Digital B2B Payments

Do digital B2B payments live up to the hype? In this week’s post, we see how they stack up against more traditional options.

Millions of businesses use PayPal, Square, QuickBooks, and other fintech platforms to collect digital payments from their customers. The technology is quick, convenient, and provides multiple payment options.

So why aren’t businesses using these platforms to pay and collect from other businesses?

Paper checks dominated B2B payments in 2018, representing 47% of transaction funds. ACH payments came in second at 34%, and wire transfers were third at 14%. Card payments came in last, and no measurement was taken on how many of them were made digitally. 

Then, in 2020, COVID-19 closed banks and sent business teams to work from home. Checks sat buried in piles of office mail. Suddenly, there was buzz about digital B2B payments. Could digital payment platforms solve the paper payment slowdown? If so, would they become the preferred payment method of the future?

To answer these questions, we dove into the pros and cons of digital B2B payments. Here’s what we found.

Enabling Digital B2B Payments Has Clear Benefits

A Deloitte study of 150 organizations found that digital B2B payments are typically considered “better, faster and cheaper than existing processes.” Digital payments:

  • were 70% more cost effective than traditional purchase order processes
  • improved cash flow by 73%
  • reduced manual work through process automation for 68% of respondents

On a basic level, this is perhaps unsurprising. An online credit card or virtual card payment certainly moves faster and requires less manpower than a mailed check, after all. However, there are additional and more nuanced benefits under the surface.

To some degree, most digital B2B payment platforms automate invoicing, billing, late payment notices, and collections. They also store credit card information, are available 24/7, and eliminate the problem of lost checks.

What’s more, these platforms record a detailed payment trail with room for more data about payments. More data means better reporting and record-keeping, and the option to automate other related processes.

With all that on the table, you’d think businesses would be moving to digital B2B payments en masse.

...But Not Everyone Is On Board

Despite these benefits and increased interest, digital B2B payment providers still have competition. Even if paper checks were totally out of the picture, wire transfers and ACH payments have a firmly rooted history in secure business transactions. 

With data breaches and credit card fraud growing evermore common, the security hurdle can’t be overlooked. This is especially true for legal, health, and other sectors where privacy regulations create more complex security needs than other businesses.

Then there’s the fact that so many businesses still use paper checks and other methods. Offering digital B2B payment options to vendors and partners is one thing; getting them to use them is quite another.

For many businesses, this means financial teams will have to incorporate paper check processing into a digital system. They may also still need to manually annotate wire transfers and ACH payments and onboard vendors and partners who may use similar but different digital payment platforms.

What Do Digital B2B Payments Need to Take Off?

If there’s one thing fintech companies have demonstrated, it’s an uncanny ability to overcome obstacles. Strict security compliance is already required of payment processors, and robotic process automation could meet the need of transferring data from non-digital B2B payments into payment systems.

More than solutions, however, digital B2B payment platforms need more businesses to trust and invest them and invest in them in. Only time will tell whether that happens.

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