How AvidXchange is tapping into cross-border payments for the middle market

Businesses with revenue ranging from $10 million to $1 billion are categorized as the middle market, collectively generating revenue worth $10 trillion. This sector is one of the consistently growing and core areas of the US economy – driven by nearly 220,000 companies and making up one-third of the country’s private sector GDP.

However, the middle market B2B payments space hasn't received the same level of attention from financial institutions as consumer payments or corporate payments directed at large enterprises.

Despite playing a significant role in the country’s economy, the segment has long been underserved in its B2B payments needs. The middle market buyers and suppliers face various challenges that boil down to managing cash flow, maintaining sufficient working capital, cost of manual Accounts Payable, and data remittance processes/labor.

Moreover, mid-market businesses that expand globally face additional challenges when it comes to cross-border payments. The sector seeks tailored payment solutions to help address pain points owing to its unique business needs – which lie somewhere in between the large and small businesses' perimeters.

Source: Deloitte

As new technologies are paving the way for innovation in payments, B2B payments providers are finding new opportunities to penetrate the cross-border payments domain. Aimed at facilitating businesses' need to process cross-border transactions, AvidXchange – an AP and payments solutions provider for the middle market – has debuted its cross-border payments service.

Embedded into Oracle NetSuite – a software designed to help businesses manage their accounting processes – the new offering is first accessible to NetSuite customers, who can make payments to both domestic and international suppliers without leaving their ERP systems.

Billing is one area within payments that can be quite intricate and challenging. This happens when multiple transactions, likely driven by external billing events, must assemble in one invoice. To tackle this, NetSuite helps companies gain visibility into billing against each financial activity, which adds more transparency throughout the invoicing.

Through a partnership with Wise, AvidXchange is able to provide an electronic funds transfer-based solution integrated into the new service. Customers can transact from USD to foreign currency or USD to USD – regardless, the amount sent to the supplier is the amount they would receive. However, cross-border transactions done from USD to USD settle at less than the amount originally sent, due to correspondent bank fees. Other currencies offered for transactions include AUD, CAD, EUR, GBP, INR, and MXN.

“The supplier experience is extremely important to us, so we made sure fee transparency was part of what we were going to offer, and have seen our customers super-receptive to this offering,” said Dan Drees, chief growth officer at AvidXchange.

Despite the launch of various B2B payments solutions, pain points continue to exist in the space – which means there is still scope for improvement.

“There are pain points because there is no one-size-fits-all approach, and the market is dictating the changes that the B2B payments sector needs. The complexities and the ever-changing nature of the landscape can alter the needs of customers overnight – for the same reason, we provide an end-to-end solution that saves time,” added Drees.

Among other barriers, one that is deep-seated is that payments in middle-market companies still depend on checks to a large extent. This means a considerable amount of time is spent signing, stuffing, stamping, and sending stacks of paper checks – making it more time-consuming, error-prone, costly, and inefficient for both buyers and suppliers.

In today's increasingly digital-focused economy, embracing paperless billing systems can be one of the strategies for mid-market businesses to bring down obstacles when handling extensive accounts payable documentation.

Some players in the field are skeptical about displacing check payments entirely due to a lack of customized digital management systems, fraud risks, and the challenge of successfully introducing new processes into their existing workflows.

Nonetheless, many companies are willing to take a proactive approach to modernize payments given the evolving market. 50% of mid-market companies are looking for better financial advice and consultation from their banking partners for a smooth transition to automated accounting and payments within the next five years, according to a Visa survey.

Additionally, 50% of companies surveyed use personal cards for business spending, while 34% indicated they are taking measures to write fewer checks. However, 64% of middle market payments are still initiated using checks, which remain the preferred payment choice for supplier payments.