It’s an exciting time in the B2C (business to consumer) payments space as adoption of emerging capabilities grows, bolstered by success stories and lots of interest from developers. But it’s a much different story in the B2B (business to business) payments space. According to the 2017 Electronic Payments Report by PayStream Advisors, many organizations continue to rely on check and ACH. This is true despite the growing availability of electronic payments (ePayments) solutions designed especially for the B2B environment.
There are a few fairly obvious factors that contribute to the lag in ePayments adoption. B2B buyers, especially in large, widespread organizations, must adhere to rigid approval hierarchies and sometimes extremely complex regulations. They also tend to favor a net-30 payment term and the associated float time. This makes implementation of ePayments tools more difficult to implement and scale than in a typical B2C environment.
There are additional nuances that explain how payment methods are selected and implemented in the B2B space. All payment methods come with their own unique characteristics and processing challenges. These can be training-related challenges, like a lack of understanding about the correct method to use. They can also involve hard costs when they lead to missed discounts or duplicate payments.
As the basis of the 2017 ePayments report, PayStream surveyed hundreds of B2B professionals across several industries about their attitudes and usage of payments tools. PayStream’s research found that payments challenges are more common for heavy check users, or “strong proponents” of checks. Strong proponents of check payments are much more likely to report hard losses like missed discounts and late payments than strong proponents of other payments types (see Figure 1 below). They were also more likely to experience payment fraud. Among respondents with no payment challenges, none were strong proponents of checks.
Of course, payment challenges vary depending on industry and market segment. For example, in a highly regulated environment like healthcare, payment costs tend to be higher. This isn’t surprising, since complex process flows and approval hierarchies are common in healthcare payables. The result is overall longer payment cycles that demand extra time and resources.
PayStream also found that when ePayments tools are introduced to a company’s payments management process, both costs and headaches are reduced. Organizations that adopt commercial cards reported improvements in convenience, costs, and rebate capture, see Figure 2.
ePayments tools help speed up cycle times and boost security and compliance. Organizations that use them are better able to capture early payment discounts and achieve card-based rebates. Speeding up payment cycle times also improves relationships with suppliers—when suppliers are paid faster, less time and energy goes into responding to calls and emails about payment delays. The secure data conduit provided by these tools can be especially helpful for B2B organizations with high volumes of cross-border supplier payments.
Making the transition to ePayments tools is often a daunting process for B2B buyers and suppliers. However, it’s crucial to explore all available ePayments opportunities for the success of back-office operations, the bottom line, and long-run competitive advantage.