Unlocking The Recipe For Better B2B Payments

Payment capabilities are growing more sophisticated, and corporates’ own demands from their banking partners are intensifying. But what, exactly, goes into delivering a better B2B payments experience?

According to Tassat CEO Ron Totaro, the evolution of real-time payments in the U.S. has played a significant role in impacting what businesses expect in terms of payment functionality. Indeed, he told PYMNTS in an interview, speed is critical to the business and user. But it’s not the only ingredient in the recipe of B2B payment improvement.

As Totaro discussed, financial institutions (FIs) need an array of capabilities in order to deliver corporate modern payment requirements. At the heart of meeting, or even exceeding, expectations, is infrastructure.

The Right Ingredients

Facilitating real-time transactions is a capability that corporates demand from their banking partners, even smaller FIs. Today, the U.S. payments ecosystem has not yet gotten to the point where instant payments are a mainstay.

Even as banks struggle to meet this need, there are other requirements businesses have.

“The holy grail of enablement for B2B payments is twofold,” Totaro said. “One is that ability to deliver real time… The second big component is data.”

Existing payments infrastructure often fails to move enriched data along with funds to the extent that corporate’s need for reconciliation, analytics and other purposes.

Finally, Totaro noted the importance of a seamless user experience. Not only is this important for banks looking to meet business clients’ needs, but it’s vital to actually attract and retain customers as well.

This can be an especially large hurdle to clear for smaller FIs that lack the resources and money to finance proprietary innovations or product development. At the same time, however, this can also be a significant opportunity for these banks to remain competitive. Business customers, Totaro said, do not necessarily need to know what’s going on under the hood. They just need to know that payment services provided by their financial service providers work and deliver a great experience.

Existing payment rails, even those that can support real-time transactions (or will support it, such as the Federal Reserve’s planned FedNow Service), do not meet corporates’ standards for data. Totaro also noted that legacy rails can struggle to meet the needs of an enhanced end-user experience. Blockchain, he said, presents an alternative for FIs looking for a new way to meet business customer requirements.

It’s All About Infrastructure

At the core of this recipe for better B2B payments is infrastructure.

“Whether it’s the FedNow or stablecoins, banks need infrastructure,” said Totaro. “They need infrastructure around digital customer experience, infrastructure around digital wallets and infrastructure around data attachment to participate in all of these next-gen digital payments capabilities.”

That’s the focus of Tassat, which offers an Infrastructure-as-a-Service solution for banks to support their B2B payment needs. Via blockchain and application programming interface (API) integration capabilities, the platform tokenizes the U.S. dollar to move funds in real time. Through its ability to integrate with existing rails, the platform can support a more agile tool for banks to meet a broader range of business payment needs, while still benefitting from the capabilities of blockchain lacking in legacy infrastructure.

But while a corporate customer may not mind how their money moves, not every bank may be immediately convinced of blockchain’s potential. Despite potential hesitancy or skepticism, Totaro said that smaller FIs understand they need new strategies to remain competitive and technologically relevant. By collaborating with these banks, FinTechs like Tassat can “take a bank on a broader journey,” he said, to participate in the digital payments ecosystem in a way that is meaningful to their corporate customers.

Amid intensifying pressures from large FIs, as well as FinTech innovators, regional and mid-tier banks must take a broad-level view of B2B payments. Functionality is key, and corporates need speed and data. But to truly participate in the evolution of the ecosystem, banks must embrace infrastructure that fuels the creation of ecosystems that can connect within corporate back offices and throughout their partnership communities.

“These next-generation rails are going to create a more elegant experience around customer experience, something that’s API driven, something that creates payments as a growth engine for banks to grow deposits, and attract and retain customers better,” Totaro said.