B2B payments networks have emerged as critical infrastructure for businesses seeking security, speed, and optimal cash management. Point solutions are increasingly seen as obsolete, with more companies now tapping into B2B networks to pay and get paid.
At the heart of it is the powerful concept of the "network effect" – a phenomenon where the value of a service increases as more participants join. It’s also known as Metcalfe’s law, named for Ethernet collaborator Robert Metcalfe. He posited that the financial value and business impact of a network are “proportional to the square of the number of connected users of the system.”
Put another way, the more, the merrier.
And, with a tumultuous economy threatening all forecasts, companies are looking for certainty. B2B payments networks deliver on that, and it’s useful to understand why.
"There is always the hard side of the network where a minority of users creates a majority of the value,” says Gunita Bindra, Vice President of Strategy & Sales for Paymode at Bottomline, in a twist on The Pareto Principle. Vendors “do more work and contribute more to the network,” she says, adding that it’s strategic to acquire and maintain all network members.
This fundamental understanding of network dynamics is crucial for businesses evaluating payment solutions in the wave of modernization now underway. Unlike traditional payment methods that operate in silos, modern B2B payments networks create interconnected ecosystems where each new participant enhances the value for all existing members.
Bindra draws an insightful parallel to one famous network-based business: "If you think about Uber, while both sides are important, let's be real; if you don't have drivers, you won’t have riders." Similarly, in B2B payments networks, vendors require special attention and "hyper-care" to ensure the network thrives. This insight shapes how successful payments networks approach vendor onboarding and relationship management.
Statistics speak volumes about the power of network connections. "An average vendor is connected to over 50 payers already paying on the network the moment they activate,” Bindra notes, referring to Bottomline’s Paymode B2B payments network. On day one, “strategic vendors that have high spend on our network are connected to over 200 payers”, she adds.
Connectivity like that is the network effect in action. Each vendor joining the network creates immediate value for multiple payers, and vice versa.
For businesses considering joining B2B payments networks, this means gaining instant access to an established ecosystem rather than building connections from scratch. When a new customer joins the network, they can immediately leverage existing relationships with suppliers already in the system, accelerating payment processes and enhancing operational efficiency from day one.
Creating Value for Both Sides
The success of a B2B payments network hinges on its ability to compel payers and vendors. "The network has to provide clear value, and enough of it for both sides," Bindra says.
For payers, the benefits are immediate and substantial. In some cases, businesses can process up to 50% of their payments through the network immediately, gaining automation, enhanced security, and rebate opportunities in the bargain.
Perhaps most importantly, payers can offload the oppressive task of managing supplier information and bank account details to the network provider, reducing corporate administrative overhead and fraud risk.
"In uncertain times, businesses are looking for automation, security, and faster payments," Bindra says. A payments network provides these core benefits while ensuring business continuity through standardized processes and reliable payment execution.
For vendors, the value proposition is equally compelling but distinctly different.
Vendors benefit from a steady, predictable stream of Accounts Receivable (AR) and enhanced integration capabilities with their existing ERP systems. Rather than logging into multiple portals to track incoming payments, vendors receive alerts and notifications before payments are made in one place, streamlining the reconciliation processes.
A Partner-Centric Approach to Network Growth
The most successful B2B payments networks have adopted a partner-centric approach to scaling their operations. Rather than pursuing individual businesses one by one, these networks forge strategic partnerships with financial institutions and fintech companies that already serve large customer bases.
"We are a very partner-centric payments network. Much of our business on the payer side comes from large banks like Bank of America, U.S. Bank, and JPMorgan, which use our network. Some large fintechs, like Coupa and Jaggaer, use our network," Bindra says.
This approach creates a powerful multiplier effect. Each new partnership provides access to numerous potential customers, enabling rapid scaling and network growth. "It's more of a one-to-many relationship,” she says. “We sign one partnership; we get access to lots of customers.”
When these customers join the network and bring their vendors along, it triggers a virtuous cycle. The expanding network creates more connections, which generates more value for all participants. This continuous enablement process drives "immense value on the network" and reinforces its competitive position in the market. In today's cloudy global economy, the value of joining established B2B payments networks is increasing.
Businesses face mounting pressure to automate processes, enhance security, and generate revenue more efficiently. Well-established payments networks address these needs while providing the added benefits of fraud reduction and business continuity.
As more businesses recognize these advantages, B2B payments networks will continue to grow in both size and importance. The network effect ensures that early adopters gain significant advantages, while the partner-centric approach to growth accelerates the expansion of these ecosystems.
For businesses looking to optimize their payment processes, understanding these dynamics is the first step toward leveraging the full potential of B2B payments networks.