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It’s great that your money doesn’t jiggle-jiggle—it folds—but relying on cash and checks isn’t a scalable payment solution.

As restaurants and wholesalers shift towards more efficient and sustainable operations in response to labor shortages, supply chain woes and inflation, food technology platforms have emerged in an industry that did nearly $800 billion in sales in 2021. Despite these impressive sales numbers, the entire food and beverage industry is being reimagined with robotics, automated guided vehicles for delivery and new payment solutions. The transactions that pay the food suppliers, the tips collected and the franchise royalty payments—those are also undergoing their own digital transformation.

What’s happening is food tech companies are building platforms that can work for large franchises to individual food truck owners. Embedded within those platforms is a payment API that can create a unique B2B or C2B payment network as part of the larger software offering.

Some are calling this the “Food as Software” trend for not only the back of the house, but the front, too.

Modern Technology For Supplier Payment Solutions

Fund flow: End users on both sides with arrows pointing to each side.

Corporations and wholesalers have thousands of transactions every month being tracked in various spreadsheets with checkbooks and receipts. It can be expensive and quite time consuming to undergo a digital transformation—so these organizations will work with food tech platforms to introduce vendor payment automation into their own supply chains.

These platforms will enable this functionality by embedding a payment API into its suite of services and initiate bank transfers from within the platform.

For example, if the Koala Platform works with food trucks and has integrated the Dwolla API, the food trucks on the platform can transact in a variety of ways. Because the platform has fully integrated with the API, the food truck owner is able to collect, disburse or transact with another party all from within the application. And these transactions can happen in a variety of ways and speeds.

Continuing with the example, if the Koala Platform has integrated with the Dwolla API to facilitate payments, one of the merchants involved in a transaction on the platform is required to undergo a verification process to transact. This verification process can be for a consumer or business.

Once the merchant is verified, a Dwolla Balance is created for any verified customer within the Dwolla API. A Dwolla Balance is wallet-like functionality that can hold funds and send or receive a payment. In this example, once merchant A is verified, merchant A can attach a bank account to preload and hold funds in its balance. From its balance, merchant A can initiate a disbursement to merchant B.

We’ve just injected automation into a vendor/supplier payment workflow! A supplier payment solution or royalty payment between a franchisee and franchisor can be that simple.

These types of transactions can be done with standard ACH timing, taking between four and five business days to complete. Faster transaction times like Next Day ACH or Same Day ACH can shorten that timeline dramatically but do come with additional considerations for the business.

Platforms that offer this type of functionality and incentivize bank transfers instead of credit card transactions are often reinvesting those funds back into the platform as a “rewards program.”
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Create an Instant Payment Network

Fund flow - Send and Receive: End Users with arrows to Dwolla Balance then arrows to End Users. Create your own B2B or C2B payment network utilizing a digital wallet for business.

Aside from creating a B2B payment network for the back of the house, what food tech platforms are doing is reimagining payments for the front of the house.

In the food services industry, credit cards and checks are what we know best. Plus, credit card companies incentivize usage with rewards! Why shouldn’t the consumer choose the option that comes with a small percentage back on each transaction? And when everybody isn’t carrying around their account and routing information, adoption of any new payment method isn’t going to come easily.

Which is why bank transfers are still growing in popularity.

From the merchant perspective, credit card fees have been taking bites out of their revenues for years. It was accepted as the cost of doing business. As interest rates continue to increase—and with restaurant profit margins averaging between three and five percent—restaurateurs and franchisees are being forced to find alternative payment methods.

With desperation comes innovation, helping increase the adoption of bank transfers.

We’re seeing franchises and restaurant groups work with tech platforms to recreate the familiar “Venmo” or “Zelle” experience and adopt bank transfers. To increase adoption, these platforms incentivize consumers to add a bank account by providing rewards after making a purchase, similar to credit card rewards, which can then be redeemed at any of the establishments within the group’s chain that are also utilizing the food tech platform!

What this looks like in practice from a point-of-sale perspective involves going through an account verification process to connect a bank account and permissioning that data to be used for initiating a credit or debit transaction.

Once verified on the platform, funds can be loaded into the newly created Dwolla Balance and an instant transaction can be initiated from one balance to another. If those franchises and restaurant groups work with a platform that has embedded the Dwolla API, a unique differentiator in addition to payment functionality would be offering instant payments for verified consumers or merchants.

When both parties have been verified with the API, whether it’s a merchant or a consumer, a transaction from balance to balance will happen instantly.

You can view more information about transfer lifecycles in this API documentation.
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Disrupting an Industry

It takes imagination to create your own B2B or C2B payment network, especially in an industry that is so tightly associated with supporting one type of payment method.

Listen to Dwolla CEO Brady Harris on the GrowthCap Podcast discuss the pricing differences between credit card transactions and bank transfers—along with the future of fintech.

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