The sectors of the modern world are driven by automation and “smart” technology. Whether it be online shopping or artificial intelligence, these advancements and more like them are becoming the new norm.
One area that has been struggling to innovate is business-to-business (B2B) methods of payment. While customer-to-business (C2B) payment methods adapted easily, B2B payments seemed to be lagging behind… until now. Here is a glimpse into how disruptive payment technology is modernizing the B2B world.
What are B2B payments? In short, they are the exchange of currency for goods or services between two business parties. The payments can be recurring or on a one-time basis, depending on the terms the two parties agreed to. These business entities can include manufacturers, distributors, wholesalers, and retailers among others.
In B2B commerce, purchases are often expensive and involve quantities of goods in bulk. This can be a painstaking, time-consuming process compared to typical C2B transactions. What’s more, there are many factors that could impact timeliness, such as purchase volume, payment histories, and the relationship between the buyer and seller.
Due to this, the B2B payment network has relied on manual and paper-based processes. However, there has been a recent shift toward cloud-based, automated payment systems. More than ever, B2B buyers and suppliers are implementing methods of digitization that drastically simplify the transaction process while providing business payments faster and more efficient than ever.
While not the only correlation, the pandemic did play a role in pushing this digital transformation forward. 68% of small businesses reported having to decrease their use of cash and paper checks in favor of newer more efficient methods. It is predicted that by 2025, 80% of B2B transactions will be digital.
Increased efficiency isn’t the only positive. Cost-effectiveness is a main draw to digital and smart payment methods. A report found electronic invoice payment cost 60% less on average than paper-based processes. High processing costs are listed as a major obstacle for 35% of businesses. Typical accounts payable (AP) organizations need to pay around $8 to process a single payment.
One new payout method is cryptocurrency and blockchain technology. In 2019, only 8% of firms used cryptocurrency as a form of payment. While this method hasn’t exactly taken off in the U.S. just yet, international businesses are benefiting from the evolution. For example, fees in global transactions could potentially see a 75% decrease with crypto payments in comparison to wire transfers.
While cash is still king when it comes to B2B payments at 45%, smart and electronic disbursements are the future. For more information on B2B payment methods and the emerging trends, please see the accompanying resource.
Guide created by CardConnect