Buy, Build or Partner? The Dilemma in B2B Payment Modernization

Business innovation typically follows customer expectations, and today’s customers have more expectations than ever. 

Even commercial business-to-business (B2B) players, who are starting to expect the same technology-driven experience in B2B transactions as they receive in their day-to-day lives as consumers.

Embedded finance, generative artificial intelligence (AI), and other payment advances are reshaping the ecosystem for commercial players by streamlining processes, enhancing decision-making, and offering unprecedented insights into financial transactions.

And while successful B2B payment offerings tend to be comprehensive, easy to use, and fast, all the innovative new bells and whistles end-users are coming to expect have put firms looking to succeed in 2024 in a tricky, if age-old, spot when it comes to determining a strategy. 

That’s because the dilemma of Buy, Build or Partner in the realm of payment modernization has taken on new dimensions in the face of rapid technological change. 

The traditional choice between building an in-house solution, buying a ready-made product, or forming strategic partnerships is undergoing a paradigm shift.

Get the report: Businesses Fast-Track B2B Payments Digitization to Boost Growth

Traditional Paradigm Is Evolving

Historically, building custom solutions was seen as a way to maintain control over the entire payment process. However, the complexities of embedded finance and AI-driven systems often require expertise that might be outside a company’s core competencies.

Alternatively, purchasing prebuilt solutions can offer a faster route to modernization, but it may result in less flexibility and customization. Off-the-shelf solutions might not fully align with the unique needs and processes of a B2B organization.

That’s in part why within the current landscape, strategic partnerships are gaining prominence. By collaborating with FinTech firms and technology providers, B2B players can leverage external expertise, access cutting-edge solutions, and stay agile in the face of rapid technological advancements.

“There is tremendous opportunity in this environment to strike new partnership deals and create ecosystem collaborations around product,” Igor Bazay, VP of finance at data intelligence platform Enigma, told PYMNTS. 

This is particularly true for banks and FinTechs, as they increasingly rely on each other for data sharing and compliance, despite having potentially viewed each other as competitors or competitor-adjacent players in the past.

PYMNTS Intelligence in “The FinTech-Bank Relationship Shifts Toward Collaboration” shows that nearly 2 in 3 banks and credit unions surveyed (65%) have entered into at least one FinTech partnership in the past three years, with 76% of banks viewing FinTech partnerships as necessary to meeting customer expectations.

See also: Data-Ready Banks May Have Competitive Edge in Digital Innovations

Catalysts for Transformation

As PYMNTS has reported, digital is no longer just a strategy but an entirely new way of doing business, one that is built on the three F’s of flexibility, features and functionality.

While the B2B space traditionally has lagged consumer-facing innovations, the gap is narrowing thanks to the operational improvement and revenue growth that tools like embedded finance and AI can provide. 

“The market changes over the past few years have really accelerated the adoption of digitized B2B payments, which in turn has accelerated the innovation in the industry,” Chris Lolli, vice president and general manager of B2B product, partner and client management, at American Express, told PYMNTS.

As complex technical innovations in their own right, embedded finance solutions and AI tools are also fundamentally reframing the buy, build or partner question. 

“There are very few [organizations] that don’t have a program already in effect or are planning to increase investment in their payments environment in 2024,” said Dave Scola, CEO-U.S. at Form3. 

Partnerships and data-sharing are becoming essential components of successful payment modernization strategies, but it’s still important for B2B players to carefully assess their capabilities, goals and the ecosystem more broadly to determine the most effective path.

“Payments is experiencing kind of a second renaissance, if you will, with the rise of alternative payment options such as buy now, pay later, wallets, and bank payments. … Businesses are spending a huge amount of time and money on UX [user experience] improvement, figuring out how they can improve the customer experience,” Andrew Gleiser, CRO at FinTech platform Aeropay, told PYMNTS. 

And in an era where data is the new currency, collaboration and shared intelligence are becoming key drivers of success. 

Data-sharing enables B2B players to access a wealth of information, facilitating better risk assessment, fraud detection and overall decision-making. By sharing threat intelligence and best practices, businesses can fortify their defenses against evolving risks, creating a more secure payment environment.

“When your issuer partners are aware of the commonality of some of those data elements, then they’re able to let their authorization approval rules be a little bit more relaxed than they otherwise would, and that helps drive more revenue for the ecosystem as a whole, as well as having that good experience for the legitimate customers,” Jeff Gipson, director of payment product management at Discover® Global Network, told PYMNTS. “There’s a lot to be gained from interactions like that.” 

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