In the dynamic realm of B2B transactions, the payment ecosystem serves as a critical conduit driving operational efficiency and financial stability.
This article delves into the multifaceted landscape of B2B payment trends, confronting challenges, diverse types, and the compelling benefits they offer.
B2B payment ecosystem
B2B payments are the exchange of goods or services supplied for a determined value that is denominated in currency. B2B payments can be recurring or single transactions, depending on the terms set between the buyer and seller.
Paper checks still make up a large part of the payment space, but digital B2B payment solutions are a more effective form of financial services. This B2B method speeds up issuing, receiving, and processing payments and helps to greatly improve positive cash flow.
Pedro Silva, Alviere’s COO, explains the B2B Payments Ecosystem, giving businesses control over supply chain payments, cost reduction, and streamlined processes through trends like closed-loop systems and direct account-to-account payments.
The B2B payment ecosystem is undergoing a transformative evolution, spurred by technological advancements, changing consumer behavior, and globalization.
As organizations seek streamlined processes and enhanced liquidity management, understanding the intricacies of B2B payments becomes paramount.
The most popular types of B2B payment methods
Credit Cards
A credit card is one of the primary vehicles for B2B payments. They provide a convenient and inexpensive way to facilitate transactions and float cash. In addition, card payments can be easily tracked at month-end with an electronic or paper statement.
ACH Payments (Automated Clearing House)
ACH, which stands for Automated Clearing House, is another form of B2B digital payment that’s faster and more efficient than hard-copy methods.
This type of transaction moves electronically from one entity to another using a routing number and bank accounts. Because they’re so simple, ACH payments work great for B2B recurring payments.
Wire Transfers
Much like an ACH, wire transfers are a digital form of payment that facilitates B2B transactions. For real-time payments, companies often use wire transfers for e-commerce and other digital transactions.
PayPal and Other Digital Payment Platforms
Another form of a B2B digital payment option is using an online platform from a fintech brand. You may have heard of companies like:
- PayPal
- Venmo
- Google Pay
- Dwolla
- Skrill
Major challenges in B2B payments
Despite the availability of various payment solutions on the market, businesses continue to face significant challenges in the B2B payments process. Diverse geographies, policies, regulations, and levels of business maturity have created numerous payments challenges for enterprises.
High Transaction Fees
High transaction fees charged by payment providers are one of the most significant pain points for B2B payments. These fees, which can quickly eat into profit margins, can be especially burdensome for businesses with high transaction volumes.
Payment Security
Another major issue for B2B payments is payment security. With the rise of cyberattacks and fraud, businesses must ensure the security and protection of their payment processes.
Payment Delays
Payment delays are a common source of frustration for businesses when it comes to B2B payments. These delays can cause cash flow issues as well as strained business relationships.
Payment Options
Many B2B payment providers offer limited payment options, which can be inconvenient for businesses with specialized payment requirements.
Lack of Payment Visibility
Another major issue for businesses in B2B payments is a lack of payment visibility. Businesses may be unable to identify and address issues before they escalate if they do not have real-time visibility in their payment processes.
Top B2B payment trends for 2024
Digital Payments
The shift from traditional payment methods such as cheques and cash to digital payments, including ACH (Automated Clearing House), wire transfers, and electronic invoicing will continue to gain momentum.
A digital payment service allows business customers to pay for goods using a digital device in real-time. Also known as electronic payments, examples of B2B digital payments include:
- Shop Pay
- PayPal
- Venmo
- Apple Pay
According to Business Wire 2023, 73% of consumers prefer to shop and pay with digital methods.
Real-time payments
Real-time payments, also known as instant payments or RTP would enable prompt transactions to be made. Buyers can pay vendors in a matter of seconds, and complete orders in good time with no delays.
This also improves cash flow so businesses can easily predict how much money they are set to have and they can distribute funds accordingly.
By 2027, Global Data forecasts that real-time payments will make up 27.8% of all electronic payments globally.
Enhanced Cross Border payments
The globalization of businesses will lead to an increase in cross-border transactions, driving the need for more efficient and cost-effective payment solutions that can handle multiple currencies and regulatory environments.
Cross-border payments across the globe are predicted to rise from $190 trillion to $290 trillion by 2030.
Collaborative partnerships between card companies, payment processors, and banks are expected to streamline cross-border transactions.
Mobile payments and digital wallets
Mobile payments enable a business to pay for goods, services, and items on mobile with a quick tap on a machine. This shift to mobile is driving a change in preferred payment methods for business customers.
Mobile payment systems also offer built-in biometric authentication, which protects your business from credit card fraud.
For C-suites often on the go, mobile payments enable them to confirm and trace payments whenever they are. They are not just limited to a desk. Thus, Mobile payments are estimated to hit $607.9 billion by 2030.
Cryptocurrency payments
The adoption of cryptocurrencies like Bitcoin and Ethereum, as well as blockchain technology, will become more widespread for B2B transactions, providing greater security, transparency, and efficiency.
Cryptocurrency payments are one of the B2B payment trends for 2024. Therefore, according to Trust Piar, it is predicted that International B2B blockchain transactions could hit $1.7 billion by 2025.
One of the reasons they are popular is that they work on decentralized networks (unlike banks). There are no middlemen and therefore, extra fees.
Virtual cards
One of the B2B payment types that is trending is virtual cards because of their ease. Virtual cards and payment cards will continue to gain traction in the B2B space, providing a secure and convenient way for businesses to manage expenses and supplier payments.
According to Straits (2022), In the Virtual Cards Market, North America has established itself as the market leader with a significant market share.
The benefits of virtual cards are:
- Can control spending with spending limits
- Secured by a unique credit card number
- Cheaper than a paper check
- Integrate with accounts payable software
AP/AR Automation
Businesses are no longer solely relying on manual accounts payable (AP) and accounts receivable (AR) processes, such as paper checks and cash.
In fact, according to a study by PYMNTS and American Express, firms that depend on manual processes take 67% more time to follow up on overdue payments than firms that use automated AR.
As a result, 70% of B2B companies are taking steps to automate their AR processes in order to better manage cash flow and accelerate operations.
According to MarketsandMarket (2023), Switching to automated payables cut accounts receivable departments’ operating costs in half and manual processing by 85%.
AI & machine learning
The use of artificial intelligence and automation to secure payments is only becoming more popular. A study by Forbes Advisor found that more than half of businesses are using AI to help with cybersecurity and fraud management.
AI also plays a part in automated payments. It can arrange invoices, send payments for approval, and complete payments all without an employee needing to intervene.
AI-powered finance solutions are gaining traction, offering improved cash flow and transaction security. AI can automate payment processing and enhance fraud prevention and detection, streamlining operations and safeguarding against anomalies in transactions and personal data.
Conclusion
As businesses navigate the intricate terrain of B2B payments, a nuanced understanding of evolving trends, persistent challenges, diverse payment types, and compelling benefits is essential.
By leveraging innovative solutions and fostering strategic partnerships, organizations can optimize their payment ecosystems, driving sustained growth and competitiveness in an increasingly interconnected world.
For personalized guidance and insights into optimizing your B2B payment strategy, contact us to reach out to our team of experts.
