What’s fueling the growing adoption of real-time payments in the B2B environment? The old aphorism time is money. Though B2B digital payment methods have become faster in recent years, they haven’t kept pace with the speed of modern business, where “digital” is often synonymous with “real-time.” Slow bank transfers and delays – even same-day ACH processing – cost B2B companies more than just time. The global market for real-time payments is projected to grow by nearly 35% in the next eight years.
Real-time payments represent a new era in which payments are not only completed faster, but also operationalized for increased business value for customers and sellers. For example, B2B companies that use real-time payments also gain better visibility into cash flow and control over their working capital. In this article you’ll gain insight into the instant payments trend, and learn why real-time payments are a B2B game-changer.
What are Real-Time Payments (RTP)?
Real-time payments (RTP) enable B2B companies and consumers to transfer funds immediately, 24/7/365, to pay invoices and bills. Increased speed and efficiency are just two of the advantages of this advanced digital payment method. RTP also enables two-way messaging about the transaction, which makes trade more efficient and transforms business and consumer payment experiences. Request for payment, payment confirmation, RTP credit transfer and remittance advice are some of the message types available in RTP which remove friction and enhance the relationship between companies and their customers. The volume of real-time payments is expected to increase by 100% in 2022.
What are the Three Types of Instant Payments?
Several types of instant payments have become popular for B2B and B2C trade because they are secure, convenient and efficient digital payment options:
- E-wallets: A B2C e-wallet or digital wallet is a secure app like Apple Pay or an online platform like PayPal that enables you to make purchases 24/7 with sellers who accept digital transactions. You can prepay, or link your e-wallet to your bank account. An e-wallet is often a free mode of digital payment. Within the last year, several e-wallet systems have emerged for the B2B market.
- Instant bank transfers: With apps like Venmo, Zelle and PayPal, you can send funds from your bank account to another bank account or a debit card in minutes. Instant transfers are available 24/7, and there is typically a fee. Several instant bank transfer platforms are now available for B2B companies, too.
- RTP transfers: These are payments made via RTP networks purpose-built for 24/7 instant payments and two-way exchange of information about the transaction. RTP® Network from The Clearing House (TCH) and Faster Payments in the United Kingdom are two leaders in RTP payments. RTP networks can be used for B2B and B2C transactions of up to $100,000. There is typically a transaction fee.
How does RTP Payment Work?
Companies and consumers that have an account with a bank on an RTP network can use RTP payments. These payments can be made with or without a request for payment. For example, a consumer could pay his rent every month by initiating an RTP from his bank to his landlord’s bank. The transfer can be made 24/7/365, and happens immediately. The funds are available in the landlord’s bank account immediately, and the renter receives an immediate payment confirmation. Consumers can use RTP for managing personal finances more efficiently, including regular payments like rent and utilities as well as one-time purchases.
In B2B environments, a request for payment is often used with RTPs. For instance, as soon as a supplier delivers the product, she can send a request for payment to her customer that appears in her customer’s banking app. The customer verifies that he wants to pay, sends payment back through the app, and receives confirmation of the payment. The supplier receives immediate payment.
What are the Benefits of Real-Time Payments?
One of the primary benefits of RTP payments is the reduced risk of fraud. RTP networks carry an additional layer of security, and because they are “credit push” only, are less susceptible to certain types of fraud. Other key RTP benefits also reduce fraud risk:
Simplified and Secure Payment Processing:
RTP streamlines and automates business processes related to payments as well as the payments themselves. Simplifying payments end-to-end reduces the chance for errors, and also reduces opportunities for fraud to occur.
Funds Instantly Available for the Recipient:
All RTP payments are irrevocable for the sender, which allows funds to be instantly available for the recipient. For B2B companies and consumers, instant access to payment creates flexibility they can use to capitalize on further financial opportunities, in essence turning time into money. One popular use case during the pandemic has been the use of RTP by employers to pay their employees faster, in some cases enabling employees to have daily access to their earnings. Instant access to a paycheck can help employees ease financial challenges. For employers, it can create an advantage for attracting and retaining employees in the current highly competitive labor market. Digital payment to employees through secure RTP networks also eliminates check-related fraud.
Confirmation for Both Recipients and Payers:
In traditional payments systems, communication goes in one direction, from payer to recipient. Any exchange of information beyond that is separate from the transaction. RTP innovates by integrating two-way communication into the transaction, in real time. Payers and recipients can clarify details of the transaction with message types that are embedded, such as request for payment and payment confirmation. The expanded communication can increase transparency in trade and reduce the risk of fraud. It can also greatly enhance trust and satisfaction in the working relationship. Additionally, RTP creates a message trail that can be used for audit purposes.
How the Economy Benefits from RTPs
RTP can significantly reduce the amount of capital that is inaccessible due to lengthy payment processing. In the average U.S. business, 24% of monthly revenue is unavailable to the company because it is held up in A/R or trade credit processing. RTP payments allow companies faster access to and better control over their working capital, so they can optimize for growth and reinvestment. Businesses benefit from instant access to payments because it ensures consistency in the supply chain and minimizes payment uncertainty.
With certain instant payment platforms such as Apruve, B2B companies also get instant insight into their customers’ available credit, which allows them to onboard customers in minutes. Apruve is the only B2B payment platform that offers real-time invoice financing as well as custom terms programs through its partnership with some of the world’s most trusted lenders. Together, B2B trade credit and automated invoice financing are creating the tipping point for B2B companies. Learn more about the power of automated invoice financing that’s integrated with a global network of lenders in 40 countries, including the APAC region, at Apruve.