B2B eCommerce Friction Between Payments And Trade Credit

Jan 11, 2021

Trade finance is a field within financial services that are still trapped in the outdated use of paper and legacy systems. Leaders within the FinTech industries lament that this lack of innovation is partially to blame for the approximate $1.5 million “trade finance gap” that continues to afflict the market worldwide. 

As explained by Tsafrir Attar, vice president of Digitization at Surecomp,

“Today, some documents are still sent the old-fashioned way,” “Sometimes, they’re still sending documents using snail mail.”

Using these antiquated tools greatly delays the process of getting much-needed capital to both importers and exporters to power their businesses. 

However, the onset of the pandemic and its subsequent external pressures has pushed many more to digitize their systems. Those players within the trade finance industry such as regulators, banks, and corporates are now ready to adopt new technology and modernization. 

Why It’s Taken So Long To Digitize 

Trade finance has historically struggled to enter the digital age due to it being part of a “highly regulated area” within the financial services. 

One of the major reasons behind this struggle is the concern about security and compliance. However, more regulators are easing their worries as possible technologies such as artificial intelligence (AI) and machine learning (ML) are coming in to offer proficiency, all while safeguarding the integrity of the transactions. 

Attar added,

“Previously, regulation was very slow in adapting and approving of different technology. Today, we can see loud and clear, now the regulators are becoming more supportive of this and understand that the only way to help the industry is to approve new tools.”

He continues to relate that, especially during the pandemic, people are seeking solutions. Most companies are beginning to see that resolving this problem begins by “providing digitalization flows and processes” throughout their business. 

Even in a strict area of regulation and compliance, there are technologies such as electronic documents and digital structures are becoming more widely accepted and legitimate. 

The future seems ripe to usher in new technologies besides efforts of digitalization. As the industry begins to modernize, new and upcoming business models will be able to promote the cash flow of businesses within the global market. Other innovations coming down the pipe include services to encourage “healthier liquidity”. Technology will be at the core and center of this development. 

Challenges Generate Opportunity

The global pandemic has brought on unprecedented challenges never before seen in businesses around the world. However, challenges should not mean defeat. They should be seen as an impetus to seek new and innovative ways to improve and problem solve. 

Although the trade finance arena has been slow to adapt and embrace new technologies due to strict regulation and compliance, we are now seeing a dramatic shift to a gradual acceptance. Since it is such a complex field, the transition will not be easy and it will certainly not happen overnight. The bright spot is that the industry has recognized its need to improve its current systems and processes. 

Furthermore, as it looks to B2C business models, the trade finance industry is beginning to see the importance of providing multiple forms of payments as well as offering payment installments to increase their overall income. In time, there are hopes that they, as B2B providers, will offer their suppliers excellent customer service as well. 

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.