Page 304 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

3 Benefits of B2B payments: Small buyers

Small buyers are one subset of businesses which could benefit from digitizing B2B payments. These small buyers
include small shops owned by BoP. These shops often buy goods from wholesalers or distributors and then
resell those goods. If the payment between the buyer and the seller could be digitized, the small buyer could:

• gain more control over the timing of disbursement, and obviate the need to be physically present to pay
suppliers at the time of delivery;
• build a digital history of timely payment;

• hire and trust employees to manage day to day operations, and receive goods;
• manage relationships with key suppliers more strategically.
Disbursement timing:

Control over disbursement timing is one of the most essential elements of B2B payments. Suppliers want to
get paid as soon as possible, while buyers want to keep control over the payment until they are sure that goods
have been delivered. Digital payments can help buyers maintain control. The digital payment provider Oxigen,
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for example, offers a tool where buyers can pay Oxigen, and the service will then pay suppliers on the due date.
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Another example comes from the Democratic Republic of Congo, where cash is nearly the only option for
making payments. When given the option to use eMoney, many small buyers reported that digital payments
were more secure and saved time. Digital payments eliminated the need to travel with large amounts of cash.
This saved the business owner time, and made the payments significantly less susceptible to theft. 8

Another example comes from the company Copia Global, a distributor that supplies goods to shopkeepers
in Kenya. Copia can use mobile payments to offer shopkeepers a mobile “layaway” plan where they can pay
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for goods in small instalments. This allows shopkeepers to receive revenue from their own customers before
paying the full amount to suppliers for goods.
Digital history:

Every time a buyer makes a payment, that payment can be recorded as a part of that person’s or company’s
digital history. While cash leaves no digital trail, a digital history of B2B payments could allow small buyers to
gain more business credibility – allowing them to obtain more favourable credit terms from strategic suppliers.
Many SMEs lack the stature and bargaining power to negotiate good credit. As a result, their suppliers don’t
trust them to pay later, and will not offer them trade terms (pay in 30 days, for instance). As a result, many
SMEs are forced to pay immediately without credit.
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Digital payment histories could help address this situation. By showing a history of successful transactions,
SMEs can establish a willingness to pay on time that indicates creditworthiness. For example, the merchant
services company Kopo lends money to merchants who have established digital payment histories. The
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company builds a credit-scoring algorithm to measure each merchant’s ability and willingness to pay back
a loan. The company then offers “business cash advances” where a merchant can accept a bulk payment in
exchange for a percentage of future revenue (until the advance, including a fee, is repaid). The size and terms
of the advance are determined by the merchants’ digital history of payments. A similar mechanism could be
used to provide trade financing and other credit mechanisms using B2B payment histories for small businesses
in many other places.

6 Carol Coye Benson. The Problem with B2B Payments. Payments Views. April, 2009.
7 Oxigen Wallet: https:// www. oxigenwallet. com
8 Mobile Money in the Democratic Republic of Congo: Market insights on consumer needs and opportunities in payments and
financial services. GSMA. July, 2013.
9 Copia Global Website: http:// www. copiaglobal. com/
10 Anne Marie Van Swinderen and Grace Mungai. Supply Chain Financing for SMEs. July, 2015.
11 Grow Cash Advance – 5 Frequently Asked Questions. Kopo Kopo. May, 2014.

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