How B2B marketplaces are working with fintechs to build a new business economy
By Ben Lipschitz (pictured) – Co-Founder & CEO, FoodByUs
Managing the never-ending flow of incoming and outgoing payments has always been particularly difficult for B2Bs. Individual trade financing arrangements and legacy payment systems – some still based around paper invoices – create an inefficient time drain.
Thankfully, a major shake-up is under way. Leading B2B marketplaces are teaming up with best-in-class fintech products to build integrated payment solutions into their own interfaces, with the goal of creating seamless payments based around generous credit terms. It means that businesses are finally able to access similar ‘buy now, pay later’ privileges that consumers have been doing for years.
Faire and square
A good example is Faire, a US-based B2B marketplace that connects a huge range of local and independent retailers with brands around the world, which was recently valued at an impressive $18.9 billion. Faire’s sophisticated electronic payment system, described as “the hallmark of Faire’s value proposition” by respected startup accelerator Y Combinator, offers 60-day inter-business payments. Effectively, Faire pays the seller immediately, and gives the buyer 60 days to make payment.
It’s a compelling offer for the thousands of indie retailers and brands that connect through Faire’s online marketplace. It acts as a de facto bank for its customers, providing a buffer that alleviates immediate cashflow issues plus the need to chase up outstanding payments.
An industry under stress
Here in Australia, where FoodByUs has grown into Australia’s leading online wholesale food ordering platform, we’ve been watching this space for some time now with interest, because both our supplier and buyer customers have been crying out for a more flexible and user-friendly payments system. The hospitality industry has been under incredible stress since the pandemic; think rising rents and food costs, labour shortages and inflation, and many are on a knife’s edge when it comes to maintaining their cashflow.
Bill Moragiannis, chef and owner at HoneyDee Loukamades and a FoodByUs customer, sums it up, saying, “As a small business it’s tough managing payment when you have to chase individual buyers for payment, and the reality is sometimes they just don’t pay. I might sell thousands of dollars’ worth of product but with 30-day payment terms I won’t see that money for at least a month, or longer if they don’t pay on time. There’s no doubt that’s stressful, as I still have bills to pay.”
A better way to do trade financing
Trade financing is a critical function in the hospitality industry, typically arranged one-on-one between venue and supplier. This is incredibly cumbersome for venues who need to fill out and manage multiple credit applications and limits, while suppliers have been burdened with having to chase payments, as well as being exposed to the possibility of not getting paid at all.
As a technology business in the hospitality industry, our priority has always been on understanding the pain points of our customers and then working towards developing a solution to address them. We could see that trade financing was a huge challenge for our customers; but rather than try building our own tech, we consciously sought out best-in-class fintechs in this space and worked together over a period of about six months to develop a solution.
The result is an industry-first trade financing product that guarantees suppliers receive instant payment, while buyers have the flexibility of up to 30-day payment terms, with no fees involved.
With over 90,000 independently owned and run venues across Australia, we believe this will be a game changer for the industry and we’re already seeing hundreds of venues choosing to use this offer.
A helping hand for small business
In light of estimates that over the next two years around 80% of transactions between business buyers and suppliers will be made online, it seems clear that B2B marketplaces are here to stay. The ones who prosper will be those who listen to their customers and have the skills and agility to deliver the innovations they need.
It’s an important step forward, both for our business and across the landscape of the Australian hospitality industry. In the space of a few months FoodByUs is already transacting millions of dollars through our new platform, which tells you just how needed and appreciated it is. It has also opened up a new revenue stream for our business, with the added bonus of building loyalty by providing our customers with exactly what they need.
Oftentimes at FoodByUs it feels like we are innovating to solve problems that are unique to the hospitality industry. But with B2B marketplaces taking off around the world in a number of different industries, we feel that in this instance, we’re using our expertise and collaborating with others to help blaze a trail that can create enormous benefits for businesses across many diverse industries.