Case studies

A B2B marketplace digitizes payments

B2B marketplaces are responding with better payment features in response to online demands from B2B buyers. Already, one-third of the top marketplaces offer some type of payment option, including financing, according to Applico, a consulting and research firm that tracks B2B marketplaces. An additional 20% of marketplaces plan to introduce digital financing within six months, Applico says.

But there are challenges along the way, and B2B marketplace operators need to plan and execute a payments digitization and alternative financing program that best fits the needs of their vertical market and, more important, their customers.

A case in point is Bay Supply. The company, an industrial distributor based in Farmingdale, New York, has been selling a wide array of fasteners to big and small companies since 1961. In December, it rolled out a new marketplace on BaySupply.com. It brings together buyers and sellers in what the company calls a disparate industry.

In less than a year of operation, Bay Supply’s B2B marketplace has attracted about 50,000 buyers to its inventory of nearly 180,000 fastener products. Its products range from rivets, lock bolts and blind bolts to blind sealing plugs, rivet nuts, helical inserts, and key locking inserts.

The distributor is also adding more digital payment options — slowly and carefully. “We still have many companies that have their teams do all sourcing online but are forbidden to process orders online. These companies force staff to print shopping carts to pass up the chain of command for an emailed purchase orders to be submitted,” says Bay Supply chief operating officer Michael Eichinger. “You cannot take a traditional legacy business model, digitally transform and ask your entire customer base to change the way they do business instantly.”

Today about 40% of all online transactions that occur on the marketplace and on Bay Supply’s ecommerce site are done by credit card, Eichinger says.

Bay Supply designed and launched is in conjunction with McFadyen Digital, an ecommerce and marketplace consulting firm. It also is working with Balance, an applications provider of payment infrastructure features and tools that support online and global B2B trade, to add more forms of electronic payments, finance options and related tools.

“We have worked for nearly two years with Balance out of Israel to create a custom marketplace finance solution,” Eichinger says. “We provide credit terms in minutes after a customer enters an employer identification number (EIN). The limits are determined by Balance and terms are net 30.”

Currently about 60% of marketplace buyers use this program to “buy now and pay later,” he says, a number that could exceed 70% later this year.

Bay Supply is looking to add electronic data interchange in the next few months. “We are adding this under our Bay Connect launch in Q1,” Eichinger says. “It is expected to become part of our automated product data, invoice and purchase order (PO) process to avoid manual processes.”

Bay Supply is taking a slow but steady approach to adding digital payment options, especially for electronic funds transfer (EFT). “This is a problem,” he says. “We offered as a method with 30-day execution under net 30 terms and customers did not like this. Most employees do not have access to execute immediate online payments via EFT.”

Another challenge is about payment digitization for domestic and international transactions.

“In the USA, companies are slow to adapt. Balance was challenged with this because they realized they must offer BNPL in a different way in the USA, and they can’t expect companies to change old habits overnight, so we worked together to create a gradual adoption of paying electronically,” Eichinger says. “We could have simply extended our own credit terms online and managed ourselves. We invoice our customers, and they mail checks net 30, but as a marketplace, we did not want to extend our credit terms on third-party sales where we had fiduciary responsibility and only collect a success fee portion for transactions.”

Progress on adding in more digital payment tools and payment options  will take time. “With digital transformation you can’t ask your entire customer base to change the way they do business instantly. This has been a weekly call for nearly two years to tackle each new challenge, working in concert with the Balance product development team.”


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