Integrating payments into websites is simple. Even moderately experienced developers can do it in days and for off-the-shelf Ecommerce software, no technical work is required at all.

We are talking about Ecommerce websites accepting payments. If you are a marketplace or ERP, accounts payable or procurement software provider who needs to automate making payments, integration is not so easy.

Embedding payments has important benefits for these businesses as described here but it is estimated that embedding banking can take 12 - 18 months, cost up to $2.5 million and another $1 million a year to maintain.

What’s worse, this has to be repeated a few times because single sourcing is risky and there are no providers with global coverage for all services.

So what explains this difference and what can be done about it?

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Why making payments is different

One reason for the difference is that payments acceptance for websites has been around for almost 20 years while embedded banking has been around for only about 3 years.

This relative immaturity however only explains a small part of the difference.

The second reason is the need for customisation. Every website has a similar checkout experience but every marketplace or ERP, accounts payable or procurement software has its own payout process. This means embedded banking APIs cannot provide many pre-built components.

A third reason is that making payments requires holding a deposit to fund the payments. That is why it is often referred to as ‘embedded banking’, not just ‘embedded payments’. Managing balances and statements brings another layer of complexity, both technically and also from a compliance perspective.

The final reason is support. If a payment fails, the person being paid will usually contact the platform responsible for making the payment. That is why a support portal is required when integrating making payments, not when integrating receiving payments.

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The role of embedded banking aggregators

Embedded banking aggregators allow platforms to solve these problems.

Aggregators are companies that are pre-integrated to a network of embedded banking APIs and offer value-added services on top.

Their network offers their customers global coverage and a wide range of payment methods. It also allows platforms to easily switch should one embedded banking provider have technical issues or should another provider offer lower costs or higher rebates. They can also provide advice to make sure the platform meets financial regulations.

The value added services are designed to make integration and support easy. This usually means payments can be launched in weeks and switching can be done in days.

Aggregators usually specialize in specific sectors to allow them to tailor their value added services to the needs of their customers.

About Yordex

Yordex was a spend management platform with payments that became an embedded banking aggregator for marketplaces and ERP, accounts payable and procurement software providers.

Our background gave us a rich set of value-added services. First hand experience with being the customer of embedded banking APIs made us appreciate the value of multi-sourcing.

To find out more, please contact us.

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Purchasing was one of the first business processes to get automated. In the 1960s, manufacturers started using computer systems to better manage inventory and these systems already included basic purchasing functionality.

Purchasing software has come a long way since then. A very sophisticated suite of solutions now exists including analytics, eSourcing, contract management, eRFX, eInvoicing, supplier management, catalogs, marketplaces and procure-to-pay solutions. These solutions come in a wide range of bundles and industry specific solutions.

One process has resisted being bundled in: payments. They are still treated as external: a payment file is generated and shipped off to the bank.
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Sub-optimal payment methods = lost margin

Payments being external to purchasing software leads to a number of problems.

The most important one is that it stops businesses optimizing the use of new payment methods. Payment files shipped to banks get translated into a one-size-fits-all, usually expensive payment method such as wire transfers.

In many cases, better payment methods exist including P-cards, same day ACH and in the future real-time payments, and one day maybe even crypto.

Not using the right payment methods increases payment costs and, in the case of P-cards, means missed rebate opportunities. These can easily add up to 1% - 2% of the gross payment value, particularly for low value payments. That is 1% - 2% margin that would have gone straight to the bottom line.

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Other issues with payments being external to purchasing software

Payments being external to purchasing software also leads to other problems.

Payment files are by nature batch processes which cause delays and include manual steps. Manual processes mean higher costs and an increased risk of errors while slow payments cause friction with suppliers and reduce the scope for working capital optimization such as early payments and supply chain financing. Payment files are also a security risk.

Reconciliation is another issue. Because payments are external, the data coming back to the purchasing system is often hard to reconcile back to the original purchases. This leads to extra process cost and also increases the risk of double paying.

Finally, if payments are external, validating supplier bank details or credit risk are often also external making supplier onboarding time consuming, expensive and insecure.

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Adding payments using embedded banking

These issues have been known for a long time but they were unfortunately hard to solve before. Payments were handled by banks which had their own systems which were impossible to integrate.

This is now changing. Most major banks are starting to offer banking-as-a-service (BaaS) APIs. The number of US banks offering these services is expected to grow sixfold from around 50 in 2022 to over 300 in 2026.

These APIs for the first time make it possible to make payments an integral part of purchasing systems. This is also known as “embedded banking”. Some providers such as Coupa are offering integrated payment solutions in the US and we expect most other procurement and ERP software providers around the world to follow suit.

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About Yordex

Yordex helps purchasing software providers build a competitive and global banking partner network through a single integration. To find out more, please contact us.

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What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

Today around 2% of B2B payments are made on card. This number is growing rapidly and Visa believes that around 20% of the B2B payments market is ‘cardable’.

This seems surprising, particularly for suppliers who are paying the high card payment fees. They’d rather use bank transfers or maybe switch newer payment options like open banking or cryptocurrencies.

In this article I will explain why we agree with Visa that cards have a bright future in B2B payments. We suspect some of the new payment methods may struggle if they seem to mistake cards’ strengths for weaknesses.

Let’s look at a few of these alleged weaknesses.

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Cards: when lack of security is a strength

Diners was the first ever credit card. It was launched in New York in the 1950s to allow diners to pay on credit. At that time, hackers did not exist and security was provided by security guards. While some security measures have been added since, they are still insecure: one tap or 16 digits is all it takes to pay.

However, as any security expert will know, perfect security does not exist. Good Chief Security Officers will spend most of their budget not on keeping hackers out but on limiting the damage hackers can do once they are in.

The same applies to cards. Credit card companies are forced to accept that fraud is inevitable. They therefore designed a system to limit the damage of fraud. This system includes financial institutions being liable for their clients’ actions and a mechanism to get back your money when fraud has happened (chargebacks). Compare that to APP fraud and crypto currencies where billions become irrecoverable every year despite the technology being more secure.

An additional benefit of the lack of security is the ease of use cards provide. It turns out that buyers like paying with just one tap or by just entering 16 digits. Ease of use is a big part of the success of cards.

Cards: when being expensive is a strength

I used to work at a large payments business where I regularly had customer councils with some of the country’s largest retailers. Invariably, the first 30 minutes of these meetings were taken up by those retailers asking us what we were doing to lower the card payment fees ('interchange').

Unfortunately, retailers don’t decide which payment method is used. Buyers do. Most of the card fees end up in buyers’ pockets either directly as cash back or points or indirectly as protection against fraud (the chargebacks I mentioned before). The remainder ends up in the pockets of card processors who use it to innovate and stay ahead of the new payment methods.

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Cards are here to stay

Cards aren’t all bad for sellers. Payments are approved in seconds and once approved, the money is guaranteed. This is particularly useful for B2B sellers. 43% of B2B invoices are paid late and businesses need to employ entire teams to chase payments.

At Yordex we help platforms, marketplaces and large buyers automate and save costs on managing large volumes of payouts. We are payment method agnostic, but like Visa we see cards getting stronger, not weaker. That is why we are extending our global network of card issuers.

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What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

Managing small supplier spend remains a headache for most organizations.

The cost for onboarding suppliers can range from $1k-10k and sometimes much higher for Enterprise customers [1]. Even if we assume $2k that still means $1k per year assuming an average supplier lifetime of 2 years.

It is estimated that the average business spends $10 processing an invoice [2]. This analysis did not include PO approval and 3-way matching for which we will assume another $2. Finally, we need to amortize the supplier boarding costs. Taking a generous assumption of the supplier sending 6 invoices per month that more than doubles that cost to $25 per invoice.

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Corporate cards: better but not yet perfect

Corporate cards or P-cards are used for many of these tail spend payments today because they are convenient for both buyers and suppliers. 

For the supplier, P-cards allow them to get paid on time without having to chase their customers. This comes with a hefty card payment fee of up to 2.5% but that is sometimes still worth it for small invoices.

For the buyer, employees can use cards to avoid the overhead of the PO process while the finance team benefits from less time spent onboarding suppliers and matching invoices. Assuming the card payment is put through as an expense, we estimate that a card payment costs around $2 per supplier payment in people time compared with $25 for pay-on-invoice.

However, there are important downsides to cards for buyers

• Cards allow employees to bypass spend approval processes. They also allow employees to buy from non-preferred suppliers thereby missing pre-negotiated discounts
• Card statements lack the data required to analyze spend and sometimes also the data required for proper VAT filing 
• Due to the high fees, many suppliers won’t accept cards limiting the potential of using cards to reduce invoice processing costs

There must be a better way.

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The ideal small supplier payment process

The ideal small supplier spend payment process combines the ease of use of P-cards with the control and data of the PO-invoice process. We will call this the 'One Vendor' process for reasons explained in the next section.

Table 1: ideal small supplier payment process

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This process would give buyers the ability to:

• Have visibility over suppliers used
• Avoid supplier boarding costs for small suppliers
• Avoid PO/invoice matching for small invoices
• Negotiate payment terms including an early pay program

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For suppliers, it would:

• Avoid the need to have to chase customers for payment
• Offer low payment cost

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What this process looks like in practice

Similar to card payments, the buyer should receive a single statement or invoice every time period. Unlike card payments, that statement includes all the data the buyer needs for their accounting system: amount, taxes, supplier, line items and cost code(s). This data can also be used for spend analysis by the procurement team.

An important difference between this ideal process and card payments is supplier boarding. Card payments offer little information about and no communication with suppliers. Supplier boarding should be self-service to keep costs down for both suppliers and buyers.

At least one supplier still needs to be set up in your ERP system which will be the facilitator of the service. We therefore called this process the 'One Vendor' process.

Similar to the PO-invoices process, an invoice and/or justification of the spend is still required before a payment is released. However, unlike traditional invoice payments but similar to cards, approval by the employee is sufficient to release the payment on the (negotiated) payment due date.

Also similar to card payments, a supplier should be able to trust they will be paid on time. The payment provider guarantees timely payment just like card payment providers do.  

A final but important difference with cards are the payment fees for suppliers. The One Vendor process can work on any payment ‘rails’ (cards, bank transfers, crypto) and the buyer or supplier should be able to choose the payment method and fees that best fit their needs.

About Yordex

It is possible to implement this One Vendor process today. At Yordex we work with many organizations to drastically reduce their invoice processing costs while retaining control and visibility.

To find out more, please contact us.

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What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.