The patchwork of partnerships: Deciphering the future of payments

The patchwork of partnerships: Deciphering the future of payments

Team Balance
Team Balance
·
June 14, 2022

We sat down with Serena Wong of American Express and Austin Siegfried of Vartana, who cumulatively have over 16 years of experience in B2B payments, to discuss what trends they think will take a forefront in this space. Both agreed that the future of payments will not be won by one single player. Instead, payment partnerships will rise to the top. 

A need for speed

The first way to understand the new wave of payment partnerships is the increasing expectation for fintech companies to be agile and quickly bring solutions to the market. “Historically, when it came to traditional financial institutions, the mentality was always to build in-house. This was because the speed to go-to-market was so incredibly slow just given legacy architecture, strategic investment, and IT prioritization,” says Serena. 

Now, in order to survive in an increasingly competitive and crowded market, you can’t afford not to move fast. 

This has moved us in the direction of leaning on a partnership schema where cooperation can bring better results than competition.

“The value is in being the originator. To do that, you need to be first. And you can’t move quickly into the B2B space if you have to build everything from scratch. At the end of the day, in order for us to survive and continue to iterate, we’ll have to work together,” says Serena. 

The rise of productization

Serena and Austin also describe how it's a lot easier now to meet your regulatory requirements. Companies can say, “ Hey, I don't do KYC. So, I have company X do it for me.” Transferring data sharing and customer lists used to be looked down upon by regulators and by professionals in the industry. 

Whereas now, it's almost become the standard. There's no longer the default of: “Let's build it.” First, companies will look for a partner and then only if it doesn't work, will they do it in-house.

Serena describes that this creates a perfect situation for purpose-built fintech solutions – because there is a need for outsourcing every piece of the puzzle, from KYC to fraud detection. 

“I almost feel like the future of FinTech will be built by non-financial people. It will just be whoever can make the connections. They don't need to have that expertise that traditionally was needed,” says Serena. Instead, they just need to find the right partner. And, with an increasing number of startups dedicated to solving one particular piece of the puzzle, that’s not a hard thing to do. 

One might wonder whether the market can sustain all of these unique solutions.

Serena explains, “Yes, you can have a framework for how you evaluate partnerships, but there’s so many offerings in the market that at the end of the day. A lot of it is just: who do you know and who have you worked with?”

BNPL as an incentive

The growing number of brands and service providers choosing to function as financers is also fueling the partnership trend. “This became clear when about five years ago, Affirm launched with Visa to expand their BNPL offering,” says Austin. 

This introduced what would become part of a wider move from brands to offer more value at the time of checkout.

Austin explains that over time, “fewer businesses have depended on sales and discounts. Their intention is that if you offer financing, you don't need to discount the product itself in order to get someone to buy it.” 

 In B2B industries, negotiation centers around the payment terms– whether it's a five-year loan or a seven-year loan and at what interest rate they’ll pay. 

That is what Austin describes as what's becoming the go-to for more services as BNPL grows as a category of finance.

Partnerships are enabling that shift. Why? It's becoming easier for everyone to white-label. Austin explains that this is because you have a number of background players that are providing financing, and all the brand has to do is plug and play. 

As a result, a far wider variety of merchants can offer financial services. You no longer have to be a big retailer like Sears to offer financial services.

“I think it's super interesting that now you have the option to decide whether you borrow or build trust. There are cases where you don't necessarily want a third party like Amex to take your brand recognition - you want to be the one to offer financing. And, that’s possible today thanks to payment gateways and partnerships that weren't there before.” 

So what will it be?

It's clearer than ever there is plenty of space for innovation. Whether that innovation will take place within an ecosystem of solutions or be consolidated to just a few, is still an open question. Some players will try and do it all and others will focus on their bread and butter while relying on partners to do the rest.

Either way, there are enough unsolved challenges to go around for everyone to have their share of the pie. Curious about Balance's role in the future of B2B payments?

Contact our team to learn more.

Team Balance
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Team Balance

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