This morning, Finextra reported that B2B logistics network GT Nexus has agreed to merge with cloud-based financial supply chain network TradeCard for an undisclosed sum. Could this be the start of a much-needed consolidation within the B2B payments industry?
I've been covering B2B e-payments since I started at IDC, over 12 years ago. During all that time, it has been a frustrating subject: despite having the largest potential for adding value of any technology I cover, B2B e-payments seems stuck in a rut, slowly adding companies without ever hitting critical mass for growth. Every time I write about it, one of the things I always say is that the industry needs to consolidate; there are too many networks competing for the attention of corporates, and they divide the available market so that no network ever reaches the critical mass of enrollees it needs to be successful.
This morning, I was in the midst of writing yet another update on the B2B e-payments market when the news that GT Nexus was merging with TradeCard landed in my inbox. The timing was fortuitous, for my focus this time was specifically on what I call the "walled gardens," or third-party networks that work outside the mainstream payment networks, enabling buyers and suppliers to exchange electronic invoices and remittance data without having to alter their existing accounts payable and accounts receivable systems. Both GT Nexus and TradeCard were included in the study, and I had just finished writing about how some of these networks would have to consolidate.
GT Nexus and TradeCard are a good match, because each company has based its value proposition on integrating logistics data, and both are threatened by INTTRA, the main ocean shipping logistics network, which recently rebuffed a patent challenge by GT Nexus. TradeCard's technology has always been very good, but it has been dependent on partners for much of its functionality, any of whom might decide to use what they have learned from TradeCard and set up shop on their own. By combining, the two companies make themselves much more able to withstand challenges from companies like INTTRA, who have an established base of business and see e-payments as an expansion opportunity. They also extend their reach, making the combined network more attractive to corporates.
Now all we need are a few more combinations, and B2B e-payments will become the next "overnight" success. You'll have to wait for the report to come out later this month to find out who else I think might be good matches, but in the meantime, feel free to speculate in the comments below.