Transcript of a sponsored discussion on how the popularity of digital payments in the consumer world is now spreading to the B2B payments world as well, and for good reason.

1. Following Consumers’ Lead, Digital Payments Catching On
Across the Business World
Transcript of a sponsored discussion on how the popularity of digital payments in the consumer
world is now spreading to the B2B payments world as well, and for good reason.
Listen to the podcast. Find it on iTunes. Get the mobile app. Sponsor: SAP Ariba.
Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re
listening to BriefingsDirect.
Our next technology innovation thought leadership discussion focuses on how
digital payments are catching on for many more companies in the business
world following the popularity of services like Apple Pay in the consumer
world.
We'll now explore how digital payment solutions are changing the game for
small companies like 487 Consulting Services, which is seeing faster and
simpler payments using AribaPay. And we will hear more about how
AribaPay is expanding around the globe.
With that, please join me in welcoming our guests, Drew Hofler, Senior Director of Marketing at
SAP Ariba. Welcome, Drew.
Drew Hofler: Thank you, Dana, great to be here.
Gardner: We're also here with Ken Crouse, Principal Consultant and Owner at 487 Consulting
Services in Folsom, California. Welcome, Ken.
Ken Crouse: Thank you very much. Appreciate it.
Gardner: And we are also here with Bill Dulin, the Vice President of Commercial Payments at
Discover in Chicago. Welcome, Bill.
Bill Dulin: Hey, thank you.
Gardner: Drew let’s start with you. For almost anything that consumers want to buy these days
there's a swipe or there is a card chip, or we are now into wireless connectivity. And yet, with
business-to-business (B2B), we're still many times faxing and writing paper checks -- and it's
largely still a manual process.
So why such a dichotomy between what people can do as a consumer buying gasoline, for
example, and a company buying critical goods and services?
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Gardner

2. Hofler: It's fundamentally the difference between payments in B2B and the consumer world. For
consumers, it's relatively simple.
Everything that you're going to buy is in a single cart at the time of payment,
and it all takes place in one spot. The information and the payment itself happen
together.
In the B2B world, that is just simply not the case. In the B2B world, you have
an invoice that comes in for a good delivered or service rendered, and then
payment may happen 30, 45, 60, 90 days later, and that payment may include
more than one invoice.
Oftentimes in the B2B context, it includes hundreds of invoices on a single credit of funds into
an account. So there's a huge gap between the payment and the information, and that’s what
we're trying to solve. That's where the innovation needs to come, bringing that information that’s
necessary for all parties to know what's being paid for, when, and why, bringing that together
with the settlement of funds in a very secure environment.
Closing the gap
Gardner: But we are closing the gap. Tell us a little bit about AribaPay. How long has it been
around and why is it now in a position to begin closing that gap even more rapidly than ever?
Hofler: We launched general availability of AribaPay a little over year ago, and we started here
in North America. We've seen rapid growth and we just announced that
we're expanding into Canada with our partner, Discover. We are also
expanding, later in the year, into Europe and Latin America.
Even though the payment systems are different, the fundamental issue
with B2B payments -- the disconnect between information and the settlement of funds -- is the
same no matter where you go geographically.
So that's why we're taking it global, and why we're in a position to really change the game and
innovate in B2B payments. We sit at the nexus of the digital network age, which is a very
different age from where payments began.
You have electronic payments like ACH in the US (or SEPA in Europe) and these types of
electronic payment schemes were created back in the '70s, based on a paradigm of that time,
which was COBOL-based mainframes behind brick walls, and there was no way to connect a
buyer's systems with the supplier's systems.
But now, we live in the digital age, where the Ariba network connects millions of buyers and
suppliers together to transact and move terabytes of data in real time between backend systems.
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Hofler

3. Instead of doing what B2B payments and electronic payments have done in the past, which is try
to take a small subset of that information out and attach it to the payment, (using the ACH or to
the SEPA formats, 140 characters in Europe, which is the same as a tweet, or 80 usable
characters in the US) we're taking the payment and attaching it to all of this information that’s
already on the Ariba Network, the PO, the invoice, the reason why the invoice maybe paid a little
less than was expected. All of that information is fully available on the network.
We make it visible with the payment, so that both buyers and suppliers know exactly what's
being paid, why it's being paid, what this million-dollar deposit is, even if it's a thousand
invoices, and why it may be a little different than the supplier was expecting. All of that is fully
visible and available on the Ariba Network.
Gardner: Bill, tell us a bit about the role that Discover plays in all this. And how do you feel
about the gap closing between what happens in the consumer space and what can now happen in
the business space?
Facilitating payments
Dulin: I think I would like to start off with what AribaPay is not, and it's not a card offering.
Usually, when people see the Discover logo, they're thinking of a credit-card
offering, but this is not that. We're using our infrastructure to facilitate commercial
payments.
In that case, we’re making sure that we're gathering the bank account information,
we're acting as the financial institute of record, we're boarding the suppliers, so all
of that information is now in our trusted network. That's how we show up as the
financial institution, as the bank. We then move the money and, as Drew talked
about a little bit earlier, along with that data as well. That's really where the gap is
closing. We're bringing the data and the financial transaction together.
Gardner: Drew, this is not just for large companies. It should be for any company. The long tail,
if you will, the larger number of people involved, will be those small-to-medium size businesses
(SMBs). Is there something in it that's different or special for them other than your Global 2000
corporations?
Hofler: It’s particularly different for the receivers of payments on that long tail. The large
companies have the IT resources they need to manage the complex electronic payments that are
available today. That's based on EDI and things like that, and that's great.
But then the midsize to the smaller suppliers simply don't have the technical resources to
consume the information in those formats. They just can't do it. What AribaPay really does is it
makes it as simple as possible.
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Dulin

4. It is as simple as an email with the information about the payment and a link into their account in
the Ariba Network that they can visibly see all the information around their payment in a very
nice UI. For example, if they were expecting a $1,000 payment and they got $900, the big
question is why. There may be 10 invoices on that payment.
They come in, click that link, and come right into their account on the network. They see the
payment ID for that $900 that they have, and we show them exactly what was invoiced, the
$1,000. You expected $1,000, but you received $900, and here exactly is where the difference is
from.
They have hyperlinks to go into the invoice. They can see the comments that may have been
made on how maybe something was broken on the pallet, and so they only paid for 9 items
instead of 10.
All of that is a very simple online experience.
Gardner: Ken, tell me a bit about 487 Consulting Services, what you do, and then we'll ask
about how you like to get paid?
One-man shop
Crouse: 487 Consulting Services is my personal business. It's a one-man shop. I literally get
up in the morning, walk over and turn on the coffee pot and walk over to my desk. That's
probably the best part of being an independent.
The other side of being an independent, though, is that I'm responsible for every
single aspect of the business from submitting the financial filings that we did
with Discover and getting on board with everybody and actually doing the work
for which I'm getting paid. It's all done by me and is controlled by me.
There is no IT department. There is no human resources department. There is no
large infrastructure behind me -- it's just me. I came to SAP Ariba via a
customer that said they wanted to pay me that way.
Initially, I was a little apprehensive because I was expecting that I'd have to learn a new program.
I could just flash back to COBOL in college back in the '80s, and that was petrifying, but the
simplicity and the transparency of Ariba was just refreshing.
The first webinar I attended, although scheduled for one hour, only lasted about 30 minutes
because of the simplicity and then, within a couple of days, I was able to get all my paperwork
together for Discover, and I was live on Ariba within less than a week.
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Crouse

5. Two weeks later, I received my first series of payments through Ariba and have been now
receiving payments since the first of January 2015. Ariba has processed something north of 300
invoices for me amounting to probably 500 to 600 individual tasks.
Gardner: I think there are going to be more and more folks like you, smaller businesses,
independents working to provide discrete services throughout our economy, around the world,
many of them working off just the smart phone.
So this is an important part of our growing economy, but also it’s important for an organization
like yours to have great visibility to know when the money is coming and when to expect it.
Cash flow is pretty important.
So tell me a little bit about that visibility and expectation, and how this system worked better
than paper, faxes, and checks?
Previous system
Crouse: It's probably best that I just take a step back from that and review where I was before
Ariba, and like you mentioned, it was a paper invoicing system. My customer required that each
purchase order be on a separate piece of paper for the purposes of invoicing.
So I might create 15 or 20 invoices, put them all in the same envelope with a nice little
transmittal sheet, mail them off. Then, 75 days later, when I'm not getting paid for some invoice,
I would then get hold of them, and they would say "Oops, your invoice isn't in our system. And
I'd start all over again. That would be a time out from work. I had to stop what I was doing,
resubmit the invoice, and then start the clock all over again.
Now, with the Ariba Network, when it comes time to do my invoice and do it about twice a
month, I open my Ariba account, identify the purchase order to be billed, click the service that's
to be billed and click the submit button. Quite literally, the invoicing is just that simple.
Within a matter of minutes, I receive recognition that the invoice is in the system, as opposed to
waiting 75 days for confirmation that it's not there. I receive a positive affirmation within just a
matter of minutes.
And then, within 48 to 72 hours, I have a customer who has acknowledged and has approved that
invoice for payment. At that point, I know with certainty that that payment is going to come in
and on a date certain. I can forecast my cash accordingly and then go on vacation. I don't have to
worry about it.
Gardner: Also, Drew mentioned this opportunity for more rich information to be associated
with the transaction, remittance information for example. Have you been able to avail yourself of
that and is that an important part of what you're doing, being able to see all the information
associated with an invoice or a payment process?
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6. Crouse: When I get the notifications of the payment being in there, it's broken down line item by
line item that corresponds to the exact tasks that I have done for that particular payment. I enjoy
the fact that it is all in one payment and broken out that way.
In the past, a year and a half ago, I might receive individual payments for all of those invoices.
I'd get an envelope in the mail that might have a dozen checks in it and then, I'd have to go back
and reconcile one check against one invoice. It was just a very time consuming and very clumsy
effort.
The other part is that I wouldn’t necessarily get paid for all of my invoices submitted on a given
date at the same time. I'd get paid for 10 of the 12 invoices and then would have to start this tail-
wagging-the-dog episode of chasing around payments on the other invoices and payments.
Although the majority of them might be paid in 60 days, it wasn't uncommon that they would
stretch out to 120 or 150 days.
Digitizing processes
Gardner: Bill, any thoughts from the Discover perspective on the ability to not just repave
cow paths, but actually do things in business that could not have been done before, given that we
are digitizing these processes?
Dulin: A key for us in this, and what we haven’t talked about too much, is the compliance that’s
around it. So as we are moving these payments, knowing who the customer is, anti-money
laundering, all the regulatory compliance that goes around it. That makes it a more robust
payment.
We become more sophisticated as the technology wraps around that payment, to know where it's
going, where it should be going. If something has happened that triggers it -- it makes us stop
and take a look, to make sure. Sometimes, we talk about purposeful friction. Something triggered
an event that made us stop the payment and take a look around and make sure that we have it.
From our perspective in this case, it's not so much of the technology; it’s pulling that sensitive
information out of enterprise resource planning (ERP) programs or other places that it shouldn't
be and then putting it in a financial institution, again, using that technology around it to help
secure that.
Gardner: Now, we heard a lot at the recent Ariba Live 2016 Conference about risk reduction
and visibility in the supply chain, that it's really about managing your supply chain. Is there
something about using AribaPay, when you have all that data associated that gives people more
insight into their supply chain than they may have had, auditability, the ability to further define
what it is that they want in terms of best practices, Drew?
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7. Hofler: More data is better than less data, as long as you can consume it and put it in a useable
format, and that's really what we are doing.
Knowing exactly who is being paid and removing the opportunities for fraud in the payment
process is huge, and AribaPay really removes those opportunities for fraud or a vast majority of
them.
We have this whole platform of information and data about the interactions between a buyer and
their supplier, from the moment that they source, to when they procure, to the PO, to the invoice,
to the payment going through. They can see the on-time performance and they can see how often
that supplier requests early payment, if they're using Dynamic Discounting on the Ariba
Network, and they can feed that back into the procurement side and start to define payment terms
as a result of that at the very beginning.
Gardner: I am afraid we will have to leave it there. You've been listening to a BriefingsDirect
thought leadership podcast discussion on how digital payments are catching on for many more
companies in the business world. And we've seen how the popularity of digital payments in the
consumer world is now spreading to the B2B payments world as well, and for good reason.
So please join me now in thanking our guests, Drew Hofler, the Senior Director of Marketing at
SAP Ariba; Ken Crouse, Principal Consultant and Owner at 487 Consulting Services, and Bill
Dulin, Vice President of Commercial Payments at Discover.
And a big thank you, too, to our audience for joining this SAP Ariba-sponsored business
innovation thought leadership discussion. I’m Dana Gardner, Principal Analyst at Interarbor
Solutions, your host and moderator. Thanks again for listening, and do come back next time.
Listen to the podcast. Find it on iTunes. Get the mobile app. Sponsor: SAP Ariba.
Transcript of a sponsored discussion on how the popularity of digital payments in the consumer
world is now spreading to the B2B payments world as well, and for good reason. Copyright
Interarbor Solutions, LLC, 2005-2016. All rights reserved.
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