Speaking at Fintech South, Corpay Group President, Payables Rick Fletcher and EVP, Corporate Development and Strategy Steve Greene, tell moderator Laura Gibson-Lamothe, Executive Director of the Georgia Fintech Academy, why B2B payments represent a massive opportunity for innovation.
This episode of Smarter Payments by Corpay highlights a unique opportunity in B2B payments: despite the digital transformation in consumer payments, many U.S. businesses still use paper checks for transactions, leaving a vast market potential for B2B payment innovations. Speaking at the Fintech South conference, Corpay’s Rick Fletcher, Group President of Payables, and Steve Greene, VP of Corporate Development and Strategy, discussed the complexity and inefficiencies in B2B payments.
Rick and Steve point out that, unlike consumers who manage their own finances, businesses have complex processes for spending, given the need for approval and control over funds. These transactions involve various expenditures—from paying suppliers to managing operating costs—often with checks, causing delays, fraud risk, and reconciliation challenges. While consumer payments have advanced with tools for budgeting and real-time tracking, B2B payment systems lag behind, despite B2B being a five-times-larger market than consumer payments.
Fletcher explains that many companies see B2B payments as crucial yet not a core focus, resulting in outdated processes that companies feel are "good enough" despite inherent inefficiencies. Greene adds that many businesses prioritize collecting payments over optimizing their payment processes, contributing to the relative obscurity of B2B payments as an innovation area. However, Corpay aims to change this by offering solutions that streamline and digitize B2B payments, promoting efficiency and control in an often-overlooked sector.
Fletcher: If you ask a company about their B2B payments, they will say they are critical to their operations, they almost all always admit that they're not doing as good a job as they could or they should and that they're not really on it.
Robison: While consumer payments have gone, almost completely digital, most companies, especially in the U.S. still pay bills with paper checks creating a huge untapped opportunity for companies in the business to business payment space. This is Brennan Robison, Director of Corporate Communications for Corpay. On this special episode of Smarter Payment by Corpay, we hear from Rick Fletcher, Corpay’s group president of payables and Steve Greene, Corpay, VP of corporate development and strategy, speaking on a panel at Fintech South, an international event hosted annually by the Technology Association of Georgia. The topic B2B payments, Fintech’s most overlooked $100 Million opportunity. Here's panel moderator, executive director of the Georgia fintech Academy, Laura Gibson-Lamothe.
Gibson-Lamothe: I'm sitting here with my friends from Corp a Rick and Steve I guess we should start off with some introductions, just to kind of level set or ground the audience with the the two leaders that I have here with me. Rick, let’s start with you.
Fletcher: Yeah. So, I've been with the organization for pay for 15 years. I started in our gift card business in Louisville. So, if you ever buy a Card at a Lowe's or Kroger or something like that. We produce and, and process, those cards, and kind of meandered throughout the organization and run. Will we call the the, the payables organization? So, all of our North American products like teeny, virtual cards, full accounts, payable roll up under me, we've been a growth engine for the company that's been growing profitably for the last 15 years at 20% compounding. And so, it keeps us pretty busy.
Greene: My name is Steve Greene. I run corporate development at Corpay. We've done 110 Acquisitions since 2000 and I run the global strategy group. So, like Rick, I'm a 15-year veteran of the company. So, pleased to be here.
Fletcher: I've got him by three months though.
Gibson-Lamothe: Wow. I can see the few extra gray hairs. Well before we get started diving into the subject at hand, we're talking about B2B payments. And many of you as consumers are familiar with, Zell's and Venmo, and just the consumer side of the experience, can you help us define what is be to be playing this and how it differs from the general consumer experience?
Fletcher: Sure? Well obviously, it's corporate funds, so, it's corporates paying a variety of different things. There's all kinds of expenditures, like payroll and those types of things which are B to C, but be to Is really paying suppliers, petty expenses, subscriptions. A whole gamut of both indirect support expenses and the direct cost of goods, sold and, and materials expenses, and there's a lot of different, you know, varies, you know, variations between the two categories, the first is, you know, be to B's way way bigger. I don't think people appreciate that. It's five times the amount of money being spent in the Commerce. We all turn on the news and we learn about Out, you know, consumer baskets and inflation and consumer sentiment, which is rightly. So, but what's really driving the economy underneath? That is a lot of that B2B expenditures that supply chain. And there's a lot of complexity in that at a lot more complexity than we managed as consumers who are just managing other household funds, our own funds. So all those different categories that companies are trying to manage are really complex, the rock for fraud and error, and bad actors, both internally and externally. And then finally, I think it's the Innovation that has really been a differentiating factor between the two segments. So I'm not that old or at least I don't think I'm that old. It's increasingly, not true but when I first met my wife, she was somebody who used to have the old checkbook and she would go into her checkbook and she would literally every single expenditure whether was on a check or not, she’d keep that ledger and so She seemed like you know a good steward of money and stuff like that she still largely is but we've gotten a lot more sophistication is consumers and that checkbook is gone. The only time that I needed to use in the past 18 months was to pay the US government for a passport, but that's not the case in the B2B landscape. In fact, the vast majority of payments that are made in an AP setting happened with the good old-fashioned check that gets mailed to somebody. That’s delayed, that doesn't have the right information to reconcile and causes, you know, a lot of errors and, and Imperfections to it. And so, I think that consumer landscape has really evolved with our ability to budget our expenses, see our expenses, categorize real-time use different AI, and alerts and notifications transfer funds. All kinds of different sophisticated elements have happened in the consumer space and the B2B A space is certainly lagging behind albeit larger.
Greene: Yeah, I would just I mean the one thing I would emphasize to and the difference between B2B and B2C is control. If you don't really have to control your own money, you're deciding how to spend it. When it when it's a business is money, when it's the corporation's money, the emphasis on control, it was being paid when by, how much is everyone approved is a way, way more important consideration. And so, there's a lot more software rules and process management to ask to go into the B2B world than there would be in the consumer world.
Gibson-Lamothe: You know, getting paid and then also paying seems to be critical functions for a business and a business operations. Why do you feel or why is there such an unmet market as far as the opportunity to really optimize speed to be payments?
Fletcher: Yes. So I think there's a lot of different reasons I've done a lot of research, focus groups over the years and I can summarize all of them for you is that if you ask a company about their B2B payments they will say they are critical to their operations, they are non-core to that company meaning that they don't do that for a living. It's not they're being in life. Three, they almost all always admit that they're not doing as good a job as they could or they should and that four, is they’re not really on it. And those things are at odds, you know, with each other that they wouldn't be on it and yet it would be so critical and I think it's in part because it's good enough is the first thing. So those checks do get to places. People are getting paid. It's imperfect but it's not so broken that they need to get on it and that their world is really fractured. So as Steve mentioned, in the fundamental point of B2B is that you have somebody spending somebody else's money and anytime you have somebody else pain, Somebody else's money, you have to have policies and if you have policies, you have to have administrators that create and administer those policies, you have to have more than that authorities is the money that you're actually spending good ways to use the company funds and be a steward of. And so that you need to authorities. And so when you have administrators and authorities, you have to have processes and those processes you would hope would be facilitated by technology and be very tight and efficient to use. In truth, they're not in part because not only our company spending their money on a lot of different categories. They're spending it in different spend motions and so for example if you know, are on to company done today, maybe you got parking in. You're going to charge it back to your employer. You went to lunch or something like this, and so you're spending money at the point-of-sale, you paid for it. And that, after the fact, somebody’s going to review and approve it. Well, AP is the exact opposite, everybody's reviewing and approving an advance and then those funds are being paid. There's other categories like airlines which is basically a set of decisions that are made within the context of overall policies and different providers. And so these different spend motions create different processes that need to be reviewed. And when you put that in concert with the fact that every organization is this living breathing organism of ever-changing employees, operating structures, acquisitions and mergers, and a vendor pool that typically changes around 15 to 20 percent, that set of buyers and suppliers being as dynamic as it is really makes it cumbersome for employees and companies to really corral that administer it. And so it becomes so daunting to them that. I think that there's a resignation that's ultimately built where they try to really get out the worst of the worst, but are comfortable with some level of Perpetual sub optimization.
Greene: Yeah, I think the other thing, why part of the question is why is be to be kind of flown on the radar? I think part of it is most companies, are way more focused on getting paid than paying bills. Like, let's let's have customers chaos and collect the money and so they're in the payments world, the what they call acquirers, those those companies have been around for a long time. And first two companies like first aid in which You know, is now part of fives, are they? They've been around. So those are first of all that's those are more popular, more common people would refer to that and then the second thing is what B2B payments. We always say, most of our products offer a better way to pay like everyone's paying their bills today. Whether it's a check or some, you know, old fashioned way of paying stuff that people are paying bills, really wouldn't be in business and so I think those are two reasons why B2B payments has tended to fly under the radar a little bit is people want to get you know paid First and they've already got to pay their bills. So, we're trying to tell people a look, our set of products and solutions offer a better way of doing, what you are already doing.
Fletcher: The other thing is they have multiple objectives when they make the payment. So, one objective is to obviously have the money itself. So, it seems obvious, but different types of payments, like credit cards, provide some level of liquidity that helps solve that working capital and so that scratches and itch perhaps for the treasurer of who's really focused on that, or The people who run where the money comes from. The other thing is you got to actually move the money and have controls around it and execute that and to execute that you have to have, you know, point-of-sale infrastructure. You have to have some set of network that you interoperate with to be able to do that. And then the third thing is that process, the actual workflow around reviewing and approving. And so within the company there's different stakeholders that manage that the treasure is focused on the money, the controller's focused on using the funds and keeping the bad people in and out of the system and then the admin is focused on actually the processes and the good employees and managers are really just trying to operate within the company and do their jobs. And hopefully just get back to work because they want to abide by corporate policy, but they don't want to make it their full-time job, right? They want to just be efficient with the thing and so those different stakeholders look to different partners, whether that be Bank, X or whether it be fintechs or whether it be software companies, Each of which solve a particular need quite well but don't solve the broader set of payment objectives and therefore that kind of exacerbates this fragmentation are compounding because while those stakeholders are not inherently at odds with one another, the treasurers quite happy to have the admin have, you know, efficient and happy lifestyle. In the admin is happy for the treasure to have plenty of working capital and for the company, this set of providers that offer them, those services are imperfect and create some set of tension or at odds. And so, whoever, you know, kind of is the person in power select somebody who solved some of their needs, but not all of their needs.
Gibson-Lamothe: Yeah. I've seen that demonstrated a lot in the industry. What would you say is a the company or the type of company that would be best positioned to take advantage of? Optimizing B2B payments. What would that? You know, it's a team look like?
Fletcher: Well, I think without question the company that's, but the companies that are best positioned, are banks. I mean, they have relationships and they have the money itself and you know at the core of the payments it starts with the money in in truth though, a lot of the growth has been grew, you know, driven in corporate payments by everybody but the banks Because some of those things that I mentioned like software like process like specific operational component, start beginning outside of the bank's core function right there there in the in the business of getting deposits and lending out those deposits efficiently. As long as people are using them within an overall system that is, you know, looks kind of like that consumer. Almost card-based and that type of thing, or whether their enterprise, where they're so big. That, some of the big banks put their best foot forward, they fall down and, and and so, while they're the best, positioned, they have demonstrated themselves to not take advantage of that opportunity. Particularly, as you go down to the middle market with lower middle market, which is quite underserved with the different players, that that are offering different things. So I think the the fintechs or the companies that can, you know, take advantage of it are those that have a lot of specialization and find their Niche to compete against those banks?
Greene: The other thing I would emphasize, I mean the the space has seen a lot of innovation in the last three or four years are probably five years with this fintechs that the Rick mentioned really developing software products that were way better in many cases than the incumbent products. The legacy products from some of the banks and other people in the industry. As you've seen some kind of evolution in the payment space, the products are important. And then at some point in time, you move to, you got to have customers. And so, I think you'll see if I was to, you know, look in the crystal ball going forward, a lot of the successful companies will have demonstrated efficient distribution systems where they can sign up accounts because it it's relatively cheap to create products and software tools but it takes a long and it can be quite expensive to sign up clients, particularly the B2B space where you have, you know, enterprise the top and um small businesses at the bottom. And so I think the people who are going to have the most success over the next five or ten years would have great products I'm going to say, no, I'm not saying that you have to be able to compete. I'm great products and have great service, but you also have to have a sales in the B2B space. You have to have sales and distribution that can be scaled. And that's efficient of the, you can sign up lots of business in the banks do have an advantage Vanish there because they have all the money banks and all the clients today, everyone in this room so in all businesses have bank account so that is one if the banks could ever figure out how to leverage their distribution and really focus on B2B paintings. I think they would be quite formidable. It just hasn't to Rick's Point been a big focus them.
Fletcher: So that's also an interesting most banks operate within the treasury footprint which is often Geographic and so that you know, to really be good in in be of fintech at scale. You have to have some of that software piece can be also have to be able to deliver the payments and so therein lies the fracturing as well. Is that there's companies that have great software, but then the actual payment execution is subscale, Right? Works at a unit of one, but it doesn't work at a unit of 1000. And so, getting both the vendor side of the house and the software side of the house, and getting those two, some inflection point that it creates materiality for companies, has been difficult to get to. And so I agree that this Distribution is, you know, really big component as to why the landscape is well behind that consumer realm, even though the technology probably is advanced the actual integration and application of it is still woefully behind.
Greene: Yeah, I mean, people should realize for like a lot of stuff that Rick sells those products you're not going to like buy it on like on a website. You have to talk to someone explain how the product works and walk you through other. In some cases we have to hook into your systems and so it's not it's not Signing up for Venmo. These are more that B2B products, any more complicated, which is why the sales the sophistication, the sales channels is a much bigger deal in the B2B world.
Fletcher: But here's the good news, we are at an inflection point. So if we go back to, when we started 15 years ago, the world's that we play in and the products that we have in the scale that we have, it didn't even exist, it was so nascent and infinitesimal. And here we are managing hundreds of Ian's of dollars across tens of thousands of clients and hundreds of thousands of vendors and you know, the the offering that we have, you know, didn't exist. If you can go back 50, 60 years ago, you know, payroll companies didn't really exist. It didn't mean that payroll wasn't getting paid that happened, but the idea of dedicated payroll companies that were very specialized was a newer thing. And now you look at it today and you say, well, what company wouldn't use a payroll provider? It's a category that's built and has all kinds of specialization in it and I really do believe, you know, fast forward decades from now AP will be one of those categories that has a lot of utility and stuff. And so it's not that the fact that we are we're at is in part because that didn't even exist a couple of decades ago.
Gibson-Lamothe: Well, you see you hit on implementation just a little bit and talking about how fragmented things are and the need for consolidation. And what does that implementation journey? I think look like for an organization in the complexity around what that means organizationally.
Fletcher: Well, it's tech. First, you have to make yourself work with other people's things. So you know, every company really has an ERP or some central financial system, that is the neuro system and fabric of their organization. And if your stuff doesn't work with theirs, it's going to be fractured for them and it's not going to solve their problems. So, you have to make your stuff work with theirs and Not going to change that, and so that's a really big component to it. But then there's also the change management component of it, helping them, put those policies in place, putting those authorities and glazed. Putting that process that not only will work in the implementation, but teach them the fish that many years from now, they'll be able to update that and operationalize that living breathing organism. And then finally, you have to make it work for that specific company. That specific set of vendors that industry, you have to do something nuanced than their behalf and really disposition them for what they are and what they're trying to accomplish and those objectives. And so, we put a lot of emphasis on that which is another reason again you know kind of differentiate or versus the bank's kind of has a you know bring your people and bring your own model to the thing. You can hook yourself up but they push a lot of the work on the clients themselves which you know how is it fall down? Try to do as much as we possibly can on our side and take that out of people's hands because the back offices that were really talking about are really strapped. I mean, these are a set of people that are under resource viewed as bad calories within their organization. And so, they really struggle and they're not looking for work.
Gibson-Lamothe: I have a question just based off of that we're talking about kind of, you know, the the type of company to pursue this journey embark on this. Journey for optimizing V to be payments internally. You know what is the business case for prioritizing this over some of the other efforts we talked about consumer-facing stuff is the sexy stuff that gets you know the first go or sign off to implement but how do you justify this work?
Fletcher: Well our pitch is particularly with what we call full AP, where we take possession of our customers payables. Then we make the payments for them is once you go through an implementation that we're going to do all of the work you know as much as the work is we can. So, we're going to go through some two-month journey together. Once we get on the other side you are going to get better visibility to those payments you are going to a be able to prove and run your business just like you want to do it. We're going to package the data better and reduce errors and your vendors are going to be happier because you're going to be able to reconcile and they're going to reconcile. We're going to take on all of the fraud. And so, you know, you think about that worst-case scenario where either an internal employee or someone replicating a vendor with now with AI, they are replicating themselves with different voices and different sets of emails and thought stuff that look really real. They could take some set of vendor payments that were intended to go to your largest supplier and they're off on an island. So, we take and remove all of that. And then finally, because we move a lot of the back office paperwork over to an electronic payment particularly virtual card so we can move a check over to a card, we create a set of economics from the vendor. We actually pay people to do this so when it's all said and done, you're going to do less work have more control, no fraud and we pay you to do it. It's a pretty good pitch but you do have to get through that implementation. But but now that we've been doing this for many, many years, you know, we have hundreds of thousands of ACH information and move that to electronic. We hundreds of thousands of card vendors in our database. And so, the next client is the beneficiary of the first 15 years that we've been doing it. So that's what I mean by getting to an inflection point is that you start to get some scale that that these things become a lot easier and and particularly with in verticals, like we're big in construction, or automotive most of the vendor database in those verticals, we disposition. So it's an easy button to get up and going for those no companies, specifically.
Gibson-Lamothe: We're in a, some of the panels. Before we got here to this discussion around cross-border payments. How does that play into the the B2B space.
Greene: We're actually the largest non-bank cross-border provider I think on the planet, like we we send hundreds of billions of dollars of flows to give everyone a sets. The the B2B payment space. So this is businesses paying a little business in the U.S., it's probably four or five hundred billion dollars a year. Cross-border flows which is all of the money being sent around the planet every single day is seven and a half trillion dollars a day. So, the international payments just its 30 times the size of the global GDP. It's just a massive, massive market. So, for us, we think it's quite powerful to go to a company and say, hey, look, we have all these ways to pay your domestic suppliers. And if you need to send anything overseas into any country in the planet, we can do that for you. And if you need to have Risk Management Solutions, where you, you know, hedge some You know, rest of you have your buying, you know, raw materials in one country and you have Revenue in another country. We want to have those solutions where you as well. So, we are quite bullish on that opportunity. It's another area where it's historically, been dominated by large financial institutions and those financial institutions like banks tend to focus mostly on large companies. And so, for your average middle market company in this country and around the world, they don't really have a provider that can develop solutions that really meet their needs of the middle market so we love the space. We've been acquiring businesses in that area. It's a big part of our growth and so we're quite bullish on the area.
Fletcher: It's got all the challenges of the domestic but with an added element of even more, you know, rot for error fraud with a level of increased costs and you know when you're right it a low margin business or any margin business and you have you know it's tough to get visibility or control around that that's a big expense that's fluctuating and so you know making sure it's the lowest cost and that you're able to maybe get in products that hedge and allow you visibility. So, you get certainty of how you can run your business, which is hard enough to do. If you were just here stateside, you know, there's a lot of value in that, obviously.
Gibson-Lamothe: Thank you both.
Robison: That's it for this episode of Smarter Payments. Thank you for listening. Be sure to follow the show wherever you get your podcast so you don't miss an episode. Smarter Payments is a production of Corpay Incorporated, copyright 2024. I’m Brennan Robison. We'll see you next time.