An overview of the current B2B industry and the benefits of accepting digital payments for B2B businesses.
B2C businesses have adopted digital payments as the preferred payment method due to speed, simplicity, and smooth experience. However, B2B businesses are still backward in terms of digital payments incorporation because the B2B sector is yet to unreservedly endorse the critical selling point of digital payments - speed.
Typically, the B2B business sector has always been characterized by lengthy payment processing timelines, and buyers have become accustomed to such traditions. Today, corporate buyers are still adept at opening invoices, paper checks, bills of lading, or even purchasing against an account for more significant transactions, which can take days, sometimes extending to weeks for payments to be settled.
Although sellers would prefer to get timely payments, buyers have become used to prolonged payment timelines, leaving funds under their custody for extended periods. Hardly 50 percent of all B2B buyers are interested in instantaneous settlements; hence the reason why speed has not drawn their attention as of yet.
B2B payments Industry Challenges
B2B payment services are a significant income stream for any corporate business and an indicator of trustworthiness. The prospects surrounding the efficiency and suitability of settlements are growing at a rapid pace. For B2C payments, technological advancements such as mobile-based and contactless payments have revolutionized the settlement experience.
Even in the current digital age, B2B payments are still old school, paper-based and rigid. Manual procedures remain popular in balancing purchase orders and goods received notes, bank accounts, Accounts Receivable, Accounts Payable, and client contracts. Besides, most corporate businesses rely on manual checks to confirm the authenticity of a customer, business associates, and exchange of products. These manual procedures are arduous and expensive to change to enhance efficiency or meet regulatory requirements.
The five most prevalent B2B payment options today include:
Credit cards: Credit cards are among the primary drivers of B2B payments. Corporate or personal credit cards have provided B2B businesses with a convenient and effective way of facilitating payments and cash flow over the years.
ACH payments (Automatic Clearing House): ACH transfers involve transferring from one bank to another.ACH payments can only be used within America and have other shortcomings such as delays.
Bank wire transfers: Funds are moved from one account to another through a mediator. They take time.
Paper checks: Checks printed on paper have seen a massive decline over the years. However, B2B businesses are still using them to settle payments.
Cash payments: Cash payments have been facilitating B2B payments faster than any other kind of payment. Payments are made upon delivery of goods, minimizing extra expenses.
A couple of years back, there were just a few ways to make B2B payments, and digital payment methods were only a pie in the sky. Nevertheless, fresh B2B payment methods have emerged, and the market is experiencing dramatic expansion until the advent of the COVID-19 pandemic. From middle-level businesses to vast global enterprises, the aftermath of the coronavirus pandemic has hugely accelerated the migration towards digital payments.
The global pandemic disrupted many enterprises, and a considerable number of employees were forced to go about their daily routines from home. Many companies with premise-based legacy settlement systems are abandoned in offices, and paper checks stack in offices across the world. This went down at a period when cash flow was severely needed to keep businesses afloat, as both suppliers and buyers recognized that incorporating the most effective digital payment systems could facilitate settlement reconciliation.
Benefits of Accepting Digital Payments
Digital B2B payments are overhauling paper processes one after another, which is not quick enough in a real-time engrossed commercial space. Companies now need to get quicker. As digital systems obliterate trade barriers settlement friction, here are some of the benefits of accepting online payments for B2B businesses:
1. Near-instant payments
The world of business is fast growing impatient with payments, and one of the significant advantages of incorporating online payments is the speed. Digital payment of invoices is fast and seamless. With online payments, you will not have to wait for a paper check to arrive and be cashed out to your account. This takes time and cannot be cashed out during weekends or public holidays when banks are closed. On the other hand, digital payments are processed in less than 5 minutes, and they can be processed at any day, any time.
2. Easy to incorporate
Digital payment systems are easy to establish and operate effectively with your financial plan. The account creation process for many online payment platforms is nearly the same. You can easily create an account, incorporate it into your business and begin accepting payments within a few minutes.
Most of the digital payment platforms charge zero onboarding fees, unlike internet and mobile banking. Besides, the transaction fees are more reasonable compared to traditional B2B payment methods. Some digital payment processors exempt the payment of transaction fees until the client reaches a certain threshold, which is beneficial for smaller and mid-sized businesses.
4. More cash flow transparency
B2B businesses should exploit the benefits of transparency and openness brought about by online and digital transactions. Real-time confirmation of payments could curtail the challenges associated with high volume transactions and payments.
5. New leading payment methods
Through digital B2B payment methods, businesses and clients can access many payment options that are not available in the traditional payment method. Advanced checkout systems have allowed merchants to incorporate as many domestic payment methods as possible to expand worldwide reach and flexibility.
By good luck, many banks, fintech companies, and payment processors are providing B2B payment solutions, and many players are entering the sector each passing day. Flexibility is vital nowadays and providing clients with a combination of traditional and digital payment options is not only an intelligent move but necessary. Chalking off traditional payment options is not reasonable, nor is disregarding the new frontier of digital payment systems.