How Touch Of Modern Built A Global B2B Payments Operation

27. December 2017.








Jonathan Wu co-founded a company in 2009 to help urban males, like himself, to buy interesting and unique products. That company, Touch of Modern, built its reputation on curating those products from all over the world, wherever interesting goods could be sourced.

Soon, Wu found that instead of spending all – or most – of his time sourcing products, he was spending half of his time manually processing international payments.

A grand total of roughly five payments per day.

Wu didn’t get into eCommerce because he loved processing cross-border payments, yet he was quickly thrust into that role given the complexity associated with managing vendor payments and relationships across borders, payment methods and currencies. A complexity that Wu said was the business, since Touch of Modern was all about sourcing globally from day one.

Wu said that he also quickly observed how vendors were struggling to work with other buyers in the market, and vowed to simplify the process with the Touch of Modern platform. He wanted vendors to feel confident working with the company, no matter what country they called home, and once he found a great supplier, he wanted to keep those relationships strong and intact.

“We had to figure out how to do business with different countries and cultures and accommodate their needs as a new business so they would continue to work with us,” Wu explained.

That meant providing a seamless experience that guaranteed payments would be made correctly and on time, in the currency and method of the vendor’s choice – while at the same time making things equally easy for fickle buyers, whose short attention spans and zero-tolerance policy for online checkout friction will lead them to other eCommerce sites if they experience too much complexity from any one brand.

Easier said than done. After a few months of working 15-plus hour days, Wu and the rest of the company realized there must be a better way to make it easy for suppliers to do business with Touch of Modern, while at the same time ensuring that the company was earning profits for its investors.

In a recent live discussion with Karen Webster, Wu shared these six lessons that Touch of Modern learned along the way to scaling a global online retail business.

  1. Keep It Lean

To capture as much margin as possible, Wu said, a lean business philosophy is key. The more efficiently operations are running, the more profits the business can earn.

That means investing in seamless communication across the chain of employees, customers and vendors. It means creating simplicity of navigation for customers visiting the site, and simplicity of onboarding for vendors doing business with the company for the first time.

Wu said that smaller international businesses have not necessarily worked with U.S. platforms before, so they may feel some skepticism and mistrust working with someone outside their own country. And that’s on top of the anxiety every merchant experiences over when, how and if he’ll be paid.

“Lean” doesn’t mean that a business shouldn’t spend money on back-office operations, said Wu – it means that it must do so more efficiently. The investment must make life easier for those running the business and enable it to scale.

The key question to ask, said Wu, is: “How can we use technology to do something we would have had to hire somebody to do?”

2. Up Your Cross-Border IQ

Wu said that there are nearly 26,000 global payments rules, from how to enter payments into the system in different countries and currencies, to navigating account structures, to how payments can be sent, to which country-specific rules and regulations must be met.

According to Wu, one simple mistake can cause a payment to bounce, and once that happens, funds can vanish into the financial system for weeks before finally making their way back to the sender. But if the payment doesn’t arrive where it’s expected, when it’s expected, there’s little transparency into the system to see where it got lost or what went wrong.

The easiest way around this headache, according to Wu, is simply to avoid it in the first place by following the rules.

All 26,000 of them.

One tip that Wu offered was an onboarding process that allows vendors to enter their own bank account information. This method gives control to the vendors, rather than making them wait for Touch of Modern to process their payments. He said it also reduces the risk of payments bouncing, because the vendors themselves know more about their own economy and payments system than Wu or anyone else at the U.S.-based company.

3. Use A Branded Supplier Portal

Wu noted it was important that vendors felt they were always working directly with Touch of Modern and not with an intermediary. So, when choosing a payments technology partner, the company looked for one that didn’t insist on closely controlling the vendor experience, but instead enabled an onboarding portal consistent with the Touch of Modern brand.

When vendors sign on with Touch of Modern, they enter their own bank account, shipping, pricing and payment method preferences so that all information is correct, and they don’t have to wait for the company to input that information for them.

This, generates confidence because the experience is within the vendor’s control, removing anxiety over whether they can count on Touch of Modern to make good on promised payments.

Wu added that it also removes some anxiety for the company, as Touch of Modern won’t have to have any awkward conversations with vendors who wish to be paid in a method or currency that isn’t supported, since the third-party portal by Tipalti supports them all.

4. Don’t Forget The Tax Man

In its first year of business, Wu said Touch of Modern didn’t collect any tax information from its vendors until tax season rolled around. Why? The company simply wasn’t familiar with how taxes worked. Touch of Modern learned too late that, as the retailer and initiator of payments, it was their responsibility to collect that data and report it.

Wu recounted the weeks required to track down all the vendors they’d done business with that year, including some that had even gone bankrupt, which made it even more difficult to collect the required information.

But that year, it had to be done the old-fashioned, manual way, since penalties for non-compliance can be steep.

Automating the accounts payable process was Touch of Modern’s fix, since tax data was collected up front. The tax form is provided during onboarding, and vendors were unfazed at the switch, said Wu; they understood that payments must be reported and they expected to fill out some forms.

5. Get Proactive On Fraud Protection

Wu admitted that fraud wasn’t front-of-mind in the early days. It wasn’t until the company went through its first corporate audit that the team realized the weight of this responsibility.

That was when Wu learned that one of those 26,000 rules is to make sure retailers are not doing business with any countries or companies that are on government blacklists for illegal activities like terrorism, money laundering and/or drug trafficking.

Luckily for Touch of Modern, its payments technology partner was already checking vendors against these government blacklists, as well as keeping an eye out for telltale signs like duplicate names and IP addresses attempting to do business as different vendors.

“It’s really reassuring to have another person looking out for your business,” Wu said. “To have somebody looking out for all the little things you don’t think about checking until you have a problem – and by that point, it’s too late. Knowing who you’re working with needs to be done up front, and it’s something that a great tech partner can automate and build into their processing.”

6. Find An Experienced Payment Partner

If it wasn’t obvious by this point, Wu said all of his other advice boils down to one key takeaway: Team up with the right third-party payment technology provider. The only way to really keep tabs on where hundreds of millions of dollars are going is to leverage technology, he noted.

For Wu and Touch of Modern, that was Tipalti, a partnership that took them from the manual processing of five cross-border payments a day to the automation of 20,000 payments a year – on demand, on time and without hours of daily manual input from Wu or anyone else on staff.

That, in turn, has enabled the company to scale its global business rapidly over the past five years, from its humble beginnings as a four-man startup to a 150-person company doing $100 million in sales across 6,000 vendors.

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