How First Data Plans To Rev Up B2B Payments

It’s time for B2B payments to get their consumer payments mojo. At least that’s the view from First Data President Guy Chiarello, who chatted last week with MPD CEO Karen Webster on why his company’s deal with SAP’s AribaPay is so important.

“B2B payments has not evolved at the same pace as consumer payments,” Chiarello said. “Innovation often begins with large-scale enterprises but in payments, we have seen a lot more innovation happening in the consumer space first.”

The reasons that B2B payments haven’t really gotten the “hey, it’s time to go big or go home” memo is that B2B payments are incredibly complex and friction filled. As a result, checks often become the fallback because they, like cash on the retail payments side, are something that every business is set up to accept. Ditching checks for something more efficient and electronic means sorting out a payments system that everyone can use, a system that not only moves money efficiently and cost-effectively, but also moves data along with it that makes reconciliation easy and painless. Then, if any of those buyer-supplier pairs happen to be operating cross-border, the FX and currency issues — not to mention the payments process — become even more complicated.

But it’s that set of problems that Chiarello and First Data feel that they are more than capable of solving. After all, Chiarello says, who better to show B2B how to channel their inner consumer digital payments innovator than the technology services provider who’s done it for almost half of the merchants in the U.S.?

And that’s the rationale behind their new partnership with SAP and its B2B payments network, AribaPay.

The two companies announced the B2B electronic payments solution that will be delivered through the Ariba Network across North America, Europe and Latin America, meaning everywhere SAP has a presence. With AribaPay, buyers can provide suppliers efficient remittance details about each electronic payment – making it just as easy for companies to complete B2B payments in the same way that consumers do with paying merchants electronically.

“It’s where First Data is supposed to be. We connect all types of buyers and suppliers in an electronic and efficient way, no matter where they are in the world. We feel like B2B should be an extension of our business,” Chiarello said. “This is really a solution delivered to the market by Fortune 300 players. For us to be part of that is smart and exciting.”

With a very large hand in the retail payments side, SAP also has a major presence on the commercial payments side, with tens of thousands of relationships already in place. From First Data’s perspective, that immediately expands its international payments presence.

“It gives us the large-scale enterprise footprint in just about every part of the world that SAP does business,” Chiarello said. “This basically brings us anywhere in the world where someone wants to make a B2B payment. … We think it brings us to every multinational, as well as every major business that’s buying or selling goods.”

And, in essence, a bigger footprint for both sides. From SAP’s perspective, it helps diversify their services outside the U.S. and across markets where First Data has a strong presence.

“This is an exciting partnership for the commercial marketplace,” said Greg Hammermaster, First Data Senior VP of Financial Services, who led the AribaPay initiative. “AribaPay has a very sophisticated user experience for both buyers and suppliers that First Data can enhance with our vast experience connecting multiple payment networks around the world.”

That also means minimizing its risk. A cross-border, cross-currency B2B payment method that eliminates the need for two set of contracts. In terms of capacity and footprint, SAP’s ability to diversify AribaPay and expand into different markets is another win-win for both sides of the table.

Back on the data transfer side, when it comes to the reconciliation of funds, as mentioned above, there’s a whole host of complexities surrounding multinational payments. But as Chiarello explained, it’s all about the strength of the enterprise’s ecosystem, which is also where First Data acts as the “true value add” in this deal. Of course, because of the trillions in payments across the SAP network, he noted how critical it is to have key control and security aspects in place.

In other words, what the AribaPay solution does is combine the expertise of First Data and SAP Ariba Solutions in order to make the procure-to-pay process faster, more seamless and secure using the cloud-based payments solution across the business network. Through AribaPay, transactions are automated to help end users improve billing and settlement between companies.

AribaPay’s robust solutions are also responsible for being the “great enabler on all four methods of payments [which] allows it to be more successful in giving that kind of information back to buyers’ suppliers,” Chiarello said.

And it comes with plenty of B2B perks.

Benefits of the service include: the ability to exchange purchase orders, invoices and payments in a fast, secure and electronic manner; lower processing costs; better remittance advice; lower fraud risk; the ability to track and trace transactions; and a quicker process to reconcile and dispute resolution.

As a provider of commerce-enabling technology and solutions, First Data’s decision to join with SAP can help bring AribaPay to Europe and Latin America in a way that helps digitize payments, but also establish a process that adds value across the enterprise. To date, more than $40 billion in B2B payments have been made using AribaPay.

SAP CEO Bill McDermott views the First Data/SAP partnership as a way to “fundamentally transform” the way business is conducted between companies. First Data’s Chiarello shares that vision, too.

“I think this is beginning of a very interesting evolution in B2B payments. I think it’s going to open up a different world for us to do some very creative things,” Chiarello said.

Which we think might have a lot to do with First Data Corporation’s middle name … “data.” And, on that, we’ll have to just wait and see.