Millennials are transforming B2B payments

In recent years, B2C has been the primary area of payment innovation, driving technological advancements at pace to please an ever-demanding consumer base of millennials who want to pay whenever, wherever and with whatever payment method they desire.

But it appears that B2C’s time in the sun might be coming to a close, as predicted by EPA guru John Chaplin earlier this year. The far more profitable b2b market is seeing a wealth of investment and innovation, as business professionals come to expect the same ease of communication that we’ve come to enjoy in their daily lives as consumers.

What does this surge in b2b innovation mean for the future of business payments? Who better to answer this question than Andy Barker, Head of Payments & Partner Products at commerce behemoth Magento. Barker sat down for a chat with PaymentEye on the challenges faced by SMEs in commerce, and what a surge in B2B investment is bringing to the table for businesses.

Why is B2B such an important area for innovation now?

I think the primary reason is that people are realizing the size of the B2B market – it’s substantially larger than B2C and there’s a real wealth of opportunity there. By 2021 B2C is estimated to be at around $4.5 trillion, whereas B2B is estimated to be at around $12 trillion. So there’s a massive amount of opportunity for growth in that specific area. This isn’t solely the result of the size of that market, but I think it’s also a result of the maturity of the b2c market.

Professionals in B2B are demanding the same kind of experience that B2C has brought. There’s no concern as to how, say, systems that are active in eCommerce will apply to B2B, it’s as simple as B2B professionals observing those systems and saying, “This is how I interact in my day-to-day life, and I want my work process to follow those same principles.” Because B2B has been stuck in the dark ages for so long, there are very clear discrepancies between the experiences that both buyers and sellers have when it comes to a B2B buying experience.

What do you think are the main challenges SMEs are currently facing in commerce?

Being able to make payments effectively. This is largely the result of more millennials entering into employment in this space. As the employment base evolves in this way, more employees within this space want to buy how they want, when they want, where they want, with the immediacy that millennials expect. Many of the former generation in B2B are used to that personal connection of picking up a phone, buyers speaking to suppliers over the phone, knowing each other well as individuals.

What we see now is buyers who might want to place orders at 2am, because that’s when they work, and they expect to be able to do that. People working in this space don’t solely want to work within that 9-5 paradigm that has been the status quo up to this point. The challenge isn’t just to do with changing and adding technology, there’s a fundamental change in mindset going on here too.

Where does Magento fit into this equation?

Fortunately, because of the distribution of Magento and the power of our community, we’re No.1 in the IR B2B 300 – and we never planned to build a B2B product. We have 49 merchants that are on that list, which is twice as big as the nearest competitor. The primary reason that that was the case is that we had specific SI’s within the community that took it upon themselves to actually build those capabilities for specific merchants that wanted a more seamless B2B experience. When that popped up a couple of years ago we realized just how important this was, and how Magento was so perfectly positioned for it.

Our B2B module, which we launched last year, comes out of the box. We fit into this equation because we’ve made a concerted effort to build B2B capabilities into Magento natively, and because everyone isn’t exactly the same, we’ve taken advantage of the open source nature of Magento in that a merchant can continue to customize it to their specific needs and wants. The benefit that comes along is that we discovered in our surveys that over 60% of our merchants actually have a B2B component of their business as well as B2C. So, this isn’t a small segment – the majority of the 300,000+ merchants that are using Magento have a B2B aspect. As we’re able to implement this out of the box, and the way Magento supports multi-site, a merchant can actually run their B2C and B2B business from the same instance of Magento. So that means lower TCO, more efficiency in optimization when it comes to managing their web stores – both for their B2B and B2C – so it becomes second nature. It’s no longer online, offline, B2B or B2C, it’s just commerce.

Can B2B learn anything from the state of B2C commerce?

So the good thing is that B2C has had bumps and bruises over the years. It’s probably been established and mature for the last five to six years. B2B can avoid some of the mishaps that happened during the B2C journey, and there’s an efficiency gained from that. The other thing is that B2C has driven changes in technology that are really focused on allowing consumers to buy how they want, when they want, where they want and through whichever channel they want.

A client of ours sells parts for tractors, and their customers are buying from them from a barn in the middle of a field. It’s no longer a case of having to sit down at a desktop and place your order, nobody wants to lug around a laptop. The have the ability to use a mobile device, in a field or wherever they’re at, to buy what they need at any time. B2B has the benefit that it can accelerate much faster than B2C. All the benefits B2B can learn from not only straight commerce transactions, but also the efficiencies in upsells, cross-sells, suggestions, all the things you can learn from patterns that will help those buyers be more efficient in their buying, as well as those sellers having greater attachment rates. If they can cross-sell or upsell, saying “You’re buying 1000 lightbulbs, did you know that people who bought this product also bought this cleaning fluid?”, for example, they can they attach more products to the order. It’s much more efficient for both buyer and seller.

Which emerging technologies do you perceive to be the most integral in boosting new innovation in this space?

Everyone says mobile, but mobile is definitely the major innovation which is going to drive the greatest amount of change. Commerce has always been ghosts serving ghosts – you have a merchant you know but you don’t know the person on the end and you don’t know if it’s a different brand that you might not have used, whether it’s a reputable company or not. With mobile you’re able to identify the person on the buying end and have more personalised experiences, because you’re able to have those specific identities. The technology that’s built into that, to be able to authenticate things for payments, or take advantage of optimizations, ordering when there’s a lack of Wifi available, being able to buy when you’re driving down a country road without cell service.

Magento’s focus, not only in our initiatives with PWA, is kind of ‘headless Magento’, where you’re able to enable it within all these other mechanisms outside of the traditional web browser. Even the ‘Internet of Things’ – if you have conveyor belts which are basically monitoring the manufacture of systems, or you have storage closets which have the ability to recognise levels of cleaning products, these kind of things, now that Magento has the capability to be headless, they can basically trigger orders, re-ordering back into the system. Even with machines that need scheduled maintenance, with mobile and Magento’s ability to be headless we’ll be able to support all these different channels. It optimizes that overall supply chain and allows that merchant to facilitate the easiest mechanism to support those buyers when they want, where they want, how they want. It encompasses a lot of different pieces but in the end it comes down to what mobile has done in commerce overall, and how that’s evolving faster than eCommerce on its own, on a desktop machine.

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