Paystand Blends Card, Blockchain Rails for B2B Payments
Cards are getting ground with B2B buyers, particularly as the coronavirus outbreak clutches business owners’ cash reserves. However, this leaves suppliers spending more on interchange fees as they accept more cards. Paystand declares it has hit on a hybrid solution to the problem with Zero Card, which deploys its proprietary blockchain-powered bank-to-bank payments network in alliance with a virtual Mastercard.
“We saw a gap in the solutions available for suppliers who are often faced with the choice of receiving payments by paper checks — which they want to avoid — or cards, which cost them money,” said CEO Jeremy Almond in a statement.
Over the past four years, Paystand has accumulated a roster of 140,000 North American buyers and suppliers that utilize its proprietary blockchain technology to give and accept payments in real-time at no cost. Still, he hopes adding cards will further scale the concept. “A lot of buyers are still focused on cards, so adding a card network option is a way to bring them on board and eventually migrate their payments to our blockchain rails,” Almond said in a statement.
He also added, the incentive for users signing up for Zero Card is the business and expense management service Paystand includes, which allows businesses to plan, manage and track payments in real-time utilizing familiar card rails. Once they’re on board, buyers may obtain incentives and discounts from suppliers to route payments over Paystand’s proprietary rails versus utilizing the virtual Mastercard, cutting their costs.
“We see a snowball effect happening because businesses that sign up for Paystand to pay a supplier realize they can cut their transaction fees when they accept payments from other business customers through our network,” Almond said in a statement. Paystand reaches to earn some interchange revenue from commercial card transactions through Zero Card. However, the bulk of the company’s income will come from charging users a software license fee.
Paystand has witnessed steady, organic growth as users have hired other participants, with growth coming principally from companies that have depended on checks to pay their bills. “Even after all these years of digital technology, slightly less than half of all B2B payments still go by check, which underscores the fact that suppliers don’t have a lot of good alternatives,” Almond said in a statement.
Paystand utilizes a couple of banks to issue the Zero Card and operates with a few separate processors, targeting midsize to large companies on the receiving side and companies of all sizes on the sending side. The Scotts Valley, the Calif.-based company, has allocated about $30 million in funding in current years to build B2B payments solution in a niche that’s observed rising growth in recent years.
One potential competitor is New York-based Teampay, which provides a holistic digital payment solution that uses virtual cards. “Times are changing as payment rails expand, and companies finally gain control over whether they pay instantly or get terms or float, and increasingly they also expect options for guarantees, payment revocability, and rich data streams,” said Andrew Hoag, Teampay’s CEO in a statement.