As banks and technology firms flood the market with tools to modernize corporate payments, Goldman Sachs is attempting to make it easier for enterprises to directly connect to multiple suppliers.
Goldman Sachs Transaction Banking (TxB) is collaborating with The Interface Financial Group, a Bethesda, Maryland-based technology firm that provides supply-chain financing, in an effort to make it easier for businesses to digitally pay multiple suppliers.
The partnership uses an application programming interface (API) to allow businesses to connect to different suppliers without having to manually establish and verify relationships with each supplier, one of the factors that have slowed the migration from checks. It's similar in some ways to the work that account aggregators are doing to streamline
"Embedded banking is what we're trying to enable here," said Chad Papson, head of supply chain finance sales and the consumer retail industry vertical at Goldman Sachs Transaction Banking. "It eliminates onboarding and account creation that goes with a traditional bank account opening."
Business-to-business payments have been slow to digitize compared to consumer payments, owing to their need to handle larger and more frequent transactions involving multiple suppliers. Work to streamline B2B payments has proliferated during the pandemic and the supply-chain crunch that has followed.
"A lot of processes in supply chains are fragmented and inefficient," Papson said of the need for improvements on B2B payments.
The collaborative product handles the 'last mile' issue, automating all processes and managing the ecosystems in the supply chain, said Vishnu Kumar, the lead software architect at the Interface Financial Group.
Goldman and IFG view this as an advancement of the existing processes used to assign supplier payments. While IFG has long offered click-through enrollment, there was still a parallel process that required buyers to establish IFG as a vendor in their accounts payable systems each time a new supplier was onboarded, which slowed funding.
"There are different suppliers and banks with different systems in different parts of the world," Kumar said. "There are buyers and sellers that have systems that don't talk to each other. … The biggest thing was to connect all of the dots in the payment process."
Payment technology firms are supporting faster consumer onboarding to multiple services, as digital commerce creates demand for easier connections. Last week
Stripe, Plaid and other account aggregators rely on the accumulation and fast vetting of data for authentication and a user experience that's agnostic to the number of financial relationships a consumer may have.
Goldman Sachs says the API technology behind its IFG collaboration enables enterprise systems to exchange data for enterprise resource planning systems, accounts payable systems and bank ledgers.
Open banking regulations in various regions — such as the PSD2 regulation in Europe, which has influenced similar open banking trends in the U.S. and other markets — have leveled the playing field, enabling payment service providers to access data from banks to bring more value and convenience to enterprise customers as well as consumers, according to Papson. There's a need for multicurrency transactions for buyers and sellers in different markets, which is driving payment innovation for larger businesses executing supply chain finance and smaller businesses selling online to a different nation, Papson said.
"What was missing in the market was an API-based payment system that can support different currencies for suppliers and buyers that are in different countries," Kumar said. There are some differences between consumer and corporate use cases, such as in the volume of payments, which requires a more robust system. And there are different rules for businesses that work with multiple third parties.
Embedded payments are working their way into various financial and business software platforms, including enterprise resource planning and treasury management, according to Steve Murphy, director of Mercator Advisory Group's Commercial and Enterprise Payments Advisory Service.
Goldman Sachs, for example, also provides Banking as a Service to Stripe, enabling Stripe to offer payments and deposit services to merchant clients.
"When you think about APIs it's really about providing more accessible integration between internal and external systems," Murphy said. In the typical procure-to-pay financial process, the buyer or seller needs to choose a financing source, and embedded payments are one way to automate that process, according to Murphy. "The difference with consumer embedded payments is the flow is more complicated and there are authentication and compliance issues such as know your customer."
