Power of Payments Ep. 9: Balance’s Bar Geron on why B2B payments are “stuck in the stone age”

Welcome to the Power of Payments podcast. I’m your host Ismail Umar, and as you’ve probably noticed by now, we decided to do a rebrand! We think this new title for the podcast is shorter and snappier, and it also matches the name of our upcoming Power of Payments conference, which will be Tearsheet’s first conference on payments, as well as our first-ever in-person event. It’ll be held in New York on September 15 this year. I’ll be sure to share more details on the event with you in the coming weeks.

Today, I’m speaking with Bar Geron, co-founder and CEO at Balance. Balance is an Israeli startup that claims to be the first B2B ecommerce payments platform that offers a consumer-like checkout experience for merchants and marketplaces. The firm’s clients range from startups to publicly traded firms across industries such as steel, freight, hardware, food delivery, and apparel.

In our conversation, Bar touched upon a number of topics, including the importance of bringing B2B payments online and how that’s linked with global supply chain issues, BNPL for business, as well as other B2C trends that are slowly being adopted in B2B transactions.

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The following excerpts were edited for clarity.

My name is Bar and I’m the CEO of Balance, a B2B payments company focused on the ecommerce space. A bit about me: I grew up in Israel – I live in Tel Aviv with my wife. The best way to start telling the story of an Israeli is starting with the army – for five years, I was an army officer in the Armored Corps.

I started my fintech career – which is most relevant for this conversation – at PayPal, where I performed many different roles. In my last role, I was responsible for the global strategy against account takeover. There I met Yoni Shuster, who is my co-founder and CTO. Yoni was a senior PM, and really started to go down the stack of companies from the huge corporates to the small companies. I got obsessed with B2B ecommerce at one of the fintech startups I worked at, and I decided that was something I wanted to invest a lot of time in solving.

B2B ecommerce back then was very new, and looked like – for me at least – as something that could really change the game of how the economy works. In simple words, B2B ecommerce is the technology or the idea that B2B transactions and product discovery can happen online, and doesn’t need to be relationship-based. The reason why the impact can be so significant is obviously the efficiency that it brings. The ability of customers to find new buyers, and for buyers to find new customers in a B2B context in industries like steel, chemicals, lumber, textile, everything that powers the economy, is something that is really non-trivial. But we see it all the time here at Balance, because that’s where our focus lies. That efficiency is something everyone knows from the B2C space, but that doesn’t really exist on the other side of the economy, which is everything that powers B2C, like, as we say, the seven transactions before the consumer transaction itself.

Why Balance?

Balance was a no-brainer for me and Yoni. It was really just an aggregation of insights based on the challenges faced by businesses that have an online presence and are trying to sell to other businesses. PayPal didn’t work for them, and other solutions weren’t mature enough or oriented enough for the B2B use case. We saw a lot of companies building websites and trying to go online but getting stuck in the transaction phase, and then they had to go back to pick up the phone or manage everything on emails. So the idea behind Balance was to create this digital solution which is consumer-grade, but has the flexibility customers know from the offline space as business buyers: the ability to pay with wires, the ability to get an invoice, the ability to pay with terms and all that flexibility. We wanted to aggregate those capabilities in a digital experience. But on the merchant side, we wanted to create an experience that is really streamlined to enable them to grow, because that is why they go online -- to acquire new buyers. So we just wanted to open that bottleneck and create something that could really help them solve the transaction problem and scale as a business.

Balance is essentially a B2B checkout solution. It’s a term that we coined, it’s not something we had heard about before. That is why we’re number one on Google – not because we’re such a big brand, but just because it’s a new concept, something that was only known in the B2C space. So we created an SDK, like a component you can put on your website, and created that flexibility for business buyers, really dedicated to the B2B space.

The company is backed by some interesting investors. Stripe is one of our investors. Ribbit Capital, the biggest fintech fund in the world, and a long list of angels – Lightspeed, one of the tier one VCs in the Valley, and a lot of others. Overall, we are surrounded by great partners, and we’re very fortunate and appreciative of all of it.

B2B payments are “stuck in the stone age”

In the traditional world, there is no concept of a B2B payment; there’s invoices. The concept of B2B payments is a new thing. It’s a term that technology companies coined to understand that there is a money movement there, and it can be digitized. The problem with traditional transactions is that they are very, very focused on manual work. In the setup of a payment, you need to have a quoting go back and forth, you need to provide an invoice, you need to wait on an accounts receivable manager for payments to arrive to your bank account. And then, when you identify them in your account, you need to connect them to the invoice that you created through the ERP. And in the onboarding stage of a customer that wants to pay, you need to give them terms, because that is how they are used to doing a transaction. They are used to paying net 15 or net 30 or net 60. So you need to facilitate trust with this buyer, you need references, you need to check a lot of different data components to see if you can deliver a product without accepting a payment, something that we don’t know from the B2C space, because everything is card-based there.

So, all of those challenges are something that Balance takes on as a financial software that we created to support those unique business workflows. So, for example, a B2B payment is milestone-based a lot of the time. The capture of the transaction is really only after delivery, when you see the goods and you can inspect that they are in good quality. So that is something that our software supports. We provide the terms, our system facilitates trust automatically, we can do automatic reconciliation of the manual reconciliation problem, and support archaic payment methods that are still controlling the industry.

How digitizing payments for businesses could improve global supply chain efficiencies

I think the real innovators solving global supply chain issues are our customers. Our customers are publicly traded companies, venture-backed companies, marketplaces, those that are taking archaic verticals and creating efficiency. So, let’s take one example. Bryzos, a B2B marketplace for steel, enables a local buyer of steel to not only work with their supplier, but to find steel across different suppliers. It really sounds very trivial, because every one of us has used Amazon in the past and knows how easy it is. But in B2B, that doesn’t exist. So companies like that are really using those marketplaces to make a transaction as something that can be optimized across different retailers, which is a big thing. Because if your retailer doesn't have the supply that you need because of supply chain problems, now you don't have that dependency. And you can create that independence across different suppliers. So while they are doing a good job connecting the two sides, we enable that trade to work. Our customers are responsible for discovery, while we are responsible for the payment, if that makes sense.

BNPL for B2B?

The term Buy Now, Pay Later in B2B is always a bit weird to me, to be honest. Ultimately, we are a BNPL solution as well. The ability to give terms and to pay with net terms to buyers in B2B is not a nice-to-have; it’s a must-have. But the classic BNPL approach of consumer-focused companies like Affirm or Klarna will not have the same impact in B2B. Our approach is a bit different, just because the need of B2B brands is different. It comes from a place of supporting business flows, and not really the need for alternative credit. You know, the classic use case of BNPL is customers that need that extra credit. They don’t get it from traditional creditor companies. So Affirm or Klarna are good alternatives for it. In B2B, a lot of the time it’s not to create an additional credit line; it’s just to support their business flows, because they’re paying on the 15^th of each month, because that is when they pay all their vendors. They just need a way to support that workflow, if that makes sense.

B2B is following the same trends as B2C

It’s hard to imagine, but when you think about the B2C space, it’s very intuitive today, but it wasn’t like that for a long time. I don’t know how old you are, but when I was a kid, you’d buy everything from your local retailer – you couldn’t go online to purchase anything, really. And today, buying something without optimizing across 1000 vendors that you can buy from when you buy Nikes or anything that you can buy for your home or for your work needs or whatever, those are being optimized. Just by virtue of clicking on the name at Google, you will get the best results for what you’re looking for, which wasn’t the case before.

In B2B, the same thing is happening right now, which is beautiful to see. We see more and more buyers purchasing things like chemicals online. And when they do, the power of the internet and ecommerce platforms are doing that optimization known to consumers. Now with Balance as a payment platform, online with digital checkout, they can also purchase like consumers with the ease of one-click checkout, getting the terms and the setup they need as businesses. So yeah, the future is really close. We already see it in so many verticals. We have 35 different industries on the platform, from lumber to textile to steel, to a lot of different things. Those verticals are being fully optimized. Purchases are being one-clicked with an amazing discovery experience. And this will just continue on and on, with companies like Shopify and other platforms doubling down on B2B. And really, we see the future very close in that sense.

I think what I would encourage your audience to understand is that if you are thinking about building a B2B marketplace or building an online platform, remember that there are companies that are building the infrastructure on how to build those experiences of discovery, like Shopify did for B2C. Now, they’re getting into B2B. So, know that you don’t need to build everything yourself. And the second point I’d like to make is that if you’re selling offline as a business-to-business seller, really think about moving online. It’s growing fast, and if you don’t adapt, it will be hard to compete. That will be my two cents on the industry.