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Align Commerce could modernize the B2B payments industry with bitcoins blockchain

While payments technologies have advanced, and customers are used to making electronic payments, the business to business (B2B) payment landscape has yet to reflect 21st century banking according to a recent report.

While payments technologies have advanced, and customers are used to making electronic payments, the business to business (B2B) payment landscape has yet to reflect 21st century banking. According to a report by the US Association for Financial Professionals (AFP), paper checks continue to be the most popular payment method for businesses.

The report, sponsored by Bottomline Technologies, found that the vast majority of organizations surveyed, 97 percent, still use checks. 93 percent use Automated Clearing House (ACH) Credit and 92 percent use Wire/CHIPS for payments, with small and medium businesses (SMB) using more checks than larger businesses. In addition, 22 percent of companies receive more than 20,000 checks per month which is an annual cost of approximately $360,000.

Estimated Monthly Cost

However, most companies are willing to convert paper checks to electronic payments in order to increase efficiency, reduce costs, and protect against fraud.

Rick Booth“In an economy where every competitive advantage helps an organization ‘get the edge,’ the cost savings, efficiencies, and improved control and security gained by automating payments can no longer be ignored.”
— – Rick Booth, Bottomline Technologies Chief Financial Officer

The legacy methods of B2B payments are well known among small and medium enterprises as inefficient and expensive, especially for cross-border transactions. According to an independent report by McKinsey & Company, customers face “numerous pain points,” such as a lack of transparency, a lack of tracking, and slow processing times. Since banks have done very little to improve their traditional payment process, non-bank players have increasingly gained market share, states the report.

McKinsey Company“The high cost does not translate into high speed: these payments typically take three to five working days to complete. Often, there is also a significant lack of transparency in pricing, timing and tracking. Many consumers still find cross-border payments inconvenient to initiate because they often have to be done at a branch office, or require the filling in of many cumbersome fields.”
— – McKinsey & Company

McKinsey’s report also states that there are solutions for cross-border payments gaining ground that use ‘distributed ledger’ or ‘blockchain’ technology, including Ripple and Bolero. Firms using these technologies are also gaining some traction, while Banks have been investigating their future use, although none have been deployed widely.

The immense need of B2B payments process modernization, and lack of customer satisfaction with the current system, has started attracting some competition, including Align Commerce. Having launched earlier this year, Align is already available in 60 countries. The core service enables small businesses to pay vendors using the Bitcoin blockchain, in combination with traditional banking wire and treasury management rails, at a much lower cost.

Align Commerce“Our mission is to change the legacy financial payment system through innovation. We are constantly challenging and improving the costly and outdated payments industry. Building a new user focused financial ecosystem that services businesses in a global market. We are backed by some of the most sophisticated investors in Silicon Valley, San Francisco, New York and Boston.”
— – Align Commerce

The company’s platform could be very tempting to businesses. According to the company’s CEO, Marwan Forzley, Align has pioneered an electronic ‘multi-rail’ payments platform, that combines the encrypted, data-driven rail that we know as the blockchain with traditional banking wire and treasury management rails, all into one product.

Marwan Forzley“The largest difference is that we use more efficient ‘payment rails’ or ‘plumbing’ than a bank. When a bank sends money overseas, they are unable to send it directly to the receiving bank. Your money is actually passed through many cooperating ‘intermediary banks’ until it reaches the destination bank. And every time an ‘intermediary bank’ touches your funds, they take a small fee for themselves. In the end each movement through each ‘intermediary bank’ costs you time and money.”
— – Marwan Forzley, Align Commerce CEO

Forzley explained that there are a number of use cases for the payment platform, such as cross border e-commerce, disbursements and remittances. However, the company is currently focused on B2B.

However, something that customers may find even more appealing, aside from good plumbing, is the offer of advanced payment transparency. Tracking payments inside Align’s dashboard looks a lot like tracking a package on FedEx’s website. Align provides a full tracking dashboard to watch up-to-the-minute money movements, similar to how FedEx and UPS offer their package tracking. With it, both sender and receiver of each payment can see the exact status of their money at all times. “We timestamp every step the transaction takes and communicate status and actions needed to both parties in real time,” states the company.

Align Commerce Process

Starting from the point that the invoice is generated, the tracking follows the monetary movements no matter which rail it goes over, all the way to a completion. The cost savings versus all other wire transfer services is, of course, a very important criteria too. Align only charges a 1.9% international exchange rate.

Align Commerce’s customers range from offshore services, outsource companies, importers, exporters, wineries, galleries, and travel companies, among others, revealed Forzley, in an interview with Kleiner Perkins Caufield & Byers (KPCB) General Partner Randy Komisar.

Align Commerce is also well funded. Last week, the company announced that it has partnered with venture firm KPCB, with the express goal of revolutionizing small business payments. Align raised $12.5 million in a Series A round of funding led by KPCB. Silicon Valley Bank, Recruit Strategic Partners, and existing Align Commerce investors all partook in the round, including Pantera Capital, the Digital Currency Group and FS Venture Capital LLC.

“This Series A round of funding from KPCB allows us to expand our solution into more markets, and bigger geographical coverage.”
— – Forzley

KPCB has some top-tier investments in their portfolio, helping to build companies like Amazon, Google, Twitter, Electronic Arts, Genentech, Nest, and Netscape. With offices in Menlo Park, San Francisco, Shanghai, and Beijing, it would be hard finding a better partner than KPCB both for their deep pockets and their many years of experience in the space.

Randy Komisar“We were looking for applications of the blockchain for the last couple of years in ways that could build real businesses and add real value that weren’t at the mercy of the currency valuation which will move up and down and all over the place. And of those blockchain companies, we invested in Align, because we believe it’s a market that’s underserved, with a CEO who understood it well and early traction from customers who reinforced that value.”
— –  Randy Komisar, KPCB General Partner

It appears that KPCB has found their blockchain app. Given the size of the global international payments industry, which Align estimates to be worth $25 trillion, investors could potentially find that Align is one of the most lucrative deals they’ve made yet.

However, the biggest winner could be the global B2B payment industry. Adding the immutability of the blockchain to the core of the industry is a win-win for every business involved in terms of cost savings, transparency, and other economic benefits. “Every year, banks charge small businesses $50 billion in wire and foreign exchange fees. Imagine a highly simplified experience in which proceeds from the savings in fees are injected back into the economy, thus contributing to additional employment, business spending and other avenues,” states Forzley.


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