Creating a Digital Experience in B2B Payments with Michael Noble
Jary Carter: Welcome to the podcast everybody. I’m Jary Carter. I’m here with Michael Nobel from Apruve. Michael, welcome to the podcast.
Michael Noble: Thanks Jary. Appreciate you having me.
Jary Carter: Yeah great! So, before we get into it, I’ve known you for a while, but why don’t you just tell us a little bit about your background. Just kind of personally and professionally, give us a sense for your background.
Michael Noble: Yeah. Lot of twists and turns there, but mainly have been in the startup world. This is probably the fourth early stage technology company I’ve been involved with. I was part of the team that helped start Limewire a long, long time ago, out of New York. That was a big peer to peer file sharing engine, kind of right after Napster.
Michael Noble: And then joined a company called Zanbu. We raised a lot of money with Motorola as our lead investor. We were kind of in the IOT space before IOT was an acronym, and that company was sold to AT&T.
Michael Noble: And then after that did my MBA, moved back to Minneapolis, which is where I’m from. I was out in New York for the previous ventures, and started Apruve.
Jary Carter: Great. So you’re the founder of Apruve, just walk me through how you started Apruve and what Apruve’s doing.
Michael Noble: Yeah I guess I’ll start with an analogy here too, if that’s okay. It seems to help. So let’s picture credit cards as a mechanism. When you go out to dinner tonight, and you give your credit card to the restaurant, are you paying that restaurant?
Jary Carter: Yes.
Michael Noble: Actually no! You’re not. The Wells Fargo or Chase or US Bank is paying the restaurant. Right? It’s the underlying bank that pays the restaurant. And then you go pay your bank a month later. Visa or MasterCard is the technology that connects you, the restaurant, and that bank.
Michael Noble: If that mechanism wasn’t in place, that restaurant would be lending you their money. And there would be a guy in the kitchen that said Jary owes me $60. That’s not what restaurants do. Restaurants sell food and provide great customer service and a customer experience.
Michael Noble: Restaurants aren’t banks. They’re not credit bureaus. They don’t need to be experts in lending. That’s what credit cards do. And to provide that service, the restaurant pays a fee. B2B is still the opposite. So we really dove in to try to understand this pain. But suppliers, manufacturers and wholesalers are still lending their own money to their customers who want to use purchase orders and pay on Net 30 or Net 60 day terms.
Michael Noble: And that guy in the kitchen, they have a room full of people. It’s called an Accounts Receivable department. And they are tasked to be experts at assessing credit risk, at doing invoicing, collections, payment processing. It’s, obviously, a big mess and a process. And then from a financial standpoint, the CFO of that supplier again is lending their own money so that invoice shows up as a receivable on their balance sheet. That’s cash they don’t have.
Michael Noble: And as a startup, what you want to do is build a problem that has a measurable pain associated with it, and the ROI with Apruve is we’re kind of on that Visa component. So we connect the supplier, their buyer and third party underwriters to completely automate their credit program, and any invoice that’s generated gets paid out by our underwriter in real time, even though their customer gets terms.
Michael Noble: Again, that same mechanism as a credit card, but just kind of applied to the B2B space, where orders don’t come in via credit card. They use a purchase order. And the platform is e-commerce or an ERP.
Michael Noble: Kinda make sense?
Jary Carter: Got it. Yeah. Perfect! How’s it going so far?
Michael Noble: It’s going great! We just raised a $6 million series A. Our pipelines have never been more full. I think the assumed cost of doing business in B2B has been to take PO’s and extend the terms to people’s customers. And we’re up shouting from the rooftops that there’s a better way.
Michael Noble: Payroll is another analogy we use a lot. Being good at payroll doesn’t help you sell more solar panels or more carpet or whatever product you do. And companies like ADP came along and said hey, we can do this for you better, faster, stronger and let you focus on selling more stuff. And we fundamentally believe that AR, Accounts Receivable, is in the exact same position to be automated, and we’re just seeing the market turn in our direction. And people recognizing that there are solutions like ours that can get them out of the business of acting like a bank and lending to their customer.
Jary Carter: Yeah. I totally get it. I want to get you, you know one of the reasons I wanted to have you on the podcast is you’ve got an extensive experience in B2B, specifically with Apruve, but before Apruve, you’ve been in this space. You’ve seen this problem.
Jary Carter: And you’ve been tracking and looking at B2B eCommerce for a long time. You’ve also been really talking to a lot of companies that are thinking about considering digital transformation. What are you seeing and how are you seeing B2B e-commerce change the game for B2B companies?
Michael Noble: Margins are shrinking. That’s one big factor that’s driving more aspects of self-service. The buyer profile is changing. You have someone in a procurement department that is used to an online experience. The last thing they want to do is thumb through a paper catalog or call a sales rep. I think those are two things.
Michael Noble: And the third I think the technology is finally catching up. So the ability to deploy eCommerce platforms in fairly efficient ways to take in an existing catalog of products and organize that catalog and make it searchable, tools like ours that help make a paper based process into a digital one with eCommerce, and de-risk it.
Michael Noble: I mean I think it’s kind of the right momentum, or the right kind of mix of things to really drive B2B eCommerce adoption. It’s going to be year over year double digit growth for as far as I can project for sure.
Jary Carter: Yeah. I think the shrinking margin, the increase of competition. I think you hit the nail on the head. I think the world is really changing. Yeah we’re seeing Amazon and other companies like them getting into B2B in a major way. It just does seem like the landscape is pretty drastically changing. And the companies that aren’t really sort of putting together a B2B eCommerce initiative, are going to be the ones that are the big losers over the next three to five years, or at least the ones that don’t sustain the growth that the market’s seeing.
Michael Noble: Absolutely. I think just to add a fourth point, is data. People, businesses are becoming aware of the power of information and the inability to collect the kind of data you want around how your customer is doing procurement, how they’re shopping, how they’re searching for product. That is near impossible to do with a paper catalog or even through a phone call, email or fax.
Michael Noble: The amount of information that can be mined by having your customer go through a digital experience, take that information and present them even better experience the very next time they shop, I mean there’s just huge upside to eCommerce that an offline process doesn’t provide.
Jary Carter: Yeah. It’s interesting, I mean it’s interesting that you bring that up. I mean I’ve talked to a lot of people, not many people are talking about this, but this concept of actually digitizing the customer journey really helps companies get visibility into how they’re finding customers, what their customers are doing, what they’re looking at, what they’re interested in. Even tracking things like future inventory or forecasting inventory or forecasting customer trends, that information now starts to be readily available once you offer at least digital choices.
Jary Carter: You start to get a window into buying behavior, from a data perspective.
Michael Noble: Yep. Absolutely.
Jary Carter: Yeah I really, really like that. That you brought that up, Michael.
Jary Carter: Let’s jump into, just because you brought this up, and I think it’s a really, I think that’s a good jumping off point to my next question, which is you see a lot of companies, you’re watching a lot of companies go through digital transformation. And I would ask what do you see, if you were to consolidate a few themes that you see in companies doing it well. What are those things that you see?
Michael Noble: I would say a couple things. One is buy-in throughout the organization. If you’re going to do it well, that pretty much needs to happen from Sales through, C level through Customer Service. Everyone needs to understand that not only does this channel for their customer now exist, but it’s one that we as a company are investing in. This isn’t a fly-by-night kind of experiment. It doesn’t mean you shouldn’t do testing and have a beta platform, but this is a long-term commitment. And it involves process change up and down the organization. Even with a tool like ours, which is very different than the way businesses do things today. We go up and down the stack educating everyone. And that kind of buy in is really important.
Michael Noble: So whoever that champion is at the company. The most successful eCommerce implementations we see, they get heads nodding throughout the entire process. And they aren’t necessarily, they’re held to short term goals, but this is a longer term push. And I think the second thing goes back to the data side.
Michael Noble: If you’re going to launch eCommerce, you need to figure out what it is you’re going to measure. How you’re going to measure success. Whether that’s emotional, from customer satisfaction and customer happiness to increase in recurring orders. Increase in average order size. Put those metrics out there. And measure against them.
Michael Noble: And if you’re not meeting those goals, figure out why. One great thing about digital is the fluidity of that experience. I mean if you publish a 800 page paper catalog and it’s got a spelling error on page 700, you’re pretty much screwed if you sent 100,000 copies of that.
Michael Noble: So digital allows you to AV test. It allows you to tweak visual experience, tweak videos, add customer reviews, do those kinds of things that as you measure, whatever your KPIs are, you can change those way faster than you ever could with an offline experience.
Michael Noble: So companies we see successful are doing those things, just from a starting standpoint. They have buy in throughout the stack. And they’re actively measuring what they do and trying to improve on it.
Jary Carter: And you’re saying the companies that you’re seeing that are actually collecting and tracking the data, really hearing customer feedback, what used to take probably 9 to 12 months in terms of test and learn, now can take like 9 to 12 days to sort of put something out there, see how their customer base or prospects are reacting to it and start to make changes because you’re actually tracking and measuring customer behavior.
Jary Carter: Is that kind of how you think about it?
Michael Noble: Yeah. Absolutely. I mean a very simple one would be chat. On the online chat has an ability to service a very quick customer need. And the relation to that to the number of tickets that are being generated in customer service that take more time and feedback and whatnot, and that has nothing to do with eCommerce. That has to do with a digital experience as the whole.
Michael Noble: Something like chat. So, yeah I think you can just get immediate feedback from customers in a ton of different ways. I mean the tools out there for another one would be heat maps. The ability to track a customer’s cursor filling their cart, but not checking out. Is there a pattern there? Is there something you could follow up with them on to find out is their contract price or their volume-based price wasn’t being shown.
Michael Noble: All of that information can get teased out in a much more real time basis within digital than offline.
Jary Carter: Yeah and I think a lot of that can inform, because you and I are realists. Digital, for a lot of companies, digital won’t replace I mean it’s a channel. It’s not the whole buying experience. But what I think what I’m seeing is that this, it’s one of the few channels that gives you such real time feedback that companies can actually use that data to inform every part of their business, even though it doesn’t move as nimbly.
Jary Carter: They can use this collection of data to inform a lot of their offline or their customer service, or the content that they’re publishing. These kinds of things can inform making the entire company better, like you said in the beginning if it’s really integrated into the overall strategy and not a side project.
Michael Noble: Yeah. I kind of think if your eCommerce group isn’t dotted-lined to marketing, I mean it might be sitting directly under marketing, but if there isn’t a dotted line there, I think you’re missing out on, I think that’s the biggest and most important piece of information or learning that comes, that can be applied to marketing and then reapplied to the site or into emails or advertisements or content or whatever the push is.
Michael Noble: So much of that learning can be applied into going after new customers or better servicing your existing ones. And so marketing really needs to have buy in there too.
Jary Carter: Yeah. I totally agree with that. I also am seeing product is another area that should have a really big buy in into the kind of eCommerce experience. Operations is another one. If there’s efficiencies that need to happen through the customer journey, I mean it’s interesting. I think the companies that are doing it well are really involving a lot of pieces and parts of the executive team to really make sure that it’s not so siloed.
Jary Carter: So one trend that I’m seeing as we’re talking out to the market, and because of your kind of unique perspective, I want to get your thoughts on this, B2B, eCommerce really isn’t just about eCommerce. It’s also about this idea of making self-service easier.
Jary Carter: For lack of a better word, like a really strong My Account page. And making self-service options available through that account page. Can you talk about that and what you’re seeing there?
Michael Noble: Yeah, I mean self-service and moving more towards self-service is not going away. You only have to look at the consumer world to understand AI and robots handling a phone call that went to a human before. I can say a few words now into my phone or into Siri or something, and have my problem solved through a dashboard, presenting more information back to the customer.
Michael Noble: In our world, we’re in the B2B credit space, so we see a lot of customers that still have their customer download a PDF, fill it out with a pencil and send it back of a credit application. And it takes weeks, like multiple weeks, to build that credit application, and then there’s very little transparency between the supplier and their customer around what that credit limit is, who’s associated with that purchasing team. That kind of information, the idea of transparency I think is just one that I’m sure you agree is a long time coming.
Michael Noble: B2B used to be very much we do our thing behind the curtain, and we provide units to customers with as much information as you need to know. And those days are gone. You want to be wholly open and honest and transparent with your customer. The marks and the KPIs that we track, here at Apruve, we share all of them with our customers. And we’re sharing them with the buyers that are also on our network, and we just believe that kind of transparency increases everyone’s awareness of what’s going on. How they’re buying, what they’re buying and our sense, how they’re paying back debt, how they’re paying back terms.
Michael Noble: That’s pretty big. And this is all in the self-service world. I make an order. I get a line of credit to make that order against. I’m invoiced. I pay that invoice. All this happened online. And it goes hand in hand with the eCommerce experience of procuring goods and services online as well.
Jary Carter: Yeah. I really like the consumer world analogy. And I think it’s true. You know, I think about how banking has changed in the last 15 years or even how I buy online with companies that I frequently shop with as a consumer, and how I sort of interact with them. People are much more used to this idea of this self-service and I think the expectation is if I have a relationship with a supplier where I’m purchasing tens of thousands or hundreds of thousands of dollars a year across maybe even hundreds of purchases, that I should have a way to access my information around that.
Jary Carter: It’s just such a more complex relationship that the self-serve option seems really obvious, even though I think B2B is to a large degree really behind in this.
Michael Noble: Yeah. Picture going to Amazon and not having an order history. Not having a payment history. I mean not getting product suggestions. You just have to yeah like you said, put yourself in the consumer’s shoe that we’ve now lived in those shoes for a couple decades. And you sit back and you’re like why isn’t the B2B experience the exact same way?
Jary Carter: Right. Exactly. Almost that it should be leading it, because this relationships are so much more valuable. And you have fewer of them. I mean if I have a thousand customers, I should be doing a really great job at curating a relationship with these thousand customers, versus maybe a shoe brand that or retailer that’s working with 100,000 customers. The customer value is so much lower.
Michael Noble: Yeah I mean customer life time- oh sorry go ahead.
Jary Carter: No, no- go ahead. Go ahead.
Michael Noble: Yeah I mean it’s something that we talk about a lot with our product, the CLV, Customer Lifetime Value, and you’re right, in B2C, I could walk into the Gap tomorrow, get a pair of jeans, and never go back for seven years. And B2B is about building these long-term relationships where I’m ordering on some kind of cadence or frequency, and you’re my vendor for the next two decades. So going back to that idea of transparency. Going back to self-service, making it easier to your customer, I mean it needs to drive CLV.
Michael Noble: We see just for, we have a customer, their orders through Apruve are 5.6 times bigger than orders taken via credit card. And this idea of giving someone an account to purchase against, it’s transformative within an eCommerce environment, but it also just drives sales. Plain and simple.
Michael Noble: We see on average about 2.2 times more order frequency, and about 3.3 times more line items per order for customers on account versus credit card.
Michael Noble: So having a digital experience, and then making sure the layers are on there to really drive CLV, not just one transaction, but 100. That’s really the tools and the platform that you’re looking for a long-term digital play.
Jary Carter: Yeah all that sounded really smart. I think the only thing I really got stuck on was the fact that you talked about going and shopping at the Gap to buy jeans. I don’t think I’ve been in the Gap since 1993.
Michael Noble: Yeah. Me neither, but it was the first thing that came to mind.
Jary Carter: When I turn on the TV and watch Beverly Hills 90210, I want to make sure that the online shopping experience matches.
Jary Carter: I think it’s interesting!
Michael Noble: You’re way hipper than me Jary. You’re way hipper. You tell me where you shop and then I’ll use that the next time I give the analogy.
Jary Carter: Oh if I am the fashion North Star, Heaven help us…
Jary Carter: I do think you added in a lot of data there just from what you’re seeing across all your customers that was really interesting though about purchasing. And I actually want to go to that. Because you are the forefront, and I want you to take your own company bias out of this, if you don’t mind, because you’re really at the forefront of seeing and tracking what’s happening with payments in B2B eCommerce. And I will say that we have, I’m talking to a lot of companies that are really trying to figure this out. That when they are offline, and taking payments, there’s really only a few ways.
Jary Carter: People are mailing checks or they’re paying by bank wire, large invoice amounts. But now you start to actually make an online purchase available. And people are starting to ask themselves what are the different payment options we should provide? Should we offer credit cards? Should we offer … should we keep our payments the same? Should we use systems like Apruve?
Jary Carter: These are the things that I think companies are really grappling with in terms of payments. What are you seeing? What’s happening there? What best practices? Just give us your thought leadership on this.
Michael Noble: Yeah so eCommerce, the first thing that people bring to mind would be a credit card. That’s the standard in terms of what’s been accepted. PayPal obviously grew the online side of payment in the consumer world. You move to B2B and things just dramatically shift.
Michael Noble: One of the main drivers is the fact that purchase orders still exist. And there’s many, many, many reasons why. And it’s very industry-specific. You know, needing to do a three-way match, where you have a number on an order, an invoice, and a shipping bill of laden, that’s a big one.
Michael Noble: Just trackability, accountability, paying on terms within a PO. A PO is basically a purchase order and paying on terms it’s a contract that says I promise to pay you in 30 days. And the reason a supplier does this is to help their customer with their cash flow, but as I said it also drives Customer Lifetime Value, because that customer is more than likely to come back to you if you’ve given them an account to purchase against.
Michael Noble: Paying with paper checks, it’s still a thing. I believe in the US, was it a year or two ago, I think I read 20 billion checks were written. Compare that to Europe, which is a fraction of that.
Michael Noble: So things like paying ACH through a bank account, Europe is well ahead of the US in that practice, and that standard. Do credit cards still exist? They do. A pain point we hear a lot with credit cards more and more and more is fraud. And the difficulty in combating credit card fraud. It’s just very difficult to do. Fraudsters are finding many, many ways around what are the traditional fraud deterrent techniques within credit cards. So that’s becoming a little less attractive.
Michael Noble: We have a prospect in our pipeline, and it’s about a 2 billion dollar prospect that doesn’t accept credit cards period. And we asked him why, and he said, “It’s my competitive advantage to give my customers an account.” And then there’s a pause, and he’s like, “but it’s a very painful process to manage.” And it doesn’t easily translate into eCommerce, without- I know you’re trying to keep us out of this conversation- but without a service like ours.
Michael Noble: So payment is still a tricky thing in B2B. Paper checks, like I said, do exist. They’re a bottle neck. But for the foreseeable future, they’re not going away. Credit cards- fraud is an issue. Order size is an issue. I mean we process six figure orders all the time. Those are not happening on cards. They happen with PO’s.
Michael Noble: Anything from the government. Schools. Large corporations. I mean, they’re going to use a purchase order. It is part of their procurement process for a number of in house checks and balances and accountability reasons. So it’s just a more complex payment ecosystem. And making sure your eCommerce portal can handle that is in your best interest. I mean if your customer’s been paying on terms for 20 years, and then you throw up an eCommerce site, and ask them to use a credit card or their PayPal account, good luck. You are not going to convert that customer over to a digital experience without making sure that the way they pay is the way they’ve always paid.
Michael Noble: Does that make sense?
Jary Carter: Yeah. I think that’s really, I think something that resonates with me. This concept of look, make it easy for customers. Give them a choice. Give them flexibility. And do it in a way they’re comfortable, and that they want to buy. And I think that is the lesson that we’ve learned, is it’s not about … customer experience isn’t about tons of sales people- and not that sales people are bad or not great, I mean they’re needed in B2B, but I think we’re seeing more this idea of an effortless customer experience. Give them what they want and make it really effortless.
Jary Carter: And that idea of not making them go to a digital experience and really limit their choice when it comes to payment, or change, really change so much when it comes to payment is really important in that process.
Michael Noble: Yeah. Agree. Agree.
Jary Carter: Thanks for that. That was actually very helpful. I think you brought up a couple of points in there. Tell me your thoughts and what you’re seeing from customers on offering credit cards. That’s something that I hear come up as a debate. You know, look, we’ve never offered credit card payment options. Should we now? Because an eCommerce experience, sort of feels almost incomplete without credit card as a purchase option.
Jary Carter: What are your thoughts on that?
Michael Noble: I think one of the biggest challenges in B2B is that every vertical smells and feels a little different. Your buyer base could be schools, and then another someone’s buyer base is just building contractors. And then someone else is retail. And credit cards, like I said, have their own issues for the buyer.
Michael Noble: So I think before you make any kind of decision, it’s not too difficult to reach out to your buyer, or you already have that experience full well knowing how it is they want to pay.
Michael Noble: We have a customer in the solar industry, and their average order size is significant. They’re buyers. And these are the kinds of orders that just aren’t happening on credit cards. We have a customer in the- they sell a lot of Motorola handheld radios into government related entities. Credit cards matter zero. It’s the US government. They use purchase orders. And they pay on terms. Period.
Michael Noble: So and then we have customers like Boxed, where they’re a mix of B2C and B2B, and depending on order frequency, or setting up a purchasing team, if you’re a multi-location buyer, and you want to set up an account for people to buy against, you’re not going to hand out six credit cards. Maybe. Again, I don’t understand, every vertical’s different.
Michael Noble: But buying against an account is easy, and it makes sense for people in that regard. So I’m not here to poo poo credit cards. All I’m saying is do some due diligence. Do some homework. Figure out the way your customer wants to procure and pay. And make sure that you’re building a solution to satisfy that.
Jary Carter: Yeah. I think that’s the key piece, is do what fits your business, what fits your customer profile. I like the US government analogy on this.
Jary Carter: Yeah that’s helpful. Michael, give me your final thoughts. You know our audience. These are people that are doing B2B eCommerce or thinking about B2B eCommerce. They’re doing it a lot of times in a vacuum in a silo. It’s a two or three person digital team that’s at a manufacturer or distributor or wholesaler. What advice do you have for these folks? What final thoughts do you have?
Michael Noble: If you believe that your specific industry isn’t going into a digital direction, I’m sorry, but you’re wrong. And you’re already late to the game. If you’re trying to build a business and be a market leader in that business, I fully believe that embracing eCommerce gives you an unfair competitive advantage.
Michael Noble: And whether or not you realize that the second you launch your website, again, going back to my earlier comments, this is a longer term game. So getting that buy in throughout the organization that you want your company to be a market leader in toys or artificial grass or solar panels or wholesale hats, or whatever it is, like I said, there’s thousands of these verticals out there, and if you don’t think you’re a competitor, or your industry peers aren’t doing this or thinking about it, you need to kind of get on board. And I know that sounds aggressive, but I do fundamentally believe it.
Michael Noble: And I think you’re in that same camp.
Jary Carter: Yeah. No I totally agree. Thanks for that. I think a lot of people do need to nudge. They want, I think not that this is bad, but I don’t see, in a lot of cases I don’t see a lot of manufacturers, distributors, wholesalers, brands as in many cases early adopters of trends or technology. In a lot of cases they’ve just been around a long time. They’ve seen a lot of things come and go, so that can make them a little skeptical. But this, I think you’re absolutely right.
Jary Carter: This is a business trend that is absolutely here to stay. It’s not going anywhere. There’s so much body of proof that it’s only growing. This eCommerce and B2B is not a fad. So I really like that you brought that out.
Jary Carter: Michael, thank you so much for your time today. Really time well spent. I appreciate your perspective. Thank you for sharing the data. That I think’s going to be really helpful for a lot of people considering digital transformation, and particularly how they do payments and self-service in digital transformation. So thanks so much for your time.
Michael Noble: Thanks, Jary, I appreciate the opportunity!
Jary Carter: Alright. Thanks Michael!
- Apruve is a B2B credit network that integrates to ERPs and B2B eCommerce platforms to invoice and finance customer PO's.
- Self-service is not going away. Having a digital experience is key to driving customer lifetime value.
- Apruve averages 2.2 times more order frequency and 3.3 times more line items per order for customers on account versus credit card
- Michael's advice: If you believe your industry isn't going into a digital direction, you're wrong. And you're already late to the game.