The trajectory of innovation in the B2B payments and commerce space has been largely attributed to the influence of the B2C arena.
The digitization of everything from product sourcing to online checkout has embraced the effect of consumerization, leading to phrases like “the Amazon-like experience” becoming the gold standard for B2B.
The evolution of consumer payments and commerce has undoubtedly had an impact on how professionals wish to source, pay for and finance items for businesses. Yet in the world of equipment leasing and finance, saying that the recent adoption of digitization and integrated point-of-sale (POS) finance can be attributed to consumer trends can be a bit of an oversimplification. .
This is because the workflows associated with purchasing and financing equipment are inherently much more complex than the purchasing processes of consumers. And according to KWIPPED founder and CEO Robert Preville, the continued modernization of this industry is unlikely to follow exactly in B2C’s footsteps.
In a conversation with PYMNTS, Preville explained why now is the time for equipment leasing and financing to take a more integrated approach for a better experience, not only for buyers and sellers, but also for lenders.
An optimistic recovery
Equipment leasing is big business and has become one of the most resilient verticals amid the pandemic.
“The demand is there,” Preville said. “I would say the demand is turned back.”
This is good news for companies like KWIPPED, who have entered the market with the aim of providing an online marketplace for organizations that need short-term equipment rentals or long-term leases with the intention possibly purchase the item.
Yet modernizing the equipment procurement process does not solve all business workflow issues. Financing is a crucial part of the leasing process, and yet a glance at the industry has revealed a major disconnect between the process of sourcing and financing.
Preville said he found that while the majority of B2B equipment purchases involved financing, less than 10% of equipment suppliers were able to integrate financing into their sales process. This was a glaring oversight that Preville said added significant friction to the rental process, hurting both buyers and sellers.
“It’s really surprising that integrated finance hasn’t gained more ground earlier,” he said. “The traditional procurement process starts with a problem or an application. You go through a solution discovery process and then a vendor identification process. It’s always an afterthought, how you’re going to pay for it.
Recognizing that understanding accessibility is paramount for buyers and can be a key competitive differentiator for suppliers, KWIPPED earlier this month launched APPROVE, an on-board equipment finance solution for sellers that integrates financing directly at the point of sale.
His own way forward
As integrated point-of-sale financing flourished in the B2C space, Preville was hesitant to attribute the adoption of the tool by the equipment rental industry as a reflection of its willingness to follow traces of B2C. This is because the process of purchasing equipment is much more complex than consumer purchases and may in fact not participate in the B2B e-commerce revolution as deeply as other B2B verticals.
As Preville explained, “You’re not going to put a $ 50,000 medical x-ray machine in a basket and pay with a credit card.”
Products need to be set up and customized, with warranties and services such as installation, support and training, and sometimes even presented in person. Providing this “Amazon-style experience” is probably not the most effective way to combat friction between buyers and sellers.
Moreover, when it comes to integrated finance, the complexities of the market have also forced this industry to go its own way. While demand for equipment was on the rise last year, Preville noted that a credit crunch has resulted in lower approval rates – although there is evidence that the trend is reversing.
Past efforts to integrate point-of-sale equipment finance providers have encountered obstacles in two ways. Funding had either a high approval rate but higher costs or a lower approval rate but greater accessibility, leaving equipment vendors in a frustrating position.
Preville noted that by combining an ecosystem of financiers within APPROVE, buyers have more options and a greater chance of finding the right match. For sellers, this means a better customer experience. And for lenders, that means new avenues for prospects – a three-way victory that may not be possible if the industry follows the blueprint of B2C e-commerce and point-of-sale financing.
“It’s not about minimizing your supply chain’s margin,” said Preville. “This is the technology that allows a procurement process to make it as efficient as possible, so that the parties can find each other and do business with each other.”