Issue #11: The Fee (R)evolution
Editor’s note: Hello there, readers. This month we're taking a long hard look at the inconvenience of payment fees. Most B2B businesses still can't transact without giving away a chunk of their revenue to payment processors. But, this is starting to change and the landscape is evolving to eliminate transaction fees altogether. Subscribe now.
The B2B payments market is expected to be worth $63 billion by 2026, with a CAGR of over 6%. For every dollar of that money transacted, bank and card networks are pocketing from 1.80% to 4.35%, plus over 300 processing fees that merchants are charged.
With no real alternatives to transact digitally, dealing with fees has become a zero-sum game between merchants and payers. Merchants either have to absorb the pain themselves or pass it on to their customers in the form of increased costs. In this model, someone always loses. Spoiler alert: that's untenable and it's a burden on businesses.
That's why being smart about which payment methods businesses accept is so critical: how much businesses are spending on fees directly impacts cash flow, revenue, margins.
But, the only way businesses can truly escape fees and take charge of their payment methods is by moving away from traditional payment systems altogether.
👋 Goodbye, Fees
We think it's high-time the fee-based model fades away and we're all in on giving businesses a better way to transact. Which is why we recently released our powerful Payer Incentives feature that's built-in to our zero-fee payment network and available to all Paystand merchants at no extra cost. Using Payer Incentives, businesses can offer attractive discounts to payers to move off legacy payment methods, thereby eliminating processing fees, saving costs, and moving customers over to a more modern and efficient payment method.
Here's a birds eye view of how it works: Let's say a merchant is paying 3% of the invoice amount as fees for receiving payments via credit card. They only retain 97% of the invoice amount, directly affecting margins. Sure, they could pass the fees on to their payers, but many business find that to be a non-starter, so they simply absorb the hit.
Now consider the merchant offering a 1% invoice discount to incentivize their customer to pay via the Paystand Bank Network - our zero-fee, secure, fund-verified payment network. Immediately, the merchant saves 2% that would have been lost in credit card fees -- a direct gain to the bottom line. Merchants avoid paying fees; customers get a better price. Everyone wins.
To learn more about Payments-as-a-Service and the Payer Incentive feature, talk to our team.
Product updates (UPDATE)
✨ What's New 🚀
- Sage Intacct: Create email templates and send invoices with embedded payment options directly from Sage. Learn more here with our Sage Intacct integration overview.
- Payer Incentives: Our industry-first Payer Incentives feature is available for all Paystand merchants at no extra charge. It's our way of changing the payments game and flipping the script on card fees. #NoFees. Read more here.
✨ Polishes & Fixes 🚀
- Paystand Virtual Card: Improved onboarding and security features to further enhance the card experience.
- APIs: Added additional complexity requirements to APIs and core libraries to prevent unwanted attacks and security intrusions.
- Integrations: Fixed issues in sending payment data to NetSuite when a timeout is detected, improving payment consistency.
Industry Articles 📚
- Citibank can't get back $500 million it wired by mistake, judge rules: Accidents happen, but this may have gone too far. Wire transfers may be practical but not as safe as you might need them to be. Maybe a digital bank-to-bank network might have been a better payment option.
- Mastercard to raise fees by at least 400% for EU firms selling to UK customers: Some might call this move arbitrary, others a fair adjustment to fees post-Brexit, but in the end, credit cards are the most expensive and unsustainable way to transact for B2B businesses.
- GameStop's Reddit-Driven Roller-Coaster Rages On as Volume Soars: The Gamestop Saga is proof of the community's power to beat old, outdated structures. Democratizing the financial system is necessary now more than ever.
- Bank on it Podcast: Our CEO Jeremy Almond was a guest on the Bank on It Podcast with John Siracusa, discussing Paystand's vision and our Journey to Zero. We're on the verge of changing the B2B payment ecosystem for good with a new digital approach to transactions.
Social Media 💬
Startup Investment: Recently, Wildcat Venture Partners launched the first episode on their podcast about venture capital evolution. Startup investment has changed dramatically as round sizes have increased exponentially. Check it out:
Startup investment has changed as round sizes have increased. In recent years, rounds over a $100M accounted for almost half of the #VentureCapital dollars. As funds get larger, these bigger funds have to put more capital to work. https://t.co/oPd5hm0NUm#VC #startup pic.twitter.com/JCFHKlDC20— Wildcat VC (@wildcatvc) February 23, 2021
Technology for democratization: Cryptocurrencies and blockchain are leveling the playing field between institutions and and the people. Distribution of power can be seen on the horizon.
We never hear the poor or powerless scoff at Bitcoin, decentralization, or immutable ledgers.— Pomp 🌪 (@APompliano) January 23, 2021
It is almost exclusively coming from the rich and powerful.
Everyone knows these technologies will level the playing field & redistribute power to those who have been left behind.
Democratizing the industry: We're working to build an open B2B financial industry, moving away from fees and paper-based payment methods. This isn't an easy task, but recent events prove to us we're moving in the right direction. Let's democratize finance.
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