Financial institutions should focus their investments in transforming B2B payments on supply chain finance, working capital marketplaces, and ePayments infrastructure. These areas are most aligned with traditional banking business models around lending and money movement. Supply chain finance allows banks to innovate using their lending expertise, while working capital marketplaces generate fees by connecting buyers and suppliers. Continued investment in faster payment rails and emerging technologies like blockchain will position banks to facilitate faster, global B2B money transfers.

1. Transformation of B2B Payments
Where Financial Institutions should focus
Mohamed T. Khalil
Mohamed Khalil (mkhalil490@gmail.com)

2. • Defining B2B Payments
• Future Outlook: Supply Chain Finance / Working Capital Marketplaces
• Future Outlook: ePayments / Money Movement Rails
• Sector Players: Supply Chain Finance / Working Capital Marketplaces
• Sector Players: ePayments / Money Movement Rails
• Risks & Mitigation
Table of Contents
Topics Covered
Mohamed Khalil (mkhalil490@gmail.com)

3. Viewing B2B payments as 4 major pillars, Financial Institutions
should focus on financing and infrastructure investments
Electronic
Invoicing
The exchange of the invoice document between a supplier and a buyer
in an integrated electronic format
B2B Payments Pillars
Working Capital
Marketplaces
A transparent marketplace for companies to deploy and secure
working capital. Buyers can make early payments in exchange for
discounted pricing for early payments
Supply Chain
Finance
A set of solutions that optimizes cash flow by allowing businesses to
lengthen their payment terms to their suppliers while providing the
option for their large and SME suppliers to get paid early
ePayments &
“Rails”
Electronic networks enabling transfer of funds from one party to
another as well as the infrastructure that enables it
WhereFI’sshouldfocus
Defining B2B Payments
Mohamed Khalil (mkhalil490@gmail.com)

4. There has been little evolvement in how suppliers and buyers pay
for and receive funds for an outstanding invoice
The need for marketplaces providing low cost supply capital on-demand will be on the rise
Current Processes & Limitations Perspective on the Future
• B2B payments has seen little evolution beyond slow
progression beyond check writing transitioning to
ACH
• In the B2B marketplace invoices generally have a
timeframe by which payment is necessary, this can
lead to cash management issues for both the
supplier and the buyer
• If a buyer does not have the cash necessary to make
the payment they opt for commercial card use or
factoring
• Commercial card use causes the supplier to
incur and interchange fee expense and high
interest for the buyer
• In the case that the buyer is has a high availability of
cash, they can make an earlier payment and receive
a lower payment price via dynamic discounting
• Current processes do not successfully highlight the
implications of time value of money and currency
risk with globalization on the rise
• As marketplaces start to develop to allow for a more
transparent and capital efficient B2B payments
process several developments are appearing to be
on the horizon. Marketplaces will continue to
develop to enhance working capital management
($309B industry):
• Suppliers to sell receivables similar to a bond
to achieve maturity (applying market interest
rates to calculate present value)
• Buyers to source funding from peer
organizations to make early payments to take
advantage of dynamic discounting. They will
pay back funds at maturity at an interest rate
lower than the savings via dynamic
discounting.
• Buyer ability to pay and “credit worthiness”
will be tracked to allow funding providers to
assess risk of the buyer as an “asset class”
Source: Paypers, PYMNTS, ARDENT, LTP, Perspectives on future based on analysis and forecast of Mohamed Khalil
Future Outlook – SCF/WCM
Mohamed Khalil (mkhalil490@gmail.com)

5. Blockchain’s decentralized & secure nature as a source of truth will
enable faster money transfer and trusted creditworthiness insights
As buyers/suppliers transact via blockchain a record will give insight to their ability to pay
Current Processes & Limitations Perspective on the Future
• Paper checks currently make up ~46% of all B2B
payments
• B2B payments via ACH take several days to settle
(Same day ACH to be rolled out by NACHA in Sept.
2016) causing suppliers to potentially to receive
funds beyond the expected date.
• Companies such as ARIBApay aiming to provide a
more secure portal for B2B payments electronically
still take several days to settle funds
• Traditional methods of ACH are approaching their
limitations as globalization continues to increase
global trade and cross border money movement
• Suppliers / buyers may transact in a specific
currency (e.g. US dollar) and be exposed to local
currency risk as time for payment and settlement
extend.
• ACH payments require the supplier to provide
sensitive bank information to their buyers
• Blockchain’s decentralized nature and security will
drive several developments in the B2B payments
space:
• With value capable of being transferred in
real time, companies don’t need large
amounts of working capital sprinkled across
multiple geographies to work with customers.
They can move funds from one country to
another and not sustain cash floats in
multiple currencies
• Marketplaces (discussed on prior slide) will
begin to use blockchain as both a method of
moving funds in real time across parties as
well as a true source of data to analyze buyer
/ supplier quality based on historical
transaction behavior
• Cryptocurrencies will take over as the uniform
currency for cross border money movement
for trade to alleviate currency risk factors
Source: Paypers, PYMNTS, PWC working capital research, Perspectives on future based on analysis and forecast of Mohamed Khalil
Future Outlook – ePayments
Mohamed Khalil (mkhalil490@gmail.com)

6. Several companies are creating innovative tools to offer supply
chain finance and working capital efficiency to businesses
Representative Sample
Company Description Funding Investors
Automates payment processes between buyers and sellers by linking the Ariba
Network’s B2B messaging capabilities with the capacity to securely settle funds
through Discover Network’s payments infrastructure.
N/A N/A
Offers an online marketplace for company loans. The company aims to allow
businesses to sell their receivables to a global network of institutional investors and
access working capital in as little as three days.
$51.7M
Bain, Prism,Redpoint,
Starvest, NYSE
A software company and its solution uses the creditworthiness of the public sector
and large corporations to attract capital market investors to fund payments to
suppliers of all sizes
$4.7M Dawn, MMC
Supplies financing, managing and optimizing cash flow . The solutions offered by its
OpenSCi product suite allows clients to involve their strategic trading partners to
create tangible value for the entire value chain
$105M
Battery, RRE, MMV,
eRevenue
Provides small businesses with access to fast, fair and transparent finance and
investors with the opportunity to access attractive returns through an online
marketplace
$273M
Blackrock, DST,
Sands, Temasek
Gives small businesses access to the funds they need to purchase inventory, cover
expenses or expand operations. BlueVine's quick, simple, online solution lets small
businesses get paid on day one for invoices due in 15-90 days.
$62.6M
Citi, 83North,
Correlation,
Lightspeed, Menlo
$99.7M
Citi, BlackPine, Mithrill,
Summerhill, USV
A working capital exchange that allows companies to optimize working capital
positions in a live, bid/ask environment. Companies use C2FO to increase gross and
net profit while simultaneously producing vital Early Cash Flow Delivery to their
supply chain.
N/A
Commerce
Innovated
A payment platform connecting B2B eCommerce buyers and sellers. Buyers can get
what they need now, but be invoiced for it later. Sellers can efficiently weigh the
buyer's credit risk and facilitate customized payment terms, invoicing and
collections.
N/A N/A
The platform provides netting, payment and funding services for accounts
receivable and payable for businesses, allowing them to significantly improve their
working capital and cash flow management.
Sector Players– SCF/WCM
Mohamed Khalil (mkhalil490@gmail.com)

7. ePayments and technology infrastructure such as blockchain are
rapidly evolving in the marketplace
Representative Sample
Company Description Funding Investors
Platform that allow businesses to collect payments over the bitcoin peer-to-peer
payment network. A business can accept a payment from any country, instantly,
with zero risk of fraud
$32.7M
AME, Digital Currency,
Felicis, Founders Fund,
Horizon
A decentralized platform that runs smart contracts: applications that run exactly as
programmed without any possibility of downtime, censorship, fraud or third party
interference. Built on blockchain, an enormously powerful shared global
infrastructure that can move value and represent the ownership of property.
$370K Innovate UK
Provider of global mass payout services that accelerates growth for its customers by
improving the way they make payouts to more than 200 countries in over 50
currencies worldwide.
$37M
Susquehanna,
Wellngton, Ping An,
83North, Carmel
B2B Payment Network addressing the opportunity of moving invoice payments
from paper checks to electronic networks for mid-market businesses
$11.5M
Mosaik, SVB, Women’s
VC Fund
Enables businesses and payment platforms to send and receive payments in local
currency via a simple, frictionless and inexpensive manner by using the block chain
as a new settlement rail.
$11.5M
Digital Currency, FS
Venture, Kleiner
Perkins, Pantera,
Recruit SP
Cross-border payout platform with the largest, independent, direct-to-bank
payout network in the world. Transpay's payout platform remits funds in local
currency to a beneficiary's local bank account or a selected cash pickup location.
N/A N/A
Sector Players– ePayments
Mohamed Khalil (mkhalil490@gmail.com)

8. Supply chain finance/working capital marketplaces/ePayments are
most aligned with the banking business model and future trajectory
Electronic invoicing is not in direct relation to the business model of a financial institution
Supply Chain
Finance
ePayments
&
“Rails”
Working
Capital
Marketplaces
Electronic
Invoicing
Where FIs should invest in B2B Payments
Where Financial institutions should focus
Rationale
• Banks can use their presence and expertise in lending to
innovate in supply chain finance and working capital
marketplaces
• Entering the arena of working capital marketplaces
banks can operate as a risk assessor and “broker”
generating fee revenues from users with the option of
limiting loan default via generating loans through 3rd
parties who sign up for the marketplace
• Banks should continue investing in money movement
infrastructure, with the world moving towards faster
ACH it will be important to remain ahead of the curve
• Investing in blockchain will allow banks to be at the
forefront of B2B money transfer, cross border fund
movement, as well as usage of blockchain as a
decentralized database that can amass unique data to
enhance decision making and risk assessment
• E-Invoicing is not a space that banks should pursue,
electronic invoicing is better suited for growth and
integration in the ERP market versus financial
institutions
Where FI’s should Invest
Mohamed Khalil (mkhalil490@gmail.com)

9. Investing in B2B payments may pose some risk; but can be
lessened with the appropriate risk mitigation strategy
Some potential risk examples
Risk Mitigation
Regulatory considerations: payments are governed
by various regulations requiring screening and tax
compliance potentially slowing down money transfer
with higher risk cross border
Working alongside regulators to ensure that compliance
technology is not a limiting factor and developing
appropriate integrations for 3rd party compliance solutions
Investor eligibility: Working capital marketplaces
currently do not face a stringent regulatory
environment, as supplier financing becomes a
prominent asset class, investors may be limited based
on eligibility standards set
Create an eligibility framework that only allows
sophisticated investors to “buy into” the marketplace to
ensure a high quality investor profile, If requirements
become more strict this will limit exposure to large amounts
of assets leaving the marketplace
“Lending Club phenomenon”: Risk of potentially
selling supplier receivables expected from payers that
are not of the risk profile the investor expected
Create a rigorous risk assessment process that provides
transparency to investors regarding the process as well as
granular detail on risk of marketplace investments they
make
Slow or lack of adoption of blockchain: Risk of
financial institutions and businesses not accepting
blockchain as a method of transferring and recording
money movement
Provide education to businesses as well as industry leads on
the benefits of leveraging a decentralized database
technology
Risks & Mitigation
Mohamed Khalil (mkhalil490@gmail.com)