MasterCard and Basware announce new partnership

MasterCard and Basware announce new partnership

Posted by Pete Loughlin in AP Automation, Purchase to Pay, Purchase to Pay Process, Supplier Networks, Supply Chain, Supply Chain Finance, Working Capital Management 23 Sep 2013

On the back of the extraordinary announcements over recent weeks , MasterCard and Basware have just declared another supply chain finance deal.

It’s a big deal and it’s another sign if we needed it that products and services providing working capital support to business is one of the faster growing areas in B2B. I chatted to Esa Tihilä, CEO of Basware and Hany Fam, President, Global Strategic Alliances at MasterCard last week about this new partnership. It’s good news for Basware – they now have an important new string to their bow, but I think it’s even better news for MasterCard who couldn’t have chosen a better partner.

Purchasing Insight logoWe’ll cover this deal in more detail in the coming weeks and months as it evolves, but for the time being the details are this:

Basware has partnered with MasterCard to launch a revolutionary electronic payment solution that ensures suppliers are paid fast upon invoice approval, while extending payment terms for buyers.

MasterCard and Basware claim that they will revolutionise the way that companies do business with each other by providing a single global payment solution to guarantee that suppliers receive payment fast upon invoice approval, while lengthening payment terms for buyers.

The e-payment service is enabled by the Basware Commerce Network, which is connected to the MasterCard global payment network and leverages MasterCard’s unique suite of payments products. This will deliver immediate cost and efficiency savings to companies of all sizes.

Esa Tihilä, CEO of Basware, commented: “This is a partnership of huge importance and significance, not just for Basware and its customers, but for all buyer and supplier organisations and the whole purchase-to-pay (P2P) and e-invoicing industry. The launch of this service represents another example of how e-invoicing is evolving from being a largely technical service focused on delivering process efficiencies, to one that is able to deliver transformational commercial benefits to the business. Solutions like this are the present and future of every corporate’s financial strategy and this development has the potential to revolutionise business payment, which can even impact the economy at large.”

Basware’s Commerce Network already processes over 50 million invoices annually, totalling more than US$420 billion across 900,000 trading partners in 100 countries. This scope and reach is combined with MasterCard’s international payment network covering over 150 currencies across more than 210 countries and 22,000 financial institutions. The new service will make sure suppliers get guaranteed early payment without placing any additional burden on buyers, creating a vital economic buffer for businesses of all sizes.

Hany Fam, President, Global Strategic Alliances at MasterCard: “We see this alliance as key to addressing the entire customer journey, not just one link in the chain of a customer experience. MasterCard’s goal is to help organisations of all sizes and sectors to reinvent and rewire their customer relationships in innovative new ways.

We are bringing our network, data and technology assets to bear alongside Basware’s industry-leading purchase- to-pay network to achieve these goals. Together we are combining one of the largest payment networks with a transaction network of comparable scale, so this is an ideal partnership.”

Pete Loughlin can be found on twitter @peteloughlin

  • Enrico Camerinelli September 23, 2013 at 10:03 am /

    The announcement scores another point for the likely uptake of the B2B Payment Networks model which I predicted in a recent blog post. According to this model, companies will exchange payments via the same network infrastructures they already use for business-to-business (B2B) transactions such as purchase orders, sales orders, product co-engineering specs, inventory tracking and tracing, sales and procurement forecasts. These B2B platforms have been in place for years and connect hundreds of thousands of companies, logistics providers, and distributors in extended networks of trading partners. It makes perfect sense to extend the reach of such networks to also cover the execution of payments instructions, leaving to specialized payment networks (e.g., SWIFT) the “last mile” of inter-bank connectivity.
    The combination of Basware, perhaps one of the largest and global B2B networks, and a similar network on the payments side- Mastercard- confirms the validity of the B2B Payments Network concept.

    Attempts to link physical supply chain with card networks have been launched in the recent past with alternate results.
    • OB10 with its Express Payments solution powered by American Express offers financing capabilities on the back of electronic invoicing and payments services. OB10 is now part of the larger Tungsten “family” that bundles a bank license with supplier scoring analytics. It is a very recent initiative and has still to prove its validity. And—yet—its UK center of gravity does not make it truly global.
    • Syncada fir Visa, a joint initiative between US Bancorp and Visa that aimed to leverage the power of a bank-owned platform with the granular reach of a cards network has miserably failed.
    • Ariba (now part of ERP giant’s SAP) and Discover Financial Services (a direct banking and payment services company) have joined forces to support B2B payments over the Discover Network (merchant and cash access locations, ATM/debit networks, and Diners Club International global payments network). The solution is focused on eliminating paper transactions, providing better visibility into cash flow and producing rich remittance information to improve reconciliation processes for buyers and sellers. No financing capabilities are been offered so far.

    What’s news of the (Basware + Mastercard) announcement in my opinion in not the creation of—yet another—payables and receivables finance platform. Supply chain finance (SCF) platforms these days are sprouting as a market response to the tight access to credit experienced by small and medium enterprises. What I find innovative is the true end-to-end extension of two interconnected networks that cover the physical and the financial flows of modernly organized B2B networks. In fact, almost all other SCF platforms expect the input of an invoice already processed in electronic form. Where the invoice comes from, and how it is processed, is not part of these platforms’ added value. What makes the (Basware + Mastercard) network different is that the platform runs all way from the upstream supply chain process of sourcing a supplier, creating a purchase order (PO), approving and issuing the PO, down to creating and sending the invoice when goods are delivered. Then comes the financing segment through a network already connected to just about every bank and every corporate: That is, Mastercard’s credit card network.

    One important point is still open though: Credit card companies have hardly figured out how to service corporates buying and selling from each other. The greatest penetration card providers have managed is in the travel and entertainment (T&E) and purchasing card (P-card) businesses of the corporations. I expect to see how Mastercard will be able to adapt its revenue model to new scenarios that go beyond basic purchase and T&E cards and require moving from a percentage to a flat fee. I also want to see how Basware will effectively keep its commitment to open interoperability allowing customers to connect across partner operator networks. Will that be allowed also to non-Mastercard payment networks?

    Bottom line: The merger of B2B trade networks and payments infrastructures is clearly emerging as a paradigm that enables the exchange of physical and financial supply transactions between trading partners and financial institutions. This may be the sunset of bank-centric payments networks as we have known them so far.

  • Bill Laraque September 24, 2013 at 3:42 pm /

    I agree with Enrico with regard to the undefined area of how corporates will buy from and sell to one another.
    Where exports are concerned as the underlying transaction, the area of export controls for which the USPPI (in case of a US export), is ultimately responsible, has not been addressed. How do you prevent money laundering, sales by and to denied parties, drug kingpins, countries subject to sanctions?
    Credit card sales are subject to chargebacks and other restrictions and terms of conditions. The tie-in to MasterCard does not automatically provide financing.

  • William Laraque September 25, 2013 at 11:47 am /

    The key differentiating factor among SCF systems that provide working capital to SMEs that export, will be whether they finance the cash conversion or operating cycle. Current offerings concentrate too much on financing receivables once produced. A more useful functionality as far as the SME exporter is concerned, is the provision of liquidity for the purchase of inventory and work-in-process (the conversion cycle).

    Another significant issue is that of risk mitigation where foreign political and commercial risk is concerned. This is where a tie-in to ECAs is so critical. Banks have little appetite for financing the operating cycle of SMEs but ECA guarantees can be effective in changing this attitude. I allude to the Working Capital Guarantee of US Export-Import bank, for example, not their SCF Guaranteee which is aimed at large corporates and uses the derivative of Credit Default Swaps for pricing.

  • Fernando Diaz September 25, 2013 at 8:11 pm /

    What is happening is very interesting, but I wonder if the banks can actually be fully dis-intermediated. In the end to reduce the cash cycle a financier somewhere is taking the credit risk of the entity paying the receivable. For the volumes we are talking about here you need the banks or the capital markets (via securitization). Could the platforms be organized enough to be able to handle these large volumes and access the capital markets and the bank markets?

    I see the banks still being needed, because the chain needs funding or liquidity providers in exchange for credit risk (unless is dynamic discounting using company’s own liquidity), but could they be nto needed as much in the future? having the capital markets take this role?

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