Rising expectations among buyers, for both consumers and businesses, are making an impact throughout the entire transaction experience. That includes product sourcing, customer service and, of course, payments. With business-to-business (B2B) brands taking note of the importance of the payments workflow in driving a favorable customer experience, sellers are looking to offer a payments flow that is seamless, rather than one that feels bolted on.
According to Chris Wassenaar, chief risk officer at Versapay, a heightened focus on the B2B payment experience is driving greater interest in SaaS providers becoming payment facilitators, otherwise known as PayFacs.
“You get to control the brand experience for your customers,” he told PYMNTS in a recent interview. “And what is different about PayFacs versus traditional payment processing is, essentially, you are insourcing all of the payments infrastructure within your own firewall.”
Wassenaar described how the PayFac model can be particularly valuable in the B2B ecosystem as a framework that can support the complexities and high data volumes of B2B transactions, deriving value for both buyer and seller.
Optimizing Payment Flows
With traditional payment processing, online sellers have historically been willing to hand off their customers to a third party to handle payments. But the competitive landscape of digital commerce is intensifying, leading buyers to want a more seamless payment experience and leading sellers to retain that customer relationship at the time of transacting.
Wassenaar pointed to a Versapay client — a B2B supplier that took the time to get to know everything about its customer base in an effort to create the best outcome and experience for them. If a typical payment processor is used, he said, that supplier is forced to place their customer relationships in the hands of a company that knows nothing about their customers.
“It’s a very powerless position to be in, because you’ve worked for months or years to build up that relationship and explain that value,” he said. “And at the last second, you’ve turned that over to a third party.”
The PayFac model allows that company to keep the customer within its own realm when facilitating a transaction. For business customers, this yields a more embedded and seamless payments experience. For the supplier served by Versapay, Wassenaar said the ability of Versapay’s PayFac service to support integrations with back-office systems like ERPs provides for robust and holistic management of transaction data. This could mean greater visibility into the timing of a subscription payment, or a more automated reconciliation of a payment.
While traditionally a seller may deploy a third party to manage subscriptions and another third party to process payments, a PayFac can unify these workflows, thanks to its ability to embed itself within a merchant’s back office. Further, Wassenaar noted, PayFacs can add value by allowing a merchant to sign up with different payment processors and then route transaction flows to the processor that will be most efficient or affordable depending on the transaction type.
“If one rail fails or there’s a delay, you just naturally switch the traffic to the other one,” he said. “You can improve authorization rates by using your ability as the PayFac to route that traffic to the most optimum route for your business to business customers.”
Making It Work
While it can be challenging for a chief financial officer to understand the nitty-gritty differences between a payment processor and a PayFac, Wassenaar said that what’s important for finance leaders to understand is the value this model can offer: a better payment experience for customers and greater efficiencies in the back office.
It’s a sentiment that can also be found among business customers: Payers don’t necessarily need to know exactly how the payment mechanism operates — they just want it to work.
Amid the evolution of B2B eCommerce, there are greater complexities, but also more opportunities for B2B sellers to optimize the customer experience. Wassenaar said this is giving rise to the concept of “collaborative commerce,” in which B2B payments are layered and integrated within key information about the transaction, like invoice timing, interest rate charges and pre-negotiated rates.
Considering how complicated B2B commerce and payments can be, when transactions are deeply embedded into the buying experience and become a connected part of the broader whole, both buyers and sellers can benefit. “A lot of organizations are realizing that payments need to become part of their larger or broader offering,” said Wassenaar. “It needs to become almost ubiquitous, and ‘underneath the envelope.’”
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