Thursday, February 11, 2021

Interviews with practitioners: How to transform B2B payments with Paul Christensen

Interviews with practitioners: How to transform B2B payments with Paul Christensen

In the third episode of DueDil Live Series 2021, Denis Dorval, COO at DueDil, welcomed Paul Christensen, Co-founder and CEO at Previse.

DueDil Live is a series that showcases the practitioners of transformation and innovation within the SME financial services market. So far, we’ve had the opportunity to speak to a number of industry leaders as they seek to disrupt this fast-paced industry.

Join this episode of DueDil Live Series 2021 where Denis Dorval, COO of DueDil, welcomed Paul Christensen, Co-founder and CEO at Previse, to the discussion table.

Hey, good morning, all. My pleasure to have Paul Christensen, co-founder and CEO of Previse joining us today for that episode eight for DueDil Live series with practitioners of SME finance and transformation. Good morning, Paul. How are you today?

Good morning, Denis. I'm terrific. Thanks. Really good. Thanks for having me on.

Most welcome. Very, very thrilled and excited to have you today because you're going to take us through really a very interesting topic, which is really core also on how we can help the SME economy out there bounce back from what has been really extremely challenging times, the last 12 to 18 months.

As you guys at Previse are helping with what is a huge friction zone in the SME economy, B2B payment, and how it can be done better, I'm really again, very excited to have you today. Before we dive into this, I think the audience will be interested to hear a bit about yourself, and how you ended up being where you are.

It's a great question. I was contemplating that as I went from my run around Regent's Park at six o'clock this morning in the snow because I was actually born on a piece of tin in the jungle in Papua New Guinea.

It's a long way from there to here.

I was reflecting on it this morning. I do think that is actually a large part of how I got here. My parents were both very mission-driven. In fact, my mother was literally a missionary, she's a nurse, a medical nurse. I think that is a large part of why I got here. Most relevant for our discussion is, I'm aFinTech nut. I've been in FinTech since the late '90s. I was part of the founding team of a company called, in the .com boom, a foreign exchange trading platform. Our strap line for that company was, "This changes everything."

An ambitious tagline.

We were looking to move that market from voice trading to electronic trading. 25 years later, that transition from voice to electronic still hasn't happened. It was a great lesson for what we're doing now, which is very hard. It doesn't matter how good the idea is in FinTech, it still is hard, and it's going to take a really, really long time. That's my background. I spent a long time in the banks, Deutsche Bank, Goldman, doing FinTech strategic investments, but I knew I wanted to get back to building a business. I'm a builder. Five years ago, I left to build Previse.

Hey, I think that's something we've seen across many of those interviews with the DueDil Live series here with practitioners of transforming this into financing is that combination of a lot and a very rich experience usually built up through years. I think you've been at Deutsche Bank and other major banks, where actually yes, it's a factory where there's a lot of things happening, et cetera, and you gain a lot of experience.

Let's talk about Previse. Tell us about the what. What it is you do, but also why it matters, and why that idea that things should really be done differently there when it comes to B2B payment?

Yes. Well, I'm going to start by being a little bit controversial. Well, I'm going to say B2B payments are broken, and maybe that's not controversial. People often respond to me when I say B2B payments are broken. They say, "Hang on a second, Paul. There's $125 trillion of B2B payments every year, and it works, so it's not broken." Maybe it's not broken, but it's incredibly inefficient, incredibly inefficient. Unlike most, when most people think about payments, they think about moving money from A to B. We think about why is that money being moved and who needs it? Who is it being moved to? What we're focused on is, supplier payments, and the fact that any business in the world selling goods and services has to wait weeks or months to get paid.

The problem isn't how fast you can move money from A to B, whether using Chaps, or this, or that, or blockchain, because whether that's one hour or a second is irrelevant. What matters is, the months of chasing and all the bureaucracy and nonsense that goes on. I like to start with a simple example of, Denis, I don't know if-- Well, no, in lockdown, you probably haven't been out. If you are able to go out to Starbucks this morning and buy a coffee, you tap the machine, and hopefully, they give it to you in a nice doodle mug, but you've paid £3 and you've got your coffee.

If instead you said, "Hey, thanks for my coffee. Send me an invoice, I'll pay you in 60 days," that would be absurd, and yet, that is how business works. The what and the why is, we want to make B2B just like B2C, simultaneous exchange.

I think, yes. Maybe that because I've been an entrepreneur myself, still an entrepreneur here at DueDil et cetera. True, I like what you said about, yes, maybe it's not entirely broken, but it is dysfunctional because obviously, so many SMEs suffer from having to spend so much time, energy, and all the stress it generates, and the entrepreneurs don't have then the time or they're spending time there when they should be spending time with their customers and their teams, on delivering and building good stuff.

The B2C to B2B, I think it's that big wave of consumerisation of the B2B space that needs to happen. How are you building this? It's great to have ideas, but well, now, the big question, how do you make it happen?

Yes. We're focused on a sector of B2B, which is when an SME is selling goods and services to a large corporate. That's still a very, very large chunk. When I talked about $125 trillion of B2B business every year, $30 trillion of that, $30 trillion is an SME selling goods and services to a large corporate. 20 million SMEs in the world selling to the 5000 largest corporations. We're focused on that sector. How do we do it? We focus on the corporate side. A lot of your partners and all your guests on this show are providing finance to SMEs which is fantastic, but if they got paid instantly, they actually wouldn't need so much financing.

We're trying to treat a bit more of the cause rather than the symptom. What we do is provide a machine learning solution to the large corporate so that invoices get paid the same day. Instead of waiting for 60 days, an SME sends a bill to a Fortune 100 or Fortune 500 company for £10,000 or £100,000, instead of having to wait two months, and not just wait but chase and call and do all that nonsense that you referred to that's distracting, money just hits their accounts. We come at it from the corporate side and by running a bunch of machine learning models against their data, we can assess the risk on an invoice by invoice basis. Pick any large company, there's thousands of invoices hitting their systems every day. We can very quickly tell, "Hmm, there's only two invoices here that we think maybe need a check and the rest, boom, just pay them." We take that risk. We price and underwrite the risk for them so that everyone can just get paid on day one.

All right. That sounds like a compelling proposition. Where are you now in terms of implementing it because as you said, I think, well, what you are really disrupting here is a segment of B2B payment which used to be addressed through invoice financing, I guess, in some shape or form from what I'm hearing, and you want just to do it another way, better way and quicker for those SMEs.

And cheaper.

Cheaper for all because probably, big corporates they traditionally think that, "Well, I can sit on it. Anyway, I have leverage." I imagine because obviously, SMEs are extremely dependent on those orders and those relationship, and they supply to those big companies. On the other hand, yes. They do not see the stress and risk. Also all the time they're spending, managing also those long to be paid invoices on their end. Where are you now? I think you guys started in 2016, I believe. Paul, is that correct?


Five years down the road, where are you now?

As I said, I've been in FinTech for 25 years. I've never seen a proposition so compelling as this. It is brilliant except, we are changing behaviour on every side. The 5,000 corporates, the 20 million SMEs, and the hundred banks that service that ecosystem. You're right. It is really, really, really hard. Where are we? We've got five large corporates signed up and fantastic brand names. A couple of them are public. Mastercard is one, the Daily Mail is one. Some really good brands. We're just starting to roll out. We got two banks signed up. Two of the top five banks are funding the programs. We're early. We're five years in, but it's a really big undertaking and it's really hard.

Surely a long journey but as you said, the proposition is super compelling. From the last 10, 15 years, when you look at what happened, what's going to happen, what you're describing, leveraging tech to remove frictions and create further efficiencies throughout that payment chain. Now, let's flip maybe towards also the other side of what you do is, building products, building teams, building a company. Maybe an interesting question here for the audience.

You're all about innovation. The tech is there. You did mention, you're leveraging sophisticated AI, go with them. They are available, the cloud-native platforms now allow you to really, really start being good and at speed with leveraging that type of technology and doing the best of the data. At core, innovation starts with people, on teams, working together. How do you guys go about forming your teams to deliver quick innovation in Previse?

Yes. I didn't think we do anything particularly groundbreaking there. There are so many small teams being very customer-focused, listening to our clients, constantly talking about stuff, test and learn, test and learn. That's the phrase we use all the time. Lean startup methodologies, starting withPowerPoints, getting responses from our clients. The thing is, and it's a great question because there's so much written and talked about in B2C in this concept of how you innovate and how you build a startup in B2C, and all the podcasts, all the famous- it's very rare you get people talk about B2B.

You're touching on a point that is really close to my heart. Yes, you're right. First, some of the things you mentioned were that, they sound almost mundane. You know what? Back to the title of that series we hear speaking with practitioners. Let's face it. There's a lot of people talking the talk. When you start digging, there's not so much of walking the talk. Even some of the things you mentioned, small teams iterating, test first, get the feedback, et cetera, it's not happening so much out there, especially in the B2B world which is ruled by big corporations because they have a lot of issues.

Back to innovation and B2C and B2B. I think that we're seeing a vast movement of consumerisation ofB2B, but innovation in B2B most of the time happens - it's about actually incremental efficiency. There's not so much entirely new disruptive general innovation happening in B2B, but there is a lot of doing things differently.

I was going to say, when you say there's not a lot, it's because you can't. A large organisation is not going to do something that's a big step change.

Yes. I think they tend to react rather than to be proactive for sure. I think most B2B innovations happen through a bit of disruption. Various of this position they see that, "Wow. Someone's eating my lunch now." I never believed it or I was a bit too lazy to invest and consider it. There's a lot of playing the time because it's hard. It takes time. You need finance, you need traction in B2B and sometimes you're there just observing. They're distracted by their own very short term goals most of the time.

It's also risky. This is something that I think people don't really get, or appreciate. Everyone likes to talk about innovation, any large corporate. The chief innovation officers. Everyone loves the concept of innovation, but innovation by definition means change, and change by definition means risk. The concept of, "Oh, we've got to do something different. Oh, I want innovation, but I don't want to take a risk." Those two things are completely obviously antithetical.

I had a wonderful debate once with a very senior person at a very well-known brand name in FTSE 10 company. He was explaining to me how they're running a whole bunch of RFP to do innovation. You can't deliver it with RFP.

.An RFP person is, by definition is designed to manage risks. That's where innovation dies.

Yes. RFP is a normalised process to justify decision that has already been made.

This is actually the hardest. To me, this is the- and you said it, it's the people point, right?


Most people in large organisations particularly, they want a quiet life. Getting them to change and innovate is really hard.

I think we touched on that during the prep for this call at some point that, we talked about that because you said that, well, you don't really have any difficulty getting to almost a CEO, a boardroom, talking about what you guys do because yes, it is a compelling proposition, it should be done this way. Certainly, a segment of the B2B payment should be served through that sort of proposition. It's almost a no-brainer when you think about it, now that the technology is available. Before it was not, fine, but now it is. There's oceans of data, and there is a technology that helps you de-risk. The fact of automating in all those decisions, et cetera. There is a very sophisticated financial ecosystem that allows you also to put your service into play.

We talked about that, and then we had that discussion around, yes, it's so good, but then after it's the level below. I personally believe it's a boardroom and CEO responsibility and accountability because it goes back to innovation. It needs to come from the top. Yes, sometimes it comes from the bottom, but in a big organisation, they try to spin-off, et cetera, always because they admitted that it's not going to come from the ground up. I personally feel that it is a boardroom and CEO responsibility to instil innovation because they have control of their direct line of reports. Most ofthe time, they say yes, but then all the KPIs are entirely an anti-innovation.

I remember a big, one of the giant in technology out there across the pond in the US, I was really impressed. Will not name him, but the way that they tend to measure, their executives, and at very high level is around three things. It's obviously business performance, but then two things come almost as equal, innovation, teamwork. If all the C-suite were measured the same way, maybe there will be a bit more innovation happening also from those big companies.

Anyway, back to Previse and what you do. There's virtually no better time than 2021 to help SMEs get their cash, invoices paid within days, within minutes. This is what you've been saying over the years, this is you talking, "tools and technology now exists to solve the light payment problems." It's time the public and private sectors collaborate to get suppliers paid instantly seeking a new standard of business all over the globe.

Now is the time for also those parties, public and private sectors to really help because COVID-19 is still there. What are you seeing out there that they can do? Whether it is through initiative to help theSME economy bounce back. What also big corporations should be doing and what is their role there to help with this?

It's happening, it's absolutely happening now. Because it's in everyone's interests. It is a circular economy, a large corporate relies on its suppliers, and vice versa, it's a circular economy. I think there are two big factors driving some change now, that people are actually prepared to be innovative and take risks because they get the upside. One is, just the general awareness of this concept of a circular economy, and inclusiveness, social and financial inclusion. Doing the right thing. Corporate social responsibility, that whole awakening which I think has been coming for the last five years, but just in the last year has really come right to the top of priority. That's one. I think this drive an awareness that doing the right thing is good business.

The second and it's related, I guess, is the pandemic. You said it, last year for all businesses, but particularly small businesses who have always struggled to access finance. That's always been a problem. A lot of the driver for FinTech in the last 10 years has been a better access to finance for SMEs.

The pandemic has made it much much worse. We haven't come close to seeing the effects of that yet because of all the government support which has been fantasticcheme,CBILS, Vdeferrals, rent referrals. We've done a great job. The government inmost countries, particularly here in the UK has done a great job of kicking thecan down the road. That's going to hurt.

I'm speaking to small businesses almost every day. I was speaking to the number two at a very large UK company, a manufacturer, fantastic brand name. One of the prides of the UK that makes some incredible products. This was the point he was making. He's really, really worried this year about his supply chain. He has 10,000 suppliers that he relies on. They're really, really hurting. This is the time, this is the moment. There are very simple and practical things that can be done. Of course, I'm going to plug our own product, it's one of them, that can really help. It's just good for everyone.

It's efficiency, right? FinTech is about applying technology to make finance better.

Better and quicker. True. I think on the supply chain side, there's a lot of a bit inertia before you see really there because the stock, there's a lot of things that are in process the whole incident when it needs to be replenished and back to injecting a lot of goods in the flow there. Yes, I think you're raising a very valid point that it's a bit of a worry, and hopefully, yes, we can see now some of the support scheme or initiatives. Whatever that is, it needs to really look into now, the SMEs that are really core to sophisticated supply chains. Making sure that they don't break.

Your service would be fantastic if adopted by more big corporations out there. Fast forward, how do you see B2B payments being and working in five year's time.

I would say, in five years I think is the right time. I think six months ago, I would have said it's going to take 10 years, but I do think now it's going to take five years. I would say B2B will be just like B2C. The farmer who delivers the 500 kilograms of tomatoes to the Tescos or Morrisons or Sainsbury's can just tap his card and the money is in his account.

Instant payment, AI-powered cheques.

It's straight into his accounting system, whether he's using Xero or QuickBooks or Sage and it's all reconciled.

Okay. I love that. Fast forward in five years' time, B2B payments will be like B2C today. Instant payment.

Hey, thank you very much, Paul, for your time today. Thank you all that have streamed in here live or all the others that will actually enjoy listening to this interview later or read the transcript. Thanks again very much, Paul. Have a great day. Thank you all for listening in.

Brilliant. Thank you, Denis. Good morning, every one.

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