Once a month, BillGO shares insights from our executive team so others can gain from their extensive industry experience.
However, for Summer 2021, we’re interviewing other industry thought-leaders to discuss trends and share predictions.
The following is an interview with Frank Martien, Managing Partner with Windward Strategy.
Martien’s post-MBA career launched in 1996 with First Annapolis Consulting, Inc., where he focused on card strategy, launch, and optimization for networks, national & regional financial institutions, technology companies, and private equity firms in the U.S., Canada, Europe, and Latin America. Following the firm’s acquisition by Accenture in 2017, he was named Managing Director. In 2020, he formed Windward Strategy, Inc. to where he focuses on B2B payments settled on multiple card rails.
In a recent webinar, you described a “disparity” in today’s transactions and payment vehicles - including virtual cards, ACH and checks. Can you explain the disparity?
The disparity in today’s transaction types is borne from innovation without planned or required obsolescence.
There are things I really miss about my late 1990s Blackberry phone, but time moves on and I am generally much better off with my current iPhone.
Conversely, each newer payment solution offers distinct features and benefits; however, corporate accounts payable (AP) and accounts receivables (AR) are still required to support paper checks (which are still considered by many to be the only universally accepted form of remote payment). In hopes of retaining maximum flexibility, we have perpetuated a cacophony of outbound and inbound B2B payment types.
"Banks initially viewed fintechs as competitive threats; however, opinions have evolved substantially into a view of frenemies at worst and partners at best."
What is the inevitable outcome of this disparity?
B2B eCommerce will continue to supplant telephone, e-mail and in-person exchanges to complete purchases. In a world where most organizations are purchasing through a variety of different eCommerce environments, a payments-initiation function - such as using a virtual card - will continue to have great value as the principal mode of provisioning buyers, placing limits on what and how much they can purchase, and capturing purchase details.
Conversely, industry segments in which most corporate buyers rely on a single eCommerce marketplace may find the marketplace to be a more efficient environment to provision buyers. For these clients, a virtual card could still be highly relevant; however, as a form of payment, the virtual card would become more commoditized since the buyer’s credentials and limits would reside in the marketplace, as would suppliers’ payment requirements and reporting.
Where do smaller billers - landscapers, contractors, etc. – who may be cash-strapped and dependent on paper checks, fit into this ecosystem?
For many of these billers - particularly those who may provide services on an ad hoc or infrequent basis - it may be highly challenging to move beyond checks as most mid-sized and larger organization buyers will naturally focus on vendor enrollment and payments automation resources on larger, more frequent billers.
For now, the best bet for many billers may be to accept payment via Venmo or PayPal. However, they may find it challenging to conform all their buyers to these approaches, this is not nearly as well integrated as BillGO may be, and transaction fees may be an issue.
Is there one scenario that might be more beneficial to consumers?
Theoretically speaking, consumers should benefit when organizations engage in the most efficient forms of B2B purchasing and payments because that should result in a) lower prices, and b) better products and services - assuming higher margins are invested back into product development.
The U.S. lags in B2B payment digitization, in part, because of a deeply-entrenched relationship billers and suppliers have with checks. Why does the dependency on checks persist?
Most mid- to large-sized organizations don’t view the AP or the AR function as strategic. Consequently, payment choice is typically made on a perceived level of control, working capital, familiar processes and cost considerations.
During the pandemic, checks followed a rollercoaster. Initially, organizations moved away from checks when there were concerns COVID might be transmitted through airborne or surface exposure. By now, we have probably all heard stories about buyers and suppliers meeting in parking lots to exchange checks.
As mail delivery service slowed in the fall of 2020, some organizations resurrected check usage for large payments to maximize float. So, to answer your question: to some degree, the dependency on checks is two-fold: One, checks work when all else fails. And two, generational inertia.
Will the U.S. ever phase out checks?
A realistic solution to superseding checks will likely require ubiquity, low cost, and great data. Achieving these three goals may not be possible when so many, largely incompatible accounts payable, accounts receivable, and payments automation solutions exist.
We see significant potential for industry convergence, likely through M&A, over the next five years. If we can get to a world where, if you will, three standards exist versus 30, then ubiquity may begin to take hold as more organizations stop clinging to checks. An alternative path to this sort of convergence could be a passporting among solutions, perhaps driving an interchange model (i.e., fees are exchanged between a biller’s solution provider and a buyer’s solution provider. Here, both the buyer and biller with interact with the transaction in their native solutions. In this world, who receives the fee between the biller solution and buyer solution is up for debate; however, I see merit for a biller solution receiving the fee when supplier curation saves the buyer from KYC and credit checks and particularly when the supplier’s payment preferences – particularly around acceptance of virtual cards – is known.
What would be the benefit if virtual cards gained real traction in the U.S.?
A convergence of virtual card solutions and protocols would greatly help ease the current pain suppliers experience from the disparate flood of e-mailed, faxed and phoned-in virtual cards – particularly in a work-from-home world.
Your company consults on behalf of payments and card strategy for organizations in the U.S., Canada, Latin America and Europe. What can the U.S. learn from those other markets?
Specific to virtual cards, the U.S. is considered a leader; so, learnings have often flowed from our market internationally.
With B2B payments generally, some other country markets have achieved better harmonization of data standards to improve efficiency between buyers and sellers. In this context, we have been fascinated to see virtual cards begin to expand beyond the travel vertical and into use cases that help to drive working capital for clients and monetization for solution providers well beyond what is available through electronic bank transfers, such as ACH here in the States.
Where does bill payment - specifically the efforts of BillGO to modernize bill payment technology - fit into the current landscape?
BillGO’s efforts to help improve consumer well-being by providing a more efficient way to manage and pay bills is a powerful statement of purpose. It certainly extends quite naturally from consumers to micro- and small businesses and even into the mid-market where timely payment and working capital needs are amplified during the pandemic.
No doubt the payments automation, real-time payment, and real-time access to remittance advice will attract billers and payers.
Long term, I see potential for some of the most significant value pools to be working capital tools, which can be embedded in BillGO, of course, and curated biller (or in B2B-speak, supplier) registries.
You recently suggested big tech companies may envy the relationships banks have with their customers. Can you explain where this “envy” comes from?
There is a trust factor in place with banks and there are business-critical credit relationships and treasury / cash management relationships. We are seeing big tech – and fintech - enter bits and pieces of these areas; however, these companies rarely want to cross the Rubicon of becoming a regulated bank in the U.S. as the regulatory and compliance environments are formidable.
Are any big techs or big banks envious of fintechs right now? If so, why?
I would generally say banks initially viewed fintechs as competitive threats; however, opinions have evolved substantially into a view of frenemies at worst and partners at best. A major driver for this is the many fintechs who have launched via a direct to corporate client model and then pivoted heavily towards a bank reseller model.
