The COVID-19 pandemic cemented e-commerce into everyone's daily habits in 2020, and as we look ahead, B2B e-commerce is quickly becoming the next frontier for founders and investors.
Businesses have shifted online, and the emergence of B2B marketplaces and e-commerce infrastructure is fueling a new wave of growth that's estimated to reach $3.6 trillion in annual gross merchandise value (GMV) by 2024.
But one major component remains missing from the stack: checkout, which has the opportunity to be the ultimate enabler for B2B e-commerce more broadly.
The challenge of B2B e-commerce
Historically, B2B e-commerce has been held back by deeply entrenched behaviors and a lack of cloud-based infrastructure. While the market is quickly evolving, there are nuances to B2B purchases that make the path to purchase more complex than in consumer e-commerce. Broadly speaking, these constraints fall into three buckets:
Payments: PayPal unlocked the early days of consumer e-commerce, and Stripe's ease of integrating card payments has powered the last decade. But in B2B, the challenge has always been that sellers don't want to pay a 3% surcharge — so much so that they'd rather suffer through the pain of physical checks and accounts payable. In 2018, 60% of B2B payment flows were conducted via checks, and the persistence of non-digital payments has been a major bottleneck to e-commerce.
Permissions: Most B2B transactions go through contracting and procurement, which requires multiple parties to sign off on each transaction. This creates friction in the path to purchase, as the seller can't tell if the buyer is authorized. Rather than being able to hit buy, buyers often need to fill out a form so a sales person can get in touch. This can slow the transaction from seconds to weeks.
Credit: The majority of B2B transactions are completed on some form of credit, be it working capital loans, factoring, or in the form of days payable. Credit applications are typically completed on paper forms (or at best hosted PDFs) that armies of people at internal credit departments review. For context, there are over 1,000 employees at John Deere with “credit” in their job descriptions. This costs a lot and results in sensitive information being shared on paper documents, which further slows the transaction.
The net result of these constraints is the inability to make instant online purchases, like we’re used to as consumers. It’s a combination of fintech problems that require a platform rather than a series of point solutions.
Why is checkout the answer?
While the term “checkout” may not seem particularly novel, modern checkout is a distinctly new category in fintech combining digital payments, identity, fraud, credit and much more. It creates a powerful network, the type that can not only build trust but enable one-click transactions at scale.