To Woo Vendors, Try Offering Real-Time Payments

In the B2B realm, wire payments remain a mainstay, and perhaps the less said about checks, the better.

In an age of hyper-competition between firms, especially in the gig economy where platforms promise speed and transparency when interacting with individuals, contractors and small- to medium-sized businesses (SMBs), the transfer of money — with finality — lags.

Invoices must be generated, sent, received and paid by buyers — a process that can take time. Automated clearing house (ACH) payments take 12 hours to process and can even take days to settle.

Omri Mor, CEO of B2B mass payout firm Routable, told PYMNTS CEO Karen Webster that instant payments could change the dynamics of commercial payments.

Faster payments, he said, “have a huge benefit in helping both parties resolve what they truly need, which is the transfer of money being complete.”

Mor said expedited payments — and specifically direct to bank account RTP — create better supplier/buyer relationships and offer a competitive advantage for enterprises that want to cement loyalty with their vendors.

To that end, Routable said Tuesday (May 17) that it is partnering with the Real Time Payments network to offer its Real Time Payments services, in a bid to help Routable’s clients deliver instant payments at scale. In this way, the RTP services will enable those enterprises to securely pay vendors and contractors within seconds — directly between accounts. Per the launch announcement, the service can accommodate businesses as they scale, moving from 250 payouts per month to more than 100,000.

Speed has now become a competitive advantage, Mor said, especially in an economic climate where the bid to attract and retain new talent hinges on offering what other companies don’t.

Vendors and contractors vote with their feet, and if they have the option to be paid instantly by one client company but have to endure the frictions of traditional payment methods from another firm, it’s a fair bet that the first company will win the talent war.

Related: The Data Point: Real-Time Payments Are the Norm at Nearly 9 in 10 Big Businesses

The direct account-to-account (A2A) transfers sidestep batch processing (a mainstay of ACH and 6 p.m. cutoff windows) and can be facilitated on weekends. Streamlined communications — immediate payment confirmation and remittance data — ensure both parties are always aware of payment status.

In terms of the mechanics, the payments are intuitive, flexible and available to all of Routable’s clients through plug-and-play application programming interfaces (APIs). The “why and why now” of it all remains pretty simple, Mor said.

As he told Webster, “We work with enough industries — whether they are insurance companies, companies in real estate or the food delivery and gig economy industries — to see that they need to pay out ‘faster’ in order to please their vendors.”

Getting paid quickly after getting the job done is important in any number of those verticals.

“RTP allows you to reward vendors in real time after completion of the job,” he added.

Creating Some Optionality 

Mor said that RTP is an “available feature” being rolled out to client firms and they can opt to use it or not, or even use it as a complement to RTP. As he told Webster, if an enterprise misses the cutoff time for same-day ACH, they can still elect for an RTP transfer.

He said in terms of mechanics, the firm need only select RTP as a payment option to send to receiving bank accounts (transaction limits have the same $1 million ceiling as seen over the RTP rails). Contractor firms may be early adopters of the RTP rollout.

He said the speed of a payment itself could be monetized along the way.

Looking ahead, he said Routable will look to give the option for vendors to elect to get paid earlier for a fee. That function takes its cue from the consumer realm, where individuals, with Venmo or CashApp in hand, are willing to pay 1.5% instead of waiting two or three business days to get funds.

Similarly, if terms are 30 days in commercial payments, and the vendor opts to get paid on day 15, they’d be willing to offer discounts (calculated on a per-day basis). Alternatively, if the vendor wants the money now and is willing to cover a transfer fee for that quickened transaction, that could be available.

Along the way, cash flow visibility improves up and down supply chains. RTP, he said, will help the U.S. more fully embrace open banking.

“We’re looking to build as much flexibility into this [B2B] model as possible,” he told Webster, and “RTP is just one more path toward building a better relationship with your vendors.”

See also: Killing the ‘Double Whammy’ of Closing the Books with AP Automation