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Today’s announcement of a partnership between MasterCard and global B2B network Basware scores another point for the likely uptake of the B2B payment networks model—a model that I predicted in a recent blog post would come to the fore. The combination of B2B trade networks and payments infrastructures is clearly emerging as a paradigm that enables the exchange of physical and financial supply transactions between trading partners and financial institutions. This may be the sunset of bank-centric payments networks as we have known them.
According to the new model, companies will exchange payments via the same network infrastructures they already use for business-to-business (B2B) transactions, such as purchase orders, sales orders, and sales and procurement forecasts. B2B platforms have been in place for years and connect hundreds of thousands of companies, logistics providers, and distributors in extended networks of trading partners. It makes perfect sense to extend the reach of such networks to the execution of payments instructions, leaving the “last mile” of interbank connectivity to specialized payment networks (e.g., SWIFT).
Past attempts to link the physical supply chain with card networks have seen varying results:
The real news in the Basware and MasterCard announcement is not the creation of yet another payables and receivables finance platform but the true end-to-end extension of two interconnected networks that cover the physical and financial flows of modern B2B networks. Almost all other SCF platforms expect an already processed invoice to be provided by an external source; where that invoice comes from and how it is processed is not part of these platforms’ added value. The Basware and MasterCard network is different because the platform runs all way from the upstream supply chain (sourcing a supplier, creating a purchase order, approving and issuing the purchase order), to creating and sending the invoice when goods are delivered via Basware, to the financing segment through a network already connected to just about every bank and every corporate—MasterCard’s credit card network.
One important point is still open, however: Though credit card companies have hardly figured out how to service corporations that buy from and sell to each other, the greatest penetration that card providers have managed is corporations’ travel and entertainment (T&E) and purchasing card businesses. I expect to see MasterCard adapt its revenue model to new scenarios that go beyond basic T&E and purchasing cards (and which require moving from a percentage fee to a flat fee). I also want to see how Basware will effectively keep its commitment to open interoperability, allowing customers to connect across partner operator networks. Will that also be extended to non-MasterCard payment networks?
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Nick Green Director at Purple Patch Broking Ltd
22 August
Oleg Stefanet Chief Risk Officer at payabl.
20 August
Venkatesh P Co-Founder and Director at Maveric Systems
19 August
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