Mastercard Incorporated MA has introduced Mastercard Track in collaboration with Microsoft (MSFT) to expand in the lucrative Business to Business (B2B) payment market. It is a unique B2B platform powered by Microsoft Azure, which would make it easy for businesses to carry on their work.
Despite significant automation and digitization in the payment space, the business-to-business space lags in the use of technology, which exposes them to huge administrative cost and business inefficiently.
This service has thus been developed to streamline and automate the payment carried on by businesses, which face nearly $500 billion in annual administrative costs, which are consistently rising. Moreover, nearly half of all global business transactions - $58 trillion - that are still done on paper, should drive demand for Mastercard's services as these businesses move from cash and checks to electronic.
For now, Mastercard is partnering with nine B2B networks and procure-to-pay solution providers, namely Basware, BirchStreet, Coupa, the Infor GT Nexus Commerce Network, Ivalua, Jaggaer, Liaison Technologies, Tradeshift and Tungsten Network. These networks will represent a wide range of global businesses. Mastercard Track will give these businesses identity, compliance and payment management capabilities for buyers and suppliers.
Beginning in early 2019, customers of these organizations will be able to maintain, retrieve and exchange key information relating to themselves and their trading partners through the Track Trade Directory. It is a secure, permissioned repository of more than 150 million company registrations worldwide.
Gradually, as the platform expands it will streamline and simplify back-office reconciliation, one of the pain points for businesses today. The same will be achieved by providing businesses with better visibility into cash flow - when they can expect to get paid and for how much - across multiple networks. Track will help connect all types of payments, namely account-based, card-based or bank transfer, within the platform, while also connecting purchase order and invoice information.
B2B payments is a vast market with unmet needs. Per CBInsights, B2B payments hold the biggest total addressable market within payments. It estimates market sizing of B2B payments to be a more than $20 trillion, by 2020. B2B payments are often analog, involving paper invoices and long payment cycles. Even though more businesses are embracing the use of electronic modes, digital payments comprise only a small percentage of total B2B volume.
The market therefore, remains underpenetrated and offers huge scope of growth. Therefore, players such as Visa Inc. V , Square, Inc SQ and PayPal Holdings, Inc. PYPL are looking to expand into B2B payments.
MasterCard certainly sees this opportunity too and has already been active in developing this segment of its business.
The company estimates that there is $120 trillion in addressable payment flows in B2B globally, of which approximately $100 trillion is related to accounts payable. To address this opportunity, the company is expanding its capabilities to capture noncarded payment flows with new solutions, such as the Mastercard B2B Hub and Mastercard Send for cross-border payments, and real-time account-based payment systems for ACH transactions. To become a provider of ACH transactions, the company acquired VocaLink in 2017.
Also, the company launched the innovative Mastercard B2B Hub platform in 2017 to enable small and midsized businesses to optimize their invoice and payment processes with automation tools that improve the speed, ease and security of their commercial payments. We believe these endeavors will position the company to achieve fast-paced growth in the evolving payments industry.
Coming to price performance, year to date, the stock has gained 41.4% compared with the industry 's growth of 23.6%.
Mastercard carries a Zacks Rank #3 (Hold).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
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