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Modernizing B2B Payment Methods

Automation and “smart” technology are driving changes in almost every sector. From how consumers shop to how products are manufactured, these advancements and more like them are shaking the world left and right.

One area that has been slower to adapt to these innovations is business-to-business (B2B) methods of payment. While customer-to-business (C2B) payment methods were quick to acclimate, B2B payments are only just starting to keep pace. Here is a brief look into how disruptive payment technology is modernizing B2B transactions.

First, what are B2B payments? Put simply, they are the exchange of currency for goods or services supplied between two business entities. The payments may be recurrent or on a one-time basis, depending on the buyer and seller’s agreement terms. Such business entities might include manufacturers, distributors, corporations, wholesalers and retailers.

With B2B commerce, purchases are often expensive and involve large quantities of goods. This makes purchasing decisions arduous and the process takes notably more time than typical C2B transactions. What’s more, there are numerous factors affecting timeliness such as purchase volume and payment histories as well as the relationship between the buyer and seller.

For these reasons and beyond, the B2B payment network has long revolved around manual and paper-based processes. However, there has been a shift toward cloud-based, automated payment systems recently. More and more, B2B buyers and suppliers are adopting methods of digitization as they can considerably simplify the buying and selling process while delivering business payments faster and more efficiently.

Although it didn’t cause the shift, the pandemic played a role in accelerating this digital transformation. In fact, 68% of small businesses reported they had to decrease their use of cash and paper checks — because deposits took too long during this timeframe — and turn to new, more efficient methods. As it looks now, it’s predicated that by 2025, 80% of B2B sale interactions will occur in digital channels.

Efficiency isn’t the only draw. Cost-effectiveness is a leading attraction to digital and smart disbursement methods. A report found electronic invoice payment processes cost 60% less on average than their paper-based counterparts. High processing costs are listed as a top challenge for 35% of businesses. Typical accounts payable (AP) organizations see a price of nearly $8 to process a single supplier payment.

One new and fascinating payout method is cryptocurrency and blockchain technology. In 2019, only 8% of firms were using cryptocurrency as a payment solution. That percentage has not increased significantly in the U.S., yet international businesses are benefiting from the transformations it’s prompted. For instance, fees in global transactions can see a 75% decrease with crypto payments when compared to wire transfers.

While check and cash remain the most popular option for B2B payments at 45%, there’s no denying smart and electronic disbursements are the future. For further information on B2B payment methods and additional emerging trends, please see the accompanying resource.

Guide created by CardConnect

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