Oliver Fellowes

GM – Payments

Blog | 4 min read

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Payment infrastructure evolves on a minute-by-minute basis. It is what makes payments such an exciting field to work in and a great environment for anyone who likes to continuously innovate and learn, especially about how the payment infrastructure is evolving to meet the needs of global businesses. I remember a time when I was asked if I wanted to sign up for a ‘store card’ every time I bought a new pair of jeans. The cashier behind the desk would do their best to make it feel like a seamless part of the checkout process, but any illusion of simplicity evaporated as soon as the thick wad of paper was placed on the counter asking for my signature at the bottom. Today, we have a burgeoning Buy Now Pay Later market that is positioning credit with unchanged motives but unrecognizable simplicity.

My career in payments began in a sector dominated by FX spreads and basis points, waiting for something called the Non-Farm Payrolls Forecast to deliver exciting news and quoting margins on ‘cable.’ Perhaps nothing illustrates the way payment infrastructure evolves more than the fact that ‘cable’ is the term used to describe the GBP/USD exchange rate. The phrase dates from the days of the transatlantic cable that enabled faster communications between London and New York. Nowadays, the concept of Central Bank Digital Currencies (CBDCs) raises questions as to whether the currencies we know today, and the ways we quantify their value and exchange them, will even continue to exist. No matter what side of that argument you land on, it is undeniable that the infrastructure is evolving rapidly, and increasingly it is doing so to cater to the needs of individuals and businesses rather than its architects. Focusing on businesses, what I find particularly interesting is the separation of ‘rails’ and value-added services.

Much has been written about the dynamic between fintech, or big tech, and legacy infrastructure. The narrative has shifted from the threat that fintech poses to the incumbents to the phenomenon of them working together in unison. The M.O. for a fintech was once to pick apart a traditional process and focus intensely on solving one part of the problem. There are two reasons why I think this narrative has changed:

1. Fintechs aren’t just collaborating with legacy infrastructure.
  They are teaming up to collaborate with legacy infrastructure

The infrastructure of a country, society, or organization consists of basic facilities such as transport, communications, power supplies, and buildings, which enable it to function (Collins Dictionary). Infrastructure does not evolve if its basic facilities do not work together. I’m reluctant to quote the over-used railway anecdote but can’t resist. Imagine a technological genius that focused on making the best train wheels. They never need servicing. They can stop a train 20% faster in an emergency. Unfortunately, they need to run on the tracks owned by a legacy provider and they don’t fit. In this instance, the genius has provided no value to anyone, and the infrastructure hasn’t evolved at all. Thankfully, such glaring errors are rare in the already mature payments sector. We all know that the wheel manufacturer has begun to work (or ‘integrate’) with the owner of the railway tracks. Much like a BNPL rocket ship embraces acquiring banks with decades of development behind them. However, a more recent trend is where multiple entities work together towards the common goal of evolving the infrastructure and influencing incumbents. For instance, the wheel manufacturer recognizes an opportunity to collaborate with the axel manufacturer and the train builder. Together they devise a strategy that benefits all parties, as well as the end consumer – the friendly commuter! How can the owner of the tracks say no? Rather than focusing on one minor problem statement, all parties work together on the overall value proposition.

Some of the best innovation I have seen in recent years has been in the combination of account-to-account payments and the provision of working capital. Technologies that analyze invoices have been deployed to highlight opportunities for early payment to be made to suppliers. These payments are funded by a panel of lenders ranging from traditional banks to new entrants. The faster payment rails were once a commodity generating little revenue for anyone. Now, they're an enabler for a number of value-added service providers ranging from the technology platform to lenders new and old. If one of them doesn't win, none of them wins.

TerraPay is embracing this approach in launching new payment products and pairing them with our global payments highway. The products are built to enable us to work with all parts of the evolving payments infrastructure. For instance, our approach to supporting business-to-business payment flows is not simply to offer a one-size-fits-all solution. Issuers, Acquirers, Master Merchants, Corporate Buyers, and Suppliers could all leverage different modules of the Card-to-Account product, and TerraPay has the appetite to collaborate with each party to solve the needs of the end-users

2. The seismic shift towards business-to-business makes it very difficult to focus on small problem statements

Another highly publicized trend is the shifting focus among fintech and investors from business-to-consumer to business-to-business. It is undeniable that most of the ecosystem wants a piece of the $120 trillion business-to-business payments opportunity (Source: Juniper Research) and the perceived wider profit margins that come with it.

On the surface, this sector appears like the consumer fintech scene. We see both start-ups and technology corporations like SAP, Oracle, and Intuit defining their offerings in neat little niches like AP (Accounts Payable), AR (Accounts Receivable), and P2P (Purchase to Pay). In reality, each one of these smaller labels is anything but niche and does not allow Fintech to tackle one small piece of a problem statement. Even if a product caters perfectly to a business's AP needs, it's highly likely that there will be an expectation for that product to communicate with the same business's accountancy software and their supplier's AR solution. Probably both parties' banks too!

It is virtually impossible to build anything that will perfectly integrate with all the moving parts of even a small business. Just ask anyone who has tried to sell a business-to-business payments product to a corporate with 4 different ERP systems and multiple versions of each one! However, the additional complexity of the business-to-business payments infrastructure presents an incredible opportunity for different players in the value chain to work together and solve larger problems.

For business-to-business, zooming out and surveying the payments infrastructure is essential. Doing this in tandem with peers within that infrastructure is invaluable. Because of this, the evolution of business-to-business payments infrastructure will be even more rapid and complex than we have seen in the consumer space. Open Banking has hardly scratched the surface of business-to-business and is another intriguing layer to the payments infrastructure!

This is why TerraPay has built a suite of payment products, including Virtual Card Issuing, Acquiring, and Card-to-Account. Each one works alongside our existing payments highway, connecting 4.5Bn+ bank accounts across the globe, and can be applied to endless business-to-business payment use cases in conjunction with our partners.