How the B2B Payments Process Can Benefit from Going Digital

Traditional B2B payments rely on manual systems

Widely used B2B payment options presently include:

  1. Instant credit granted to the customer after they undergo a financial evaluation.
  2. Trade credit that is equal to goods or services.
  3. Cash on delivery, where the customer pays cash for goods or services to seller upon delivery.
  4. Checks printed on paper and mailed to merchant.
  5. Wire transfer, where money is transferred from one bank account to another, usually through a third-party facilitator.
  6. ACH transfer from one bank account to another.
  7. Purchase order placed by buyer, followed by invoice delivery, and payment collection.
  8. Credit card payment made using a personal or company credit card.
  • Buyer obtains a credit line after a financial review.
  • Buyer and seller agree to an amount equal to goods or services in trade.
  • Cash is paid to the seller when the goods or services are delivered.
  • Paper checks are customary, and need to be printed, packaged, and sent by mail.
  • Money is transferred through a third-party facilitator from buyer to seller account.
  • Money is transferred directly from one bank account to another.
  • Buyer places an order, they receive an invoice, and payment is collected.
  • Payment is made with a personal or company credit card.

Digital payments are about efficiency, not speed

The eternal conflict between buyers and sellers in the B2B space about the acceptable speed of a payment has often overlooked the many other benefits that digital payments can bring. The industry could stand to be revolutionized through digital payments . . . and it’s not (just) because they’re faster.

More payment transparency

First, B2B buyers could take advantage of the transparency that digital payments bring. Getting instant confirmation of payments could reduce the risk that is sometimes associated with these transactions.

24/7 availability

Unlike traditional payment methods, digital payments do not depend on the working hours of a specific institution or bank. This means the buyer would benefit from being able to resolve their payment any time of the day, regardless of operating hours.

Richer payment information

Another benefit of digital payments is the availability of rich information associated with the payment. Most digital payments employ the ISO 20022 standard, which standardizes the type of information attached to the payment. With digital payments, the shopper receiving a pay request could, for example, choose to pay just part of the payment, clearly including the information about what is paid directly in the transaction flow. The presence of payment information in the transaction data saves companies on both the merchant and the buyer side a lot of time that would have been used reconciling data over the phone, in an email, and so on.

More payment methods available

Via digital payments, buyers have access to a multitude of payment alternatives that are not usually available when paying through traditional means. Modern checkout alternatives have the flexibility to include as many and as local payment methods as necessary, allowing a merchant to spread their global reach.

  1. Mobile wallets and virtual credit cards. More banks and financial services companies are beginning to provide digital B2B payment solutions, and adding API-enabled interfaces to generate faster, more secure B2B transactions. One-time-use virtual credit cards are now more widely used to pay for goods and services. PayPal and Bank of America offer mobile wallet payments to B2B companies, a wildly convenient alternative to purchase orders, invoices, and paper checks.
  2. Third-party financing. Third-party financing is when a business uses a third party (not themselves or their vendor) to finance a purchase. Digital payments could disrupt the process by revolutionizing the way businesses and consumers interact with banks and offer financing without the use of a financial institution.

More affordable payment costs

While traditional payment methods are known to be associated with high costs — 62% of which are labor costs — digital payments can bring more efficient spending. Given that the whole process is automated, the price tag that comes with the service is obviously lower.

Last minute payments as an option

The speed of digital payments could bring an unforeseen benefit for buyer companies. Because these types of transactions can be instant, a merchant would have the option to pay his bills the very due day, without worrying about being in breach of terms. This option also paves the road for automation of invoice payments.

How B2B companies can successfully transition to digital

Fortunately, several banks, fintech firms, and industry specialists offer B2B payments platforms, and new companies are entering the space every day. The Federal Reserve, NACHA, The Clearing House, and ClearXchange are all working on offering faster electronic payments in the US, such as same-day or real-time payments. ACH is increasingly being used over checks.

What should B2B companies look at before going digital

What a business sells and what its model and cash flow look like will make a difference as they move from a manual approach to a digital process. Companies should consider the following:

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2Checkout (now Verifone)

2Checkout (now Verifone)

2Checkout (now Verifone) is the leading all-in-one monetization platform for global businesses built to help clients drive sales growth across channels.