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Jan 26, 2022

PeakSpan’s B2B Payments Outlook for 2022

Originally posted

2020 and 2021 have been notable years for the payments space to say the least. Can 2022 be a continuation? We think absolutely. While NFTs and the metaverse have dominated headlines seemingly out of nowhere, the payments space has been seeing accelerating innovation for years and is as resilient sector as we’ve ever seen. The fundamentals behind payments adoption are clear, and B2B payments in particular represents an attractive combination of large TAM + low penetration which we see as a recipe for continued investment and innovation for years to come. 2021 has taught us that making any sort of predictions in this environment is a fool’s errand, and so rather than do that, we would like to share our top ten trends of focus heading into the new year:

1. The Financialization of Everything: FinTech is starting to really hit its stride. We don’t think of FinTech of a category or market such as we would when investing in hospitality software or PropTech. From 2008 to current day, FinTech was “new” and “disruptive” and it “stood alone.” These days, FinTech is now a key pillar of any software industry. In fact, software + FinTech is now threatening the very financial services firms where FinTech was originated. In any market where businesses are transacting with other businesses (B2B) or consumers and transacting with businesses (C2B), there is inherently an opportunity to embed financial services. The core financial services themselves (such as credit, processing payments, etc.) are not “new;” however, we would keep the following in mind: i) technology companies can typically do it better than banking and financial institutions (better UI, better UX, better marketing, better technology) — simply put, software will eat financial services by beating the incumbency at their own game, ii) “embedded everything” is allowing for nearly anyone to offer financial services without having to reinvent this wheel. This is powerful and allows software companies to rapidly gin up new business lines and start serving customers, fast, without a ton of cost/overhead involved.

2. Payments Experience: similar to what Amazon has done in E-Commerce, we are seeing the same dynamics play out with respect to the customer experience (across both C2B and B2B). Jef Bezos was obsessed with creating the best possible customer experience for his customers while attempting to greatly reducing the cost to shop on Amazon. In payments, we have dozens upon dozens of smart minds working towards instant, seamless payments. There is still a long way to go but we are on our way with technologies such as RTP and with lots of investment and attention being drawn to blockchain. Putting aside the rails, the businesses that touch customers now much offer world class payments experiences through simple workflows, sharp UI/UX and 100% accuracy/dependability. This extends to enterprises working with suppliers as well.

3. Crypto Infrastructure: we are bullish on blockchain’s presence and impact on payments. Several layer one blockchains (Ethereum, Solana, Polkadot, etc.) are vying for faster and faster speeds at lower and lower costs. We can now transfer value across the globe securely, in milliseconds and with low costs; yet we are still paying the card networks 3% on a cup of coffee? Surely, as the world’s best engineers, VCs and operators flock to work on blockchain projects — we will propel society to a place where payments leveraging blockchain is commonplace. If you believe this, then you will surely agree that the biggest roadblocks are regulation, compliance and infrastructure. The ginormous ecosystem of consumers, businesses and financial institutions lack the tools and technologies to handle blockchain-based transactions in a comfortable way, not to mention governments, regulators and banks need to gain comfort for this to work at scale. We see tremendous opportunities for scaleups to bridge these existing constituents onto the blockchain.

4. Verticalization of Payments: the payments space has clearly seen an explosion of tech innovation, infrastructure, and embedded financial services. While we are still extremely early by any measure, it’s unlikely that we will see dozens of startups reach the status of Stripe, PayPal or However, we see ample opportunity to build vertically focused payments platforms. Some factors to consider: i) each vertical will have it’s own industry nuances which must be catered to in the payments workflows, ii) payments technologies can be embedded with other helpful functionality for the end user, iii) product, product roadmap, customer support, customer success can all be purpose built for the vertical specific ICP and thus superior to horizontal offerings, iv) given the massive size the payments space, niche software markets can now be meaningfully larger when you are offering software + payments. Lastly, and related to the first trend cited above — LTV:CAC can be drastically improved if the same acquisition cost is used to garner software revenue AND any revenue generated from payments.

5. Payments Operations: with the explosion of new payments offerings, new commerce channels, globalization, more fraud and the increasing demands by all constituents to handle payments quickly and accurately, large organizations must now think deliberately and strategically about their payment’s tech stack and payments operations. We will see payments operations teams be formalized and we believe there will be several platforms jockeying for then “payments operations platform” positioning. That said, we see payment operations as more than a single category, but rather a vast market that will continue to evolve to handle the increasing complexity of payments. Consensus amongst operators is that they need lots of help when it comes to managing payments. Operations-focused solutions will drive immense efficiencies

6. Fraud Prevention: as we move towards large scale payments digitization — we greatly expand the attack surface for fraudsters. We don’t just have sophisticated financial professionals moving money online, we now have grandmothers everywhere learning how to Venmo, we are seeing massive volumes of cryptocurrency and digital assets are going mainstream. Whether we are talking E-Commerce, payments, or digital goods — it’s clear that fraud will continue to be a major focus area for all constituents involved in the value chain. Regulatory and compliance software platforms are well positioned to grow and will be a much needed component in the future as more and more payments occur online

7. Global Readiness: throughout the pandemic, businesses have gone “virtual” but even before COIVID-19, we saw more and more businesses scale globally through virtual workforces, offshore software development, etc. We also are witnessing a continued “globalization” more broadly, especially as it pertains to commerce whereby even the smallest merchant can sell to a worldwide audience. These shifts have opened up a world of possibilities for consumers and businesses but have also brought with it an array of challenges including tax, regulations, cross-boarder payments, cultural-considerations, etc. We see ample opportunity for software and services organizations to arm their customers with the tools and technologies needed to be a global business, a proposition which will be increasingly pursued as technology continues to enable this.

8. Tail Spend: we have been tracking a tail spend thesis in the procurement space for years and continue to like this area. One of the reasons folks getting excited about payments is because of the massive volumes seen globally. It’s easy to do some simple multiplication (TPV x take rate = opportunity), but the reality remains that in B2B, there are large pools of spending that will always be handled directly between corporations. Giving up 2% on a $2B transaction is just not happening, nor should it. That leads us to tail spend, where 80% of an enterprise’s transactions can make up 20% of the volume. All businesses spend on small, tactical items and unfortunately, theses items (or the volume of these items) is what gives teams the most heartburn and resource drain. We like this space as an area for software and payments vendors to consolidate, reduce or eliminate tail spend so that their customers can focus more on core, strategic spend.

9. Supplier Payments: looking across categories such as supplier management, supplier information management, supplier onboarding, etc. — it’s clear that payments is a large opportunity but what is less clear is who will win this space and how. We wonder whether a new or existing company will bring to market a platform that offers cohesive supplier information management, communication and payments, fully integrated into the various SoRs. Doesn’t sound too hard, yet the struggle that is faced revolves around the existing systems and processes dragging down efficiency which is made worse by a reluctance to introduce large, new systems at the enterprise level. This is ultimately a big data problem, which first needs to be solved before an enterprise can reach its fullest payments potential. We may see leaders emerge first from the mid-market coming within categories such as spend management. However, we do think the enterprise segment is fraught with both inefficiency and opportunity.

10. Credit Market Disruption: with the explosion of more data, connectivity and lots of maturity and advancement when it comes to underwriting models, we still see lots of room to run when it comes to all things involving credit. Popular use cases have been BNPL where we see ample opportunity across B2B and B2C. Invoice factoring has been around of quite some time but is a concept that we believe should be offered by every platform and in every situation. Picking you “payment terms” should be as simple as selecting your payment method or entering your billing address. This should be true for B2B and B2C. Invoice factoring should be a constant decision. Whether you are a consumer at checkout or an entrepreneur running your business — access to credit will eventually be fully commoditized and democratized. Further, with rising inflation, we see treasury management as an attractive area of growth — corporate balance sheets remain robust and have the opportunity to be leveraged to drive more yield.

2021 was a year beyond any of our wildest dreams both i) overall and ii) with respect to B2B payments. We expect this to continue in 2022 and throughout the decade.