2B online payment methods such as credit card or invoice payments, while for sellers, it involves ensuring low-cost payouts in all currencies and automated reconciliation. A functionality that is of particular importance in this context is split payments, which enable funds to be credited to different merchants within one transaction.

Deutsche Bank is currently piloting a marketplace payment engine including features such as single-purchase application programming interface (API), split payments, and currency conversion with a large original equipment manufacturer (OEM) supplier. The company operates an IoT and software platform on which business clients can purchase apps from software developers that accompany the service offering of the supplier. However, when setting up the marketplace the company faced several payment-related challenges – including the onboarding of partners globally, and ring-fencing their funds on the platform.

The new marketplace payment engine developed by Deutsche Bank now enables the treasury department to streamline bank and PSP relationships, scaling payout and FX processes globally, and establishing governance control at headquarters-level across the group.

This is an excellent example of how treasurers are becoming enablers of business growth. In an even more sophisticated operating model, the treasury department could also become an internal profit centre by internally reselling a white-labelled payment solution to other web store applications or marketplaces. This would be a true gamechanger for treasurers.