The Role of Interoperability in Creating an Efficient Global B2B Transaction Platform

B2B electronic transaction platforms help business buyers and sellers find each other; help businesses manage procurement; and facilitate invoicing, payment and financing. A number of these platforms have emerged since the mid 1990s. Although the preponderance of transactions involve paper, these electronic transaction platforms are growing at an annual rate of 25 percent and are chipping away at traditional paper-based ways of doing business. The B2B platforms compete by trying to persuade buyers and sellers to join their platforms and in investing in value-added services, including establishing supplier networks. Like most multi-sided platforms, transaction platforms do not interconnect or interoperate with each other. While it may make economic sense for B2B transaction platforms to work together some day, recent calls to make these platforms interoperate at no charge would tend to encourage networks to free-ride on the efforts of others to recruit buyers and sellers. If networks can attain critical mass by hooking into the buyers and sellers of their rivals they will invest less in value added services and tend to enter into a race for the bottom which involves less cost and more profit. Increased interoperability may occur naturally in this industry in response to customer needs and with increased consolidation