California-based Traxpay claims to be redefining the online B2B payment process. John Bruggeman, the company’s CEO, speaks to PaymentEye to discuss the company's aspirations, its new advisory board and current partnerships.
What makes Traxpay different from similar services?
There are two different types of services that aim to ease B2B payments, the first being banks, the second being business process automation companies, such as ERP vendors. The reality is that when a corporate payment is made, the actual payment is just one task in a much bigger, more complex business process for most companies. This process is typically governed by the ERP software system in today’s corporates, including book-to-bill, general ledger and manufacturing resource planning. A bank, by definition, is separate from these processes. When corporates process payments through banks, data from their business process systems are not passed to the bank (banks can only accommodate limited data character sets). So any accompanying information, such as the contractual agreements, fulfilment terms, pricing and logistics must be communicated in 140 characters or less — the equivalent of a Tweet. On the other hand, the business process services that handle e-invoicing, dynamic discounting, payment preparation, etc. can help customers get products ready to ship or ready to be received—but can’t close the loop—make the actual payment.
Traxpay provides a “bridge” between the two, leveraging both banking and enterprise software expertise, to enable a real-time, 24/7 transaction platform that integrates into existing ERP systems. The result is much better visibility and control over working capital, which translates into significant advantage for companies.
Who are your main competitors?
Our main competitors are considered to be those that offer B2B payment options, although there isn’t another company that is providing a real-time payment platform that works seamlessly with an existing ERP environment. Interestingly, some in the industry have considered us a competitor to PayPal, which couldn’t be further from the truth. PayPal is a B2C company—and a great one at that—focusing on consumer payments, which are much smaller and without the complexity of a B2B payment. For example, any PayPal payment over USD2500 requires exception handling which is problematic in a B2B context.
What is your business model?
We sell to large global enterprises and small companies and everything in between. We have developed a platform that can automate and enable real-time financial transactions and we use a transaction fee-based model.
Traxpay recently raised USD4 million to redefine B2B online payments. What are the inefficiencies with B2B online payments and how will Traxpay attempt to solve these?
The two key inefficiencies in B2B payments are time and the visibility to that time. A typical treasurer in a global company today really has no idea exactly how much working capital they have on a real-time basis for real-time use, due to the time it takes to process funds through the system. There is latency associated with payments, which can span an average of 3-7 days once a payment has been made, but before the payee has access to use the funds. They don’t know if they have access yet to a payment that has been made, if it is in the wrong currency, if the vendor only made a partial payment, etc. The time that it takes to completely process a payment and the lack of visibility to that time has a significant impact on a company’s working capital and cash flow. For large and small companies alike, this is the lifeblood of their business, yet we haven’t seen significant improvements in this area in decades.
Our mission is to not only provide 24/7 real-time access to payments and financial transactions, but to enable all the necessary data to accompany that payment. Payment and accompanying support materials are bundled electronically rather than separated, so the recipient no longer has to collect input manually from different sources. As important, our customers have complete visibility into their accounts, enabling unprecedented control over their working capital.
What are businesses main concerns regarding B2B online payments?
Most of today’s companies have an existing business process to optimise and automate their operations, whether it is SAP, Oracle, etc., in which they have invested significant time and money. Companies don’t want a new system that requires changes to their current infrastructure and systems. They have concerns over cost, training, downtime, etc. related to this investment. They want a solution that delivers the benefits of a real-time payment system but does so in the same way they do business with their suppliers and partners and allows them to leverage their current systems and investments.
According to a 2010 Federal Reserve Payments Study, 64% of U.S. corporations still use cheques as their payment vehicle, which is staggering. But companies do want to change and reap the benefits of real-time payments. They just want to do it on their terms. We believe Traxpay can meet their terms: a seamless transition, leveraging their business system investment and no downtime in their operations, while delivering unprecedented control over their working capital.
What are the benefits to real-time B2B online payments?
The benefits of real-time B2B online payments are better access and visibility into payments, giving the ability to improve cash flow and the control over working capital.
Who are you partnering with?
We are working with some of the leading names in their respective fields to enable our Traxpay platform, including:
- ABK, a software provider, helped develop the core banking software of the Traxpay platform.
- Accenture, a global management consulting, technology services and outsourcing company that has extensive experience developing many of the world’s largest proprietary peer-to-peer banking systems helped develop the Traxpay web client.
- EFiS, a provider of SaaS infrastructure/applications for financial institutions, manages the specialised banking data centre for the Traxpay cloud services.
- Net-m Privatbank 1891, one of the oldest banks in Germany that holds the accounts for Traxpay customers and ensures the 100% collateralisation of funds at the German Bundesbank
- SAP, a provider of business management software, solutions and services for improving business processes. SAP is the first ERP implementation partner for Traxpay.
Why was the Traxpay Corporate Banking Advisory Board created and what does it hope to achieve? Who are its members and how were they selected?
We are thrilled with our Corporate Banking Advisory Board. While we have considerable payment expertise in the form of our Traxpay founders, we were looking to broaden our expertise with corporate and Federal banking experience. Richard Oliver, Jane Hennessy and Danyon Lloyd all have distinguished banking backgrounds and have provided invaluable guidance to our company, as we continue to ensure that our Traxpay platform adheres to international banking security standards and practices.
Leading the Traxpay Corporate Banking Advisory Board is Rich Oliver. In his 38-year career with the Federal Reserve Banks, he is credited with several major initiatives related to an all-electronic automated clearing house network, as well as overseeing the Federal Reserve’s triennial payments studies. Jane Hennessy most recently was executive vice president and head of strategy and marketing, cross-sell, and personal banking for the Wells Fargo International Group. She understands the corporate banking requirements and was responsible for developing the Wells Fargo’s first international internet product solutions. Danyon Lloyd was most recently CEO of Privatbank 1891, one of Germany’s oldest commercial and retail banks and the Traxpay banking partner in Europe. He led the transformation of Privatbank from a regional credit institution to an international payment and transaction bank.
Where do you see Traxpay in five years’ time?
Our solution is a real-time transaction system that seamlessly integrates into business process systems. And the beauty is that the first application we are providing is in the form of payments. But, we believe there are dozens of other real-time financial transaction services we can provide that will run on our platform. We believe that as companies experience the Traxpay real-time financial transactions, they will recognise the benefits beyond payments. As a result, in five years’ time, we expect we will have a much broader portfolio of real-time financial services.