Liquidity depends heavily on payment terms, which help keep the deals moving and the wheels of commerce turning. But payment terms rely on trust and personal relationships. And invoices, with a typical net term of 30 days, still account for 90% of all B2B transactions.

This was fine when businesses transacted locally on a small scale and everyone knew each other. But it doesn’t work in a global economy when business is conducted online, over distance, and through intermediaries. In the place of trust and personal relationships, you have credit checks, which are complicated and can take a long time.

Digital platforms, which facilitate the trade of B2B goods, are making huge strides in bringing B2B commerce into the 21st Century. But payments remain a missing link and its reliance on invoicing tends to take the deal offline (and off the platform at the same time). That’s why we created Tilta - to embed financing into online B2B transactions where it’s needed the most.

In this article we’ll explore:

• The evolution of B2B payments 

• Problems faced by B2B businesses trading online

• Issues faced by digital platforms

• How Tilta helps digital platforms bridge the B2B funding gap

Evolution of B2B payments

Payments have been embedded into the digital B2C journey since eBay acquired PayPal in 2002. Today, we can order a car, book accommodation, and send out for pizza with a few taps of our finger while the payment is processed seamlessly in the background.

B2B payments, on the other hand, went from cash, to check, to bank transfer against an invoice and haven’t moved from there. Options like card payments still haven’t taken off because of the lack of flexibility around working capital and high costs.

Bank transfer against invoice seems cheap, everyone’s familiar with it, and everyone accepts it. But the process is very inefficient, relying on phone, email, and sometimes even fax, to complete. Bank fees might be low compared to cards, but the manual overhead is huge. Savings on transaction fees do not equal savings overall. Plus, it is not compatible with high-value, high-volume global commerce.

Problems faced by B2B businesses trading online

Invoices work if you’re dealing locally on a small scale with providers you know. But B2B commerce doesn’t work like that anymore. We live in a global, digital age where commerce is transacted across borders and on a large scale. Plus, digital distribution channels make B2B relationships more ambiguous with more intermediaries and fewer personal relationships. So businesses can no longer offer financing based on trust. 

Liquidity issues are also a huge challenge at the moment. Economic instability and global conflict are wreaking havoc with supply and demand. So payment terms are more important than ever to keep business moving. But how do you do this at scale, in an efficient way when you can’t rely on personal relationships? 

Offering trade credit requires knowledge, volumes, and relationships with banks and financial institutions. And businesses rarely have the infrastructure or expertise in place. This creates a huge financing gap that B2B businesses lack the knowledge, experience, and technology to solve.

Issues faced by digital platforms

Digital platforms are doing a great job of modernizing B2B commerce. They’ve built amazing technology, which is successfully migrating B2B trade into the digital sphere. But connecting the increasingly digital sales process with the outdated bank transfer against invoice is disrupting the customer journey at its most crucial point. On top of that, digital platforms have their own business challenges to contend with such as:

Slim profit margins

After years of hypergrowth, many digital platforms have entered a period of consolidation and optimization. They’re subject to the same global headwinds, which is causing trade to falter. Plus, many are still focused on achieving market dominance in their sector.

The need for new revenue streams

One way to optimize business growth is to deliver more value through additional services that can be monetized. Embedded payments and other financial services are attractive options. And a key value-add is a streamlined, digitized net term payment solution with zero counter-party risk.

High operation costs

Delivering the industry standard invoicing payment method is highly manual. Reconciliation is time-consuming and it becomes expensive to manage. As a result digital platforms become stumped with high running costs. 

Third-party branded B2B buy-now-pay-later

Buy now pay later (BNPL) methods, as a branded third-party offering, can work in some cases but are usually only suitable for a small subset of customers. Their financing capability is not sufficient to cover a business’s purchases. Plus, merchants run the risk of cannibalizing their business through the BNPL provider's cross-selling activity. On top of that, digital platforms lose control of the customer relationship, which is intercepted by the BNPL provider. 

Counterparty risk

Absorbing the risk of a lost or failed transaction is not such a risk in the B2C world where transaction values tend to be lower. But B2B transactions can be in the hundreds of thousands. If a digital platform absorbs the risk, it puts its business in serious jeopardy if even a small proportion of the buyers default or products get lost, damaged, or stolen.

Credit underwriting

To offset the risk, credit underwriting becomes necessary. But it is costly and time-consuming. Platforms need to buy data to run credit checks and credit insurance and they have to invest in qualified staff. Since this isn’t part of their core business function, they rarely have the skills, resources, or allocated funds to do so.

Customer churn

Maintaining buyers and sells on the platform is critical to achieving, and retaining critical mass. So digital platforms need to find ways to increase their stickiness to avoid churn.

How Tilta helps digital platforms bridge the funding gap and keep deals flowing

We created Tilta to help small businesses address liquidity issues in a digital world. Digital platforms are committed to the industries they serve and have an excellent understanding of their needs. We realized that the best way to support SMEs was by embedding our service into the platform they were already using to conduct business. We built our technology to: 

• Understand and manage business risk automatically.

• Manage the complete payment process, including how and when the payment is made, when the payout is issued and who’s charged what.

We also understand what digital platforms are up against so we created the following solutions to help: 

An end-to-end experience under your brand

Customers don’t trust financial services they don’t know. They don’t know Tilta, but they know your platform. So we offer a fully white-labeled solution that lets you capitalize on the trust you’ve established with your customers. You’ll also strengthen your own brand by delivering online payment terms in a streamlined way. And you’ll improve your customer loyalty.  

New monetization opportunities

Margins are narrow and most digital platforms need to diversify revenue streams in order to grow their business. With Tilta, you can embed financing into your platform. You choose what you charge for the service. Plus, our holistic underwriting solution uses your merchant data to asses their loan eligibility. So you can proactively offer additional financing, which can be an additional revenue stream.

Higher retention of both, buyers and sellers

The digital nature of B2B trade means that buyers can compare and change suppliers more easily than ever. With Tilta you can offer loyal customers exclusive trade credit limits, which provide a hook for repeat purchases. This leads to better retention and loyalty. 

Increased transaction frequency and more turnover 

Deals are lost when buyers request lengthy payment terms which sellers don’t have the capital or risk assessment capability to accept. To keep orders flowing, we’ll cover the risk and provide the capital to offer flexible payment terms without any of the worries. So your users will close more sales and your platform will grow faster. 

Zero risk

Insolvencies are on the rise and counter-party risk needs to be managed carefully. We will underwrite the financing in real time and cover 100% of the payment default. You don’t have to worry about underwriting, risk monitoring, credit insurance, debt collection or, most importantly, financial losses.

Compliance across all European markets 

The more markets you sell to the more business customs, languages, legal jurisdictions, and regulations you must adhere to and the more complex your risk assessment becomes. We can support you by offering flexible payment terms to all European buyers and underwriting any Europe-based business in real time. This helps reduce the complexity of doing business across borders by reducing the number of counterparties you have to connect to. 

Removing the pain from B2B payment terms

We see digital platforms playing a crucial role in the success of SMEs and the economies they serve and we want to help. That’s why we built our technology, to enable digital platforms to deliver an exceptional payment experience while covering inherent capital and risk challenges.

Curious to discover how Tilta can help you embed payment terms into your platform? Get in touch and we'll arrange a demo.