In early February, Visa (NYSE:V) announced it would be acquiring Fraedom, a software-as-a-service company that provides businesses and financial institutions with transaction and expense management solutions. Many of the products Fraedom offers concern expense management and accounts payable, providing organizational, mobile, and technological answers for companies struggling to keep up with technology in today's business world.

Upon the announcement of the acquisition, Visa's global head of products and solutions, Vicky Bindra, stated: "Increasingly, businesses are replacing inefficient paper-based payment systems with digital tools. This strategic acquisition allows Visa to offer a more comprehensive business solution to our corporate clients that is innovative, global, highly configurable, and intuitive for their employees."

Colorful credit cards loosely stacked in pile.

Visa acquired Fraedom, a software-as-a-service company that provides expense management and invoicing solutions to businesses. Image source: Getty Images.

Fraedom has been a business partner with Visa for over a decade and has provided the technology behind many of Visa's platforms for commercial customers. The terms of the deal were not disclosed.

B2B is the place to be

While much of the fintech world is focused on P2P payments (the sending of funds from one individual party to another), a potentially much greater opportunity exists within B2B payments -- the act of a business entity sending money to another business. Last year, Mastercard (NYSE:MA) CFO Martina Hund-Mejean estimated the global B2B payments arena to be about $124 trillion, of which "only" $20 trillion is negotiated at a point-of-sale. The rest is facilitated using ACH transfers, checks, and cash.

Visa certainly sees this opportunity, too. Last June, the company launched the Visa Ready Program for Business Solutions, a structure that would allow third-party vendors to more easily integrate with Visa's B2B platform. At its Analyst-Investor Day last summer, Visa president Ryan McInerney called the B2B space a "significant expansion opportunity," where the majority of payments were still being handled with checks and ACH payments. One of the biggest opportunities McInerney identified in the space was accounts payable, which also happens to be one of Fraedom's areas of expertise. About accounts payable, McInerney said:

It's an even bigger opportunity. Here, we've developed a full suite of capabilities to automate payments based on electronic invoices, then we run payments to suppliers over our network. We typically partner with third parties ... and what we've done is we've integrated our invoice-to-payment capabilities directly into their platforms.

It appears Visa determined it could not live without one of those third-party partners.

Winner to be determined 

Of course, Mastercard will not give up the B2B space without a fight. Last summer, Mastercard obtained a controlling interest in AvidXchange, a company specializing in automating invoicing and payment procedures. Mastercard might also have a leg up in this space because of its 2017 VocaLink acquisition, a provider of a Fast ACH network in key financial markets around the world. Because so many B2B transactions are accomplished with ACH transfers, Mastercard firmly believes this addition will help it secure greater market share in the B2B space.

Not surprisingly, Visa disagrees! Visa management believes its Visa Direct product is not only comparable to VocaLink in that Visa Direct can match all of VocaLink's capabilities, but that it's better because Visa Direct is a global system, while all ACH networks are contained within countries. At last year's J.P. Morgan Global Technology, Media, and Telecom Conference, after reviewing what the company believed were the benefits of Visa Direct, CEO Al Kelly added, "So we're not really plussed by [VocaLink]."

Of course, this back-and-forth just demonstrates the enormous opportunity in the B2B space for both of these companies as back office payments move into the digital world. The truth is that both of these companies will probably be winners as this massive shift begins to take place. When viewed through that lens, it's hard to miss that Visa's acquisition of Fraedom was a good move for the company. The more bells and whistles that Visa can offer to its prospective clients, the more likely it is to win deals and market share moving forward. Ultimately, though, this virgin territory probably offers plenty of upside to both Mastercard and Visa shareholders in the years ahead.

Matthew Cochrane owns shares of Mastercard. The Motley Fool owns shares of and recommends Mastercard and Visa. The Motley Fool has a disclosure policy.