Cost, Integration Still Obstacles for SMB Payments Digitization

Before Matt Dubois, CEO of Chargezoom, went into the B2B payments business, he was a customer. As the founder of several small startups, he found the status quo accounts receivable (AR) platforms involved a lot of manual entry, double work and a lack of integration with popular accounting systems.

“With 99.9% of businesses being small businesses and B2B being 3.7 times larger than B2C, I just thought it was strange that there’s this great B2C technology for point of sale and eCommerce where you have like, Shopify and Magento,” Dubois said.

“If you’re B2B and you could afford an ERP solution, you could have a great integrated payment experience, but if you’re among the 99% that don’t have that and do invoicing, you would like a poor man’s version of that ERP,” he continued.

Dubois decided to address the problems by founding Chargezoom in 2020 to eliminate the manual work associated with B2B credit card payments. The startup recently announced it raised $10 million in a Series A funding round led by Panoramic Ventures, with participation from existing investors SaaS Venture Capital, Stout Street Capital and Okapi Venture Capital.

See also: Chargezoom Raises $10M to Grow AR Automation Solution

Chargezoom integrates B2B invoicing and payments into small- to medium-sized business (SMB) software like QuickBooks, FreshBooks and Xero, automating receivables and payables as well as accounting.

 Challenges to Innovation

When Dubois got started, he found that there were two reasons things were the way they were. First, acquisition costs are high in the SMB market — there are approximately 7 million businesses in the U.S. alone. Second, the perception was that margins would be lower in the market.

To solve the first problem, Chargezoom decided to distribute through the major payment service providers. Chargezoom’s value proposition to these companies is that it provides a quick, easy route to compete with the likes of Stripe and PayPal — fast-growing FinTechs that are capturing SMB market share.

Chargezoom has signed agreements with 75% of the top 20 merchant acquirers in the United States, including Fiserv and Global Payments, and using this approach astronomically reduced marketing costs. The merchant acquirers are rolling out the platform gradually, moving from beta tests to making it available to new customers. The final step will be to market it to existing customers.

To solve the second problem, Dubois said the platform saves SMBs money through a patented data enrichment interchange optimization process, saving them on average 40 basis points on interchange fees. In addition, the platform aims to get payments processed faster — and save customers money by eliminating duplicative manual work.

Chargezoom is currently available exclusively through its payment processor partners and plans to launch directly to merchants via an exchange of sorts that allows them to get bids on rates from top payment service providers.

The recent raise is indicative of investor interest in the B2B payment space, which has demonstrated resilience in an environment that has been dominated by recession fears that have devastated the B2C FinTech sector. Dubois said that in his view, the current funding environment is worse than it was in the wake of the dot-com bust at the turn of the century.

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