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The Changing Landscape of B2B Payments: A Modern Look at B2B Payment

Topics: Finance, Credit & Payments

The B2B payments landscape is changing rapidly as the business world transitions to digital. B2B buyers seek the same simple purchasing experience they have in their personal lives with payment pioneers like Amazon and Venmo. Experts predict that within three years, 50% of B2B payments will happen digitally.

B2B Payments Blog Statistic

In this article, you’ll learn about the current state of B2B payment models, services and products, and what the future likely holds for B2B payments.

What Does the Current B2B Payments Landscape Look like?

B2B, or business-to-business, payments are made by a corporate buyer to a merchant for products or services purchased. B2B payments traditionally have been more complex than B2C (business-to-consumer) payments or P2P (peer-to-peer) payments, for a number of reasons:

  • B2B preferences purchasing on net terms, which increases the administrative workload for both merchants and buyers
  • Cross-border B2B purchasing increases complexity with multiple currencies and varying purchase and tax regulations
  • Continued use of paper checks and manual processes by businesses is slower and more labor intensive

Prior to 2020, businesses had started migrating toward automated B2B payments as a way to reduce administrative work and costs. The average U.S. business using paper-based payment processes could have as much as 24% of its working capital tied up in net terms. Nearly half (49%) of invoices generated by U.S. businesses go on to become overdue, with some becoming uncollectible. With the economic tightening of the post-pandemic era, the transition to digital B2B payments has accelerated. 

B2B Payments Invoices Statistic

Why are B2B Payment Trends Moving Digital? 

Efficiency and cost are perennial concerns for AR teams with B2B payments. Part of the move to digital is the increasing pressure on credit departments in enterprise organizations to lend wisely. Chief financial officers (CFOs) and treasurers are also under pressure to refine cash flow practices, reduce unpaid invoice write-offs, and streamline workflows. Other factors have come into play as well, including the following:  

The Work-from-Home Migration 

Many AR teams were not prepared for the quick shift to operating from home when the economic shutdowns of 2020 began. Conventional AR processes and paper-based workflows made the transition difficult, and as a result, organizations experienced delayed payments and errors. The need to improve AR performance when work is done remotely has been a significant driver of digital B2B payment trends.

Better Safe than Sorry 

The increase in financial crime that occurred with the global pandemic is another reason for businesses to give consideration to digital B2B payment methods. Built-in security protections that are continually being updated to combat cyber theft make automated and electronic systems attractive. In addition, the digital record created by online B2B payment solutions can simplify tax preparation and auditing. 

Rise in Online B2B Purchases 

Last year, sales on online B2B commerce sites rose by 17.8% to $1.63T at a rate that exceeded the growth of all U.S. manufacturing and distributor sales over the same period. As purchasing increases on B2B ecommerce sites and marketplaces, merchants have the opportunity to boost order size, frequency and overall customer loyalty by extending net terms at the point of order. Being able to underwrite and lend almost immediately requires transitioning to digital payments.

The Most Common B2B Payment Methods in 2022 

Though most B2B payment processing is still done by conventional methods, the B2B payment trends are steadily moving toward digital and automated payment models. Which type of electronic payment is typically favored for B2B payments?  Commonly used types of both conventional and electronic B2B payment methods include the following: 

  • Automated Clearing House (ACH) Payments were still growing in volume in 2021. ACH payments enable businesses to transfer funds electronically to other businesses using the Automated Clearing House Network. ACH is an established technology that some have seen as a safe entry into electronic B2B payments for direct deposit and direct debits. However, ACH transactions require more time and administrative steps than some of the real-time payment models recently introduced. With funds transferred via ACH typically not available for two to three business days, it’s likely that many businesses will transition directly to newer B2B payment models and bypass ACH.   
  • Checks 73% of businesses surveyed are in the process of transitioning B2B payments from checks to electronic payments. Part of the reason is expense: The same survey indicates that it costs businesses $1 to $2 to receive a check.  As with most paper-based processes, the use of checks is projected to decline. As a B2B payment method, they are too slow, too expensive, and too prone to errors and fraud to suit the future needs of enterprise organizations.

B2B Payments Check Statistic

  • Cash – With the exception of businesses in a few select emerging markets, cash is rarely used as a B2B payment method anymore. Cash carries a risk of theft and a high administrative burden in terms of recordkeeping. The other primary limitation of cash is location: Buyers and merchants have to be located in close proximity for cash to be a viable payment method. 
  • Wire Transfers – Wire transfers account for about 10% of B2B payment types and are expected to continue at that level for the next few years. A wire transfer is a transfer of funds from account to account, so the funds are available immediately, and often the same day, but for a fee. Wire transfers can be used both domestically and internationally for B2B payments, making them ideal for one-time or infrequent cross-border B2B payments.  
  • Credit Cards and Digital Cards – About 48% of businesses surveyed use credit cards for B2B payments, for many of the same reasons as consumers do: They are convenient, they provide rebates and fraud protection, and payment isn’t due right away. However, credit cards often come with fees, especially for international purchases. Virtual cards are used like credit cards, but they only exist online – there is no physical card. The online-only aspect is a barrier for some companies. The top reason companies don’t adopt virtual cards is the inability of their current financial system to handle them. 

The Future of B2B Payment Processing 

The use of conventional B2B payments methods like ACH, checks, and credit cards is likely to decline in the coming years as innovative B2B payments solutions integrate the best of B2C payment models – simple, fast, and convenient – with the specific needs of B2B transactions, such as extending trade credit, decreasing Days Sales Outstanding (DSO), and increasing efficiency in cross-border purchasing.  

Some enterprises are already using these types of B2B automated payment systems to accelerate growth and reduce costs. For instance, one Fortune 500 manufacturer increased its profit margin by implementing a B2B trade credit and accounts receivable automation platform. With the Apruve platform, the manufacturer bypasses traditional distribution channels and started selling directly to contract manufacturers on a global scale without adding back-office work or staff. A key indicator of success: The average size of orders invoiced through the platform versus credit cards increased by 5.6X. Learn about the 800% increase in order volume


Trade credit platforms like Apruve represent the future of B2B payments because they reduce or eliminate major pain points for financial professionals such as the high cost and delays of manual processing, fraud risk, and lack of visibility into transactions and cash flow. To find out more about the advantages of automated payment systems for your organization, contact the specialists at Apruve.


ABOUT APRUVE

Apruve enables large enterprises to automate long-tail credit and A/R so you can stop spending 80% of your time and resources on 20% of your revenue. We partner with each of our customers to solve their unique credit, payment, and accounts receivable challenges and build the right credit solutions for your markets, customers, and goals. 

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