B2B Payments in E-commerce
The times are a-changing for B2B payments. The boom in e-commerce is driving a huge digital shift in the payments space. This has led more merchants to move away from traditional paper-based payment methods to more digital options.
Indeed, there is a greater appetite amongst e-commerce players to use tech-based payment systems to pay and receive money. Research from IDC predicts that by 2025, 40% of businesses will use digital B2B payments to handle their finance functions.
Cross-border trade and commerce are growing. This is giving rise to more complexity as businesses move across borders. E-commerce players work with a complex network of suppliers and partners in overseas markets. And, they rely on timely cross-border payments to pay their suppliers and grow their business.
On the other hand, the rise of the gig economy has led to a surge in cross-border B2B payments. In 2020, the global gig economy payment volumes were nearly USD 300 billion.
Despite the demand, a large majority of cross-border B2B payments still use the traditional banking routes. This is a slow and costly process that is also tough to trace. Gig economies also are not well served by traditional bank-driven cross-border payments. This has led many payments service providers (PSPs) to tap into next-gen tech to simplify payments.
How do B2B payments affect you, the merchant?
B2B payments traditionally have been made using paper-based methods such as cheques or bank transfers. But these payment processes remain slow, opaque, and open to fraud. This leads to a lot of time and money lost in waiting for payments to arrive.
Cheques are slow, often get lost, and can be easily frauded. Even something as simple as setting up a cross-border bank transfer can become a legit nightmare for merchants. International bank transfers are routed through multiple banks, so there is no way to know when a payment will arrive. Also, it is impossible to trace or know where your money is at a given point in time. This creates more confusion and anxiety.
Late payments are top of mind for suppliers in Europe. A recent study found that nearly half of invoices in the region were past their due dates. Thirty-eight percent of companies said they were concerned they would not be able to collect overdue payments. This is a problem because many firms facing payment delays often struggle to pay their own suppliers on time.
Improving transparency and ease is key to making cross-border B2B payments simpler. Payment methods have to be cheaper and easier to manage than current options. They have to make payments easier to reconcile, quicker to settle, and better to control. There is a strong case for instant payments that use open banking to speed up B2B payments.
The good news is that many specialist payments providers are bringing in advanced technology to make cross-border payments much easier, quicker, and safer. These PSPs are more end-user-focused and often use software integrations to create more seamless payments.
Why automate B2B payments?
Automating your B2B payments can help you move money between your trading partners in a much more efficient way. You also get a better view of your cash flow as well as your accounts payable and receivables. This will help you align your suppliers and buyers on payments and credit.
Many other payment methods are in use to make cross-border payments faster. These include mobile phones, NFC readers, virtual cards, and digital wallets, amongst others.
Account-to-account (A2A) payments are another form of digital payment that has been a hit in some places and has the potential to become much bigger. A2A payments are made directly from one bank account to another, and no third party is involved. This lowers the cost per transaction. Plus, A2A payment systems also connect to your company’s ERP to transfer payments data in real-time. This helps you to reconcile and settle payments quickly, thus fostering stronger buyer-supplier terms.
In Europe, schemes such as SEPA are another step to make cross-border B2B payments faster. New regulation such as the PSD2 also mandates stronger security and collaboration to make B2B payments simpler and safer.
How can the right payments partner help you?
Marketplace and affiliate businesses require a lot of attention and effort to manage large volumes of transactions. Hence, look for easy setup options that let you control exactly how you want the system to process and record your transactions.
It is crucial to have the right payments partner guide you in your B2B payments journey. Our marketplace solutions can help you automate your workflows and manage your payments easily. This, in turn, will go a long way in keeping your customers and suppliers happy.
Jose Augustine is the Chief Business Development Officer at Novalnet AG with extensive experience in European payment industry and a knowledge powerhouse.