How B2B Payments Balances Compliance With A Better User Experience

With the U.K. one of the largest FinTech hubs of the world today, initiatives like Open Banking demonstrate the opportunity for regulatory mandates to encourage innovation and competition — even in markets where such regulatory mandates don’t exist.

The capabilities to unlock bank data and integrate new services into emerging FinTech platforms via API integrations is a FinTech trend that hasn’t ignored the B2B payments arena. Indeed, says Robert Courtneidge, CEO of payment technology firm Moorwand, this space is one of the most exciting and busy when it comes to innovation. Service providers are increasingly understanding that, like consumers, businesses demand a better and more seamless end-user experience.

However, B2B payments are not the same as B2C, largely thanks to high transaction sizes and volumes, as well as expanding fraud risks. Courtneidge discussed those challenges in a recent interview with PYMNTS, noting that as FinTech innovation continues to solve the biggest B2B payments friction points, service providers are tasked with simultaneously prioritizing compliance — two goals that don’t always go hand in hand.

Achieving A Better User Experience

Among the biggest benefits of the current U.K. regulatory landscape is its ability to allow non-bank players to step into the payments arena, said Courtneidge, who recently noted in a statement that “it no longer makes sense for payment services to be limited to banks.”

Open banking today isn’t isolated to Europe and the U.K., he told PYMNTS. It’s now a “global phenomenon” opening up the market to new players that are able to solve problems traditional banks haven’t been able to address.

“It’s built a lot more competition, which is key,” he said. “There are a number of FinTechs coming through, and more and more competition drives prices down and service levels up. We’re finding cleverer and cleverer solutions coming in to solve problems that before, people just took, and said, ‘Okay, you can’t change this. We’ll work with it.’ Now, innovators are coming in and saying, ‘Well, actually, we can change this.’”

Opening up the markets to service providers beyond the banks themselves is particularly impactful to the B2B payments space, where, particularly in the case of small business payments, traditional FIs have not always seen the market as a profit center worth their technological innovation and investment.

For Moorwand, Open Banking has allowed the company to help other FinTechs integrate payments capabilities into their own platforms. Its latest initiative includes a partnership with small business accounting firm Telleroo, which now enables its small business accountant users to make payments on behalf of their SMB clients thanks to a Moorwand integration.

Traditionally, accountants and their SMBs have to access separate platforms, be it other payment or online banking portals, to initiate payment. API integrations can streamline and consolidate that experience from within the accounting platform, making for a more convenient user experience.

“It’s all about being able to provide a solution that was previously only available through traditional banks, who are maybe not as flexible or may not even see the benefit of moving into these spaces,” said Courtneidge. “Some of these areas [of B2B payments] don’t generate enough volume for some of the banks to even hit their radar.”

Mixing Innovation With Compliance

While an influx of innovation and new solutions is undoubtedly a positive trend for business end-users, Courtneidge also warned that there is now a broader landscape of opportunity for fraudsters, while a complex regulatory climate can make compliance a headache.

Compared to B2C payment solutions, B2B tools must incorporate an elevated security and compliance framework straight from the customer on-boarding process, with Know Your Customer (KYC) and anti-money laundering (AML) requirements a burdensome challenge for many FinServ providers. From there, B2B’s characteristically higher payment volumes and larger payment values also makes this market a prime target for fraudsters.

“In B2B payments, you certainly do have a higher propensity for either first-party or third-party fraud to take place,” Courtneidge said.

While FinTechs may be able to incorporate security and compliance measures within their solutions, doing so without compromising the user experience is far from easy.

“The higher the level of anti-fraud risk you build into your transaction monitoring rules and into your platform, the more clunky the system becomes for end users,” he continued. “And that can damage the user experience, and take away from the benefits of all the new FinTechs coming through. We have to be very careful to balance that need to ensure fraud is kept to a minimum with an ability to make the payments process as seamless as possible to the end users — businesses or consumers.”

As fraud risks proliferate and compliance requirements intensify, that balance between end-user experience and security will become even more difficult for the growing population of FinTechs servicing business end users.

At the same time, that end-user experience is becoming more important, too, driven by the likes of Uber and Amazon working to make the act of payments as integrated, seamless, and even invisible as possible for customers. According to Courtneidge, this industry evolution creates opportunities for technologies like distributed ledgers to come into the fold and work alongside the existing regulatory framework — he pointed specifically to the opportunity for central banks to embrace stablecoin technology, for example — in order to drive a better end-user experience without compromising compliance or security.

“If we’re looking at the long-term future,” he said, “I can see those technologies coming in to continue this progression in the FinTech space for payments.”