Everything You Need to Know About B2B Payment Solutions 2022/2023.

Over the past decade, disruptive payment technology has become the norm, and the modern customer is here for it. With increased automation, the market is flooded with an array of B2B payment solutions, which make it much easier for large and small businesses to network and connect globally. With so many options in the consumer arena, it can be challenging to figure out the right payment option for your business. Therefore, we have cut through the clutter and identified everything you need to know about B2B payment processing, popular options, current trends, and how to choose the right payment solution for your business.

Payments Overview

There are different B2B payment solutions ranging from electronic options like wire transfers and credit cards- to paper forms, such as paper checks and cash. With increased fintech innovation, digital payments have become popular as they are faster and more flexible to process, which improves a business’s cash flow. However, paper checks are still the most preferred in the B2B arena.

Regarding innovation, B2B payments have lagged behind business-to-consumer (B2C)payments because they are impacted by different elements that do not apply to consumer payments. Typically, enterprises handle a higher volume of transactions and have longer processing times due to checks and balances. Comparatively, consumer payments are often settled immediately. Given the complex nature of B2B transactions, most merchants prefer payment options that can be easily tracked. Up to 40% of B2B payments are made via paper checks. When choosing a payment processor for your business, you are advised to factor in elements such as invoicing, accounting and tracking.

What are B2B Payments?

Business-to-business (B2B) payments refer to monetary transactions between two merchants for goods or services provided. The costs are conducted between startups, retailers, wholesalers, or corporations and are contingent on the needs of the buyer and the seller. Usually, B2B payments can be single or recurring, depending on the terms between the sender and the receiver. Although digital payment solutions are the most effective and preferred, paper checks are still a big part of the B2B payment space.

What are the Most Common Methods of B2B Payments?

Merchants need to understand the intricacies of various B2B payment solutions to ensure they do not struggle to receive payments. Each method differs depending on the ease of use, accessibility, transparency, and security. We have identified the top B2B payment methods and how they can impact your business.

Cash

Even with digital payments on the rise, cash is still the most straightforward payment option. This method is typically quicker and easier to process. However, for B2B transactions, cash payments can be unreliable and cumbersome. Notably, it can be highly challenging for the merchant to track anything over a few hundred dollars in transit, complicating budgeting and accounting in the long run. Not to mention that large cash payments are subject to significant regulations, making it inefficient for B2B transactions.

Paper Checks

Paper checks have been around for decades now. Although their use has significantly declined in the consumer arena, they are still prevalent in the B2B payment space because of their security. Checks offer more fraud protection than other faster payment methods, making them ideal for B2B payments where speed is of less concern. Paper checks offer a definitive audit trail that allows brands to track their inventory and cash flow better, which cannot always be possible for some digital payments. Some pros of checks include the following:

• They make budgeting easier
• They offer flexibility in scheduling because they do not need to be deposited immediately
• They are traceable
• For both merchants, there is no need for a bank account to cash checks

Wire Transfers

Wire transfers are the most popular B2B payment option because they are simple, quick, and highly flexible. They are particularly preferred for international and larger payments and can be initiated from a bank or non-bank institutions, including MoneyGram and Western Union. If you use this method, you should factor in additional transaction fees because wire transfers are rarely free. In most cases, the sender and the receiver may be required to pay a processing fee to initiate the payment.

Generally, wire transfers are secure. However, they cannot be refunded or cancelled once payment has been initiated, a factor that can lead to fraud and manipulation. As such, merchants are advised to use this method for periodic payments instead of recurring or bulk business payments.

Digital Payment Platforms

Over the past few years, there has been an increase in the use of fintech platforms to make payments. Some of the most popular platforms include

• Paypal
• Cash app
• Google Pay
• Skrill
• Venmo

Paypal has been a standard B2B online payment platform for over 20 years. It offers a platform built for businesses and doubles as a peer-to-peer payment network. On the other hand, Cash App is part of Square’s suite of business services with accessible business functionality. At the same time, Google Pay allows for integration with multiple G-Suite apps and services, including Gmail. Both methods prioritize ease of use, privacy, and security.

Users of digital payment platforms also embrace their social aspect and often leave comments and feedback alongside the transactions. Although this payment option is popular, it is expensive for B2B payments because most fintech platforms charge a flat fee or a specific percentage per transaction.

Credit Cards

Credit cards are a standard payment option for most e-commerce businesses and SaaS companies offering subscriptions. Although this method is reliable for B2B firms, most credit card payments have percentage transaction fees. The transaction fees can quickly compound and become extremely expensive for companies that typically process large payments. In addition, credit cards have a maximum transaction limit, which can make it impossible to complete large amounts. Also, hitting the credit card maximum can result in delinquent churn among the most significant Saas and subscription churn contributors.

Cryptocurrency

Cryptocurrency has become increasingly popular for cross-border B2B payments. Ideally, the details of every crypto transaction are validated and recorded in a blockchain, where they can be publicly viewed. Significantly, this method of recording restricts single entities from manipulating the data, making crypto one of the most secure online payment methods. As the global demand for goods and services rises, most clients seek speed and convenience regarding payment methods. B2B cross-border payments are estimated to reach $35 million in 2022. Most multinational firms have incorporated crypto as part of their cross-border payments. Some of the main advantages of crypto include the following:

• Inherent speed
• Security
• Transparency
• Does not require expensive technology
• Low transaction fees
• No chargebacks

However, crypto markets have various disadvantages, making them less attractive for processing B2B payments. These include the crypto market’s volatile nature, the US’s unclear regulations, and complicated transaction processing.

ACH Payments

ACH (Automated Clearing House) is a popular electronic payment method in the B2B space. Ideally, Nacha, a US-based financial institution, regulates ACH funds transactions. With this method, the payment arrives at your merchant account using a routing number. It is a generally secure way of sending money. Most business owners prefer it because it is free, safe, and efficient. In addition, it is easy to track as it offers a monthly statement listing all your monthly payments.

One of the biggest cons of ACH payments is that it only works in the U.SUSo making cross-border payments is not an option. For small businesses planning to expand internationally, it is advisable to incorporate another payment method, preferably one with fewer transaction fees. Furthermore, ACH payments take more time and are ineffective in real time. Therefore, they do not offer the convenience that most businesses desire.

The Current Situation with B2B Payments

Since the pandemic, the B2B payments landscape has significantly changed as more businesses transitioned to digital methods. Today, B2B vendors and buyers seek the same convenient experience they have in their personal lives with payment pioneers such as Amazon and Venmo. A recent study predicted that about 50% of B2B payments would be digital in the next three years. Efficiency and cost are some of the most crucial concerns for ARAR and APAP teams. With the shift towards digital payment platforms, chief financial officers are under pressure to refine cash flows, reduce unpaid invoice write-offs and streamline workflows.

Other factors that affected B2B payments include the work-from-home migration. Traditional AR processes and paper-based workflows complicated this transition, and most organizations experienced payment delays and errors. As such, most business owners seek to improve RAR performance, especially when work is done remotely.

With all that said, it is surprising to learn that approximately 90%of B2B payments still happened offline in 2021. It seems that B2B payments are not moving with the times and technological innovations. Even with the introduction of digital payment platforms, most business owners still feel that the available e-payment options are lacking. For instance, finance professionals claim that one of the main obstacles to using electronic payments is the lack of integration with the accounting system. B2B transactions have more complex needs than B2C payments. This means there is still a need to develop and customize the current digital payment platforms to fully suit the needs of B2B payments.

The Most Popular B2B Trends

Given the dynamic nature of the B2B market, merchants should keep up with the new trends to maintain their competitive edge in future transactions. Currently, some of the most common movements in the b2b payment arena include:

1. Increased use of Mobile Devices

Mobile devices are top-rated in B2C because of their flexibility and convenience. Correspondingly, more merchants are incorporating mobile transactions as payment solutions in B2B. Businesses in the food supply and transportation industry could immensely benefit from mobile payments’ autonomy. As the demand for convenience continues to rise, companies will start rolling out mobile capabilities to increase flexibility and keep up with the changes in the market.

2. Declining use of paper checks

With the introduction of newer, faster, and more flexible forms of payment, paper checks are quickly becoming a thing of the past. Today, most businesses opt for credit card payments and digital payment platforms, which are more expedient and popular. According to a recent Federal Reserve Payment Study (FRPS), paper checks will be phased out in the next few years as large and small businesses embrace fintech platforms.

3. The growth of Deferred Payment solutions

Even with cash flow difficulties, Buy Now Pay Later policies (BNPL) continue exponentially growing in the B2B arena. Allied Market Research estimates that BNPL solutions will be a $3.98 trillion industry by 2030. As a result, B2B BNPL solutions are increasingly being funded worldwide to keep up with future demand.

4. Increased automation in Accounts PayablAR(AR) and Accounts receivable(AR)Departments

During the pandemic, businesses could not send invoices and pay bills properly as the manual processes and paperwork were challenging to execute due to the strict lockdown rules. This increased payment and invoicing delays, forcing most merchants to automate the AP AP aAR AR departments. As more businesses shift towards automated AR/AP processes, it is estimated that about 41% of AP AP teams will be completely automated in the next three years.

5. High demand for Real-time Payments

Real-time payments offer greater security, scalability, and efficiency, which are in high demand in B2B. Most businesses are adopting real-time prices to improve the efficiency of their payment systems, reduce systemic risks, and respond to technological innovation. This approach’s main advantages are compelling e-invoicing and billing, better liquidity management, and optimized work capital.

What Challenges Are Typical For B2B Payments?

While B2B transactions have existed for years, they have their fair share of challenges.

• Too many payment mediums
• Increased risk for fraud
• High transaction fees,
• Lack of visibility
• Fluctuations in processing time.

The wide range of B2B payment mediums can create hurdles for merchants settling their bills quickly and efficiently, mainly when two transacting businesses accept different payment methods. The complex B2B payment landscape makes it much more difficult to track payments, increasing the risk of fraudulent activity. In 2020, approximately 74% of businesses were impacted by payment fraud.

The high transaction fees are also a challenge regarding B2B payments. Ideally, most B2B payment solutions have additional fees, while some include costs associated with sending and receiving money. These transaction fees also increase the time taken to process payments as business owners find themselves managing outflows and inflows instead of handling other business issues. Although larger businesses have a little problem with these costs, medium and small businesses can be negatively affected.

Why Should You Use B2B Payment Solutions?

✅ Increase your cash flow

Automating your B2B payment solutions plays a significant role in tracking your incoming and outgoing cash flow, saving you from cash flow issues. Usually, payment software and apps offer you a detailed overview of your AP aAR AR processes. In addition, automating your payment methods eliminates any hassle and allows your customers to pay you quickly. You also receive your payments faster, shoring up your cash flow.

✅ Save your time

B2B payment solutions save you time by simplifying the payment process and improving security. Most B2B payment platforms keep customer information, which is excellent for recurrent billing. With such platforms, you do not need to spend time updating your customer info, and the payment processes are faster. You can channel your efforts towards other essential matters.

✅ Transactions visibility grows

With B2B payment solutions, you receive complete transaction visibility, which you can integrate with your Enterprise Resource Planning (ERP) solution to share this view with the entire team. In doing so, your organization spends less time tracking invoices and payment status. You can quickly evaluate payment costs, discount capture, earned rebates, and accounts payable overall health.

✅ Enhance Security

As most B2B payments occur through an independent platform, you do not need to be in charge of security. Most payment platforms come with their own security protocols and official seals. Although you can intervene when necessary, the media handle all the technical and safety responsibilities. In addition, using them makes your customers trust you more.

✅ Increase your Transactions Efficiency

Using traditional methods to pay your invoices takes a lot of time and manpower. With B2B payment solutions, you can automate manual and repetitive tasks, improving the efficiency of your transactions and allowingAPour the AP team to dedicate their efforts to other essential business strategies.

What Features Should a B2B Payment Platform Have?

There is a lot of variety regarding B2B payment platforms. However, a successful B2B payment solution should have the following features:

• Escrow-type service
• Fast payment collection
• Fraud prevention features
• Automated reporting
• Analytic features
• Guarantees for both the seller and the buyer

Most B2B payment solutions typically include a payment gateway and a merchant account, while others focus on subscription management and data collection. Therefore, business owners should choose the platform that best suits their business needs. With the right B2B payment platform, you will have no issues maintaining a price strategy that allows your organization to grow.

The Bottomline

You might lose your competitive edge if most of your transactions are manual and you still use offline payment methods. Surveys show that most B2B companies are automating their payment processes to keep up with industry trends and are reaping the benefits. When choosing the right payment solution for your enterprise, identify all the features you need, the transaction fees, the ease of use and your client’s preferences. The perfect payment processor will ease your work and allow you to focus on other important business matters.