Payments As A Growth Channel For B2B Marketplaces

Payments As A Growth Channel For B2B Marketplaces

Blog Post
March 27, 2022

This is a guest blog post in collaboration with
Balance, a B2B payments partner for the Everything Marketplaces community.

Payments as a growth channel: What B2B marketplaces need to know

For B2B merchants, getting paid is more of a headache than anything else. Customers demand to use credit cards or wire transfer, and of course want to pay net 30 or more. You probably feel like you don’t really have much control over this process – it’s just an inevitable part of doing business. But with the right tools, you can take advantage of the opportunity that comes with managing and maximizing the B2B payment flow.

The leaks in the payment flow

B2B marketplaces in particular are a perfect example of the complexity involved in taking B2B transactions online. Most marketplaces don’t have the infrastructure to handle payments themselves, so they connect vendors and buyers directly and leave them to settle payment on their own. Without facilitating the transaction, marketplaces limit how they can add value to the payments experience.

What kind of value? Financing is a great example. By not offering net terms, marketplaces limit the size and value of transactions that can come through their platform. If a buyer wants to make a high value purchase, but the marketplace can’t offer them the terms to finance it – that’s lost business. On the same note, large vendors will not want to sell on a platform that cannot get them in front of their ideal customers.

Another missed opportunity to consider is take rate. If marketplaces aren’t involved in the transaction, they can’t charge a take rate. Instead, marketplaces charge subscription fees or a flat fee per transaction, even. But by owning the payment transaction process and net terms, they can add significant value, and in turn can charge a fee. They should also be able to choose to charge different take rates based on the type of product. Ultimately, this can become a whole new revenue stream for the marketplace that would be impossible without significant capital, underwriting capabilities, and payment processing infrastructure. In the example below, I’ll explain what this means and how Balance enables merchants to maximize growth. 

Fixing the leaks

Let’s say we have a marketplace called After the goods are shipped and delivered to the buyer, WidgetsDirect creates an invoice for the amount of $30,000. Assuming WidgetsDirect has successfully qualified the buyer with Balance ahead of time (either via API or manually in a dashboard), WidgetsDirect can offer this buyer an option to pay with terms. In the meantime, Balance immediately makes available to WidgetsDirect the full amount of the invoice. With the funds available for that transaction, Widgets can allocate the funds however they wish in order to enable their business model: 

  1. They can immediately and automatically send the full payment amount to the vendor.
  2. They can customize the take rate percentage on a global or per transaction basis to be withheld for an automated payout.
  3. They can manually or programmatically send a specific amount (full or partial) to the vendor, and keep a portion of their choosing as their take rate.

It’s all up to WidgetsDirect. By being paid upfront, marketplaces have full control over how and when the payout occurs. 

The impact

Ultimately, your take rate is based on the overall service you are providing – a combination of connecting buyers and vendors, processing the transaction, and offering financing with net terms (via Balance). For your customers, they benefit by getting higher value services. Paying vendors out upon delivery of goods or services helps vendors be protected against losses and boost working capital. For buyers, net terms gives them the flexibility they need during checkout. It's a win-win: buyers will want to buy from your platform (and increase order volume by over 2.8x), vendors can sell more, and you get to monetize every transaction on your marketplace.

So in the short-term, you can expect to grow your margins by enabling buyer-vendor transactions. Over time, as your buyers and vendors transact more, you’ll drive loyalty and build a strong customer base by providing a frictionless, seamless payments experience.

Want to access the Balance member deal? You can request to join us here, which will give you access to Balance member deal, resources, and the Everything Marketplaces community.