While paper-based, manual methods may have once dominated the B2B payments ecosystem, cloud-based, automated payment systems have become more prevalent recently. Due to the tremendous simplification of the purchasing and selling process brought about by digitization, B2B buyers and suppliers may now transact business payments more quickly and effectively.
What are B2B Payments?
B2B payments, or business-to-business payments, are the exchange of currency between two business entities for goods or services supplied. Depending on the terms of the agreement between buyer and seller, these payments may be made once or regularly, and business entities may include corporations, wholesalers, retailers, manufacturers, or distributors.
B2B payments are more complicated than B2C payments because they require more time to authorize and settle, which could take days or weeks. In contrast, the transaction is often finalized immediately in B2C payment processing.
B2B Payment Trends in 2023
B2B eCommerce enterprises must be informed about current trends and what's to come in electronic payments, given the constantly shifting landscape. Here, we'll break down six of the most popular B2B payment trends and discuss how you can keep up.
1. Decline of checks
The rapid demise of paper checks is not a surprise. Nevertheless, despite a gradual fall over the previous 20 years, commercial check usage reached an all-time low in Q1 2023. Although checks may seem old-fashioned, many businesses are reluctant to let go of deep-rooted operations and systems that may be difficult to digitize. However, amid the global pandemic, switching to real-time payments and electronic transactions has been essential for many remote businesses.
2. Smart payments
Unfortunately, even while the concept of electronic payments may be appealing, some businesses still need to be convinced to change. The payment procedure might become more challenging when using electronic payments like ACH (automated clearing house). Remittance information, such as invoice numbers, payment methods, and amounts, moves separately, making it easier for suppliers to identify the charges they belong to right once. Accounts receivable experts must, therefore, manually match ACH payments with the appropriate invoice.
Luckily, with the rise of contactless and remote payments comes to the advent of "smart" payment methods, which allow for more electronic payments without the added manual work. As a result, the data flows along with the money as it passes from one set of hands to another, automatically applying it to the correct invoice.
3. Collaborative commerce
Not only are digital B2B payments improving internal accounts receivable and processes, but they're also working to increase data and efficiency between buyers and suppliers. Many banks, card providers, and fintech companies are working together to solve everyday challenges, such as data, customer, and cash management, which will help simplify and enhance the B2B payment process. Businesses can lower friction and increase B2B payment process automation through "collaborative commerce," the idea of firms collaborating through connected technologies.
4. Support for flexible payment options
The days of accepting cash, checks, or credit cards are long gone. With payment options like buy now, pay later, and virtual cards becoming more available in the B2C space, it won't be long before these become the norm in B2B eCommerce, too. B2B transactions require more flexible payment options because they are typically more complicated and extensive than B2C sales. This can encourage quicker payments, increase customer retention, and lower costs for you and your clients.
5. Payment Automation
Payment automation is more important than ever, especially with accounts payable teams hiding out during the pandemic. Although this trend was already in progress, COVID-19 only accelerated the shift, with cloud-based systems minimizing the need for on-premise systems and check-printing equipment.
With payment automation, you can concentrate on your core company operations with less concern for paper checks and manual processes and be confident that payments are handled accurately.
6. AI, blockchain, and cryptocurrency
The eCommerce business has been heavily impacted by artificial intelligence (AI) and machine learning over the past few years, and the B2B payments sector is not exempt. AI technologies, like AP and AR automation, can significantly speed up payment procedures and lighten the strain on accounts payable personnel. Furthermore, machine learning algorithms can evaluate accounting data, identify trends, and offer recommendations to quicken the payment process.
Blockchain, the technology that underpins crypto payments, is another development reshaping the B2B payments market. Blockchain, which uses a decentralized approach, eliminates the need for a middleman, like a bank, and enables faster transactions - 96% faster than conventional bank transfers.
And finally, cryptocurrency is also making its way into the B2B payments space. However, its adoption has been slow thus far.
Other New B2B Payment Models
On top of current trends and innovations, several new payment models are gaining traction in the B2B landscape — all working toward greater efficiency for buyers and sellers. Let's examine three emerging models and what they can offer your company.
1. Installments
We've all heard of "buy now, pay later," a payment method that enables customers to select a financing option and pay over time in installments instead of paying the entire amount at once. Installment payments are now progressing in the B2B market as well. When given the option to select their payment method, buyers are less likely to leave items in their shopping cart and are more likely to place more significant, more expensive orders.
2. Pay-one, pay-all invoices
Offering consumers simple, flexible payment alternatives is one of the most effective ways to receive payment swiftly. Unfortunately, it can be time-consuming and tedious to go through and settle each account if a B2B customer has several unpaid invoices.
Fortunately, consumers can track, batch together, and pay all past-due invoices simultaneously with pay-one, pay-all invoices. This not only helps the consumer save time and money, but it also guarantees that you'll always get paid on time.
3. Workflow payments
Regarding receiving payments on time, "workflow payments," a B2B payment mechanism on the rise, accomplishes this goal.
By pre-authorizing a customer's credit or debit card, workflow payments trigger an automatic payment after a product or service has been delivered. Since the customer never has to give their personal or credit card information over the phone, these transactions allow you to collect your money quickly and safeguard the customer's security.
In the B2B landscape, digital payments are only getting off the ground. With legacy processes ingrained in the industry, it may take some time for electronic payments to make serious headway, but there's no doubt it's heading in that direction.
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