Why a tech-first approach is the future of B2B credit

Wednesday, August 29, 2018

In 2011, Silicon Valley visionary investor Marc Andreesen famously noted that, “software is eating the world.” By this, he meant (in part) that software is taking over and transforming every aspect of our lives, often in new and surprising ways.

This observation came more than 10 years since the height of the dot-com boom (and bust), and in that time, people didn’t stop using the internet. Just the opposite. Likewise, technology companies didn’t stop innovating.

One key innovation was the concept of using technology to not only allow people to make purchases ala e-commerce, but to allow people to pay over time through credit. The most notable company to offer this was Bill Me Later (which was later bought by PayPal). Prior to the introduction of online instant credit, credit cards were the main way to pay for goods online. Bill Me Later pioneered a system to analyze “little bits of data” to provide instant credit approvals to B2C customers. Their tech-first approach lead to one of the most important innovations in B2C e-commerce.

B2B e-commerce now faces a similar moment of innovation. It’s on the cusp of becoming one of the largest industries in the world, and as such, needs a tech-first approach in order to achieve its full potential ($1.21 trillion by 2021, if you’re wondering). Market volume aside, a tech-first approach offers a few distinct benefits to merchants that, if adopted, will enable them to get a slice of that pie. Let’s take a look at them.

Data:  We’ve discussed data previously, so we won’t rehash that post. Suffice it to say that today’s world is data-driven and instant credit is greatly enabled by it. Without having a data advantage, the other benefits wouldn’t even really exist.

Accuracy:  We’ve also discussed the many problems with trade credit, but one thing we haven’t really mentioned is the fact that it’s a human-driven process. And humans are far more prone to errors than algorithms. A keying error or typo on the merchant side can have consequences that could be the difference between a lost and closed sale.

Speed:  Without technology, instant credit couldn’t exist. Humans can’t obtain, much less analyze the data needed to approve or deny credit. On the other hand, technology can complete that analysis within 30-60 seconds (that’s why it’s called instant credit). It doesn’t matter how many people are in your credit department, traditional trade credit simply can’t move this fast.

Scalability:  Similarly, technology enables scalability that is just not feasible in the traditional trade credit model. Let’s say, for example, that instant credit technology helps you add 100 new customers per month. Could your credit department handle that additional volume? What if it was 200 new customers per month? Or, dreaming big, 1,000?  How many people would you need to add to keep up with the demand? It’s highly likely that if your business grew that fast, you wouldn’t be able to grow and train your credit department in a way that’s equally scalable. With a tech-first approach, this scalability is instantly available at a much lower cost.

Flexibility:  One of the key benefits to technology is the flexibility it offers. That is, we can analyze data as part of the instant credit process, and optimize the experience for customers. For example, we may find that your customers respond better to a 60-day, 3% interest credit line than a 30-day, 0% interest (or whatever other terms you’d like to substitute). We can test that and make the change with very little work needed. Moreover, we are constantly honing the algorithms that drive our services, and we can make updates to them without any impact to your business. If you’ve ever tried changing policies in a human-driven system, you know how hard this can be.

One last point, which we believe makes Credit Key a better solution. There are other companies out there who provide similar services. However, they don’t provide the underwriting themselves; they rely on 3rd parties. They’re just a middle-man, and as such, they have no control over the approval process or criteria. On the other hand, Credit Key underwrites all instant lines of credit we issue, which means we can agilely customize approvals to suit merchants’ needs.

Credit Key’s unique tech-first approach is at the forefront of the changes facing the B2B merchant community. If you’re ready to embrace those changes, reaping all the benefits that has to offer, contact us. We can demonstrate exactly how harnessing our technology can enable your business to seize a slice of that $1.2 trillion pie.

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