B2C payments may get most of the attention, but within the industry, there’s no mistaking the importance of B2B payments.
In a rapidly evolving space, B2B payment solutions can be a key difference-maker for organizations looking to deliver improved B2B experiences and drive faster growth around the globe. But what should businesses actually look for these solutions to solve, not just now but years down the line?
Use this guide to understand the trends and B2B payment technology that defines the current ecosystem and will shape the world of B2B payments to come.
What are B2B payments—and What Makes Them Unique?
The definition of B2B payments is quite straightforward: Business-to-business (B2B) payments are transactions between two businesses. These transactions might take place between retailers and wholesalers, a company and a service provider, or a business paying its employees.
That may seem simple, but the global B2B payment ecosystem comprises a sprawling market of businesses both small and large that, according to Juniper Research estimates, will surpass $111 trillion in value by 2027.
What separates B2B and B2C payments?
Compared with business-to-consumer (B2C) payments, B2B payments tend to involve larger amounts, more complex invoicing systems, lengthier payment terms and, oftentimes, more drawn-out processing, settlement, and approval timelines. Nevertheless, as we’ll dig into below, thanks to the increased digitization of the B2B payment ecosystem in recent years, B2B payments are beginning to look more and more like B2C purchases—or at least buyers are expecting them to.
The top B2B payment methods
Whether domestic or international, B2B payments can take several forms, including:
- Checks: Although declining in overall volume of use, checks remain the most widely used method of payment in B2B.
- Credit cards: Businesses can also make payments via credit cards, although this is less common for large transactions due to fees.
- Cash: Cash remains a common way of paying for B2B services, with 45% of businesses still relying on it.
- ACH (Automated Clearing House) payments: In the US, ACH payments are electronic payments made through the Automated Clearing House Network. They’re typically used for direct deposit of payroll, vendor payments, and other types of B2B payments.
- Wire transfers: These are electronic transfers of funds across a network administered by hundreds of banks around the world. Wire transfers are relatively expensive but are secure and typically used for high-value or international transactions.
- E-payments and digital wallets: These are payments made through online services or payment platforms. This can include providers like PayPal and Stripe, as well as digital wallets.
B2B Payment Trends
As we mentioned above, digitization is driving rapid change within the B2B payments space. And it’s behind a number of these important B2B payment trends shaping the world of commerce.
A marked decline in the use of checks
You may think that with the rise of digital B2B payments, checks might be a thing of the past—or at least nearly so. (After all, how often are checks still used in the realm of B2C?) However, even though the pandemic took a bite out of the portion of checks used by businesses, 91% of B2B leaders said they still rely on receiving payments by check.
Still, the writing is on the wall for check-based payments in most areas of the B2B payments ecosystem. In another survey, 36% of companies said they relied on checks for more than half of their payments, but the other 64% of companies already relied on digital transactions for the majority of their B2B payments. Plus, 49% of responding companies indicated they planned on converting paper checks to electronic payments.
A rise in automation and artificial intelligence
Automation and, increasingly, artificial intelligence-powered solutions are streamlining B2B payment processes and reducing the amount of work required by AR and AP teams—while also eliminating occurrences of manual error. One study found that 70% of B2B companies are seeking to automate AR processes.
Consumer-like purchase experiences are in-demand
All of this digitization is affecting not only the types of experiences found in B2B ecommerce but the expectations B2B organizations have around these experiences:
- Nearly half of all B2B buyers have not completed a purchase due to their preferred payment method not being an available option.
- Further, 74% of millennial B2B buyers, specifically, have switched vendors for a better purchase experience.
- That number is still 67% when you consider buyers of all ages that have made a switch in favor of a more consumer-like experience.
The Challenges of B2B Payment Processing
At the heart of this desire for a consumer-like experience is the issue of payment time frames. When more traditional, manual processes are used, collections management is made both lengthier and more complex, forcing businesses to frequently hunt down late payments. While the rise in prominence of digital payments has helped alleviate these issues, the challenge still remains—and so do these other common B2B payment challenges:
- Persistent fraud: One report found that identifying B2B fraud is the top-ranked challenge at 72% of US and UK companies. Two-thirds of those in the same survey were unsurprisingly unsatisfied with their current anti-fraud methods. This challenge, though, should ultimately drive further digitization, including the adoption of B2B payment solutions utilizing virtual cards, automated identity verification, and more.
- Involuntary churn: Somewhere between 20 and 40% of overall churn is driven by involuntary churn, whether it’s due to outdated payment info, server issues, insufficient funds, or other payment problems. For B2B organizations operating on a subscription model, this can pose a serious threat to overall business health.
- Cross-border and compliance complexities: Cross-border B2B payments take 55% longer than domestic payments for US and UK businesses as they run into regulatory hurdles, more intermediaries, and other potentially costly sources of friction.
How to Choose the Right B2B Payment Solution
The promise of the digital experience, along with the pain points of these B2B payment challenges, has many organizations looking for answers in the form of the right technology partner. When searching for the right B2B payment solution, today’s organizations should prioritize technology that delivers:
- International expertise: Navigate the complexities of cross-border B2B payments with the help of experts who have been there before—and can leverage the established, strategic relationships you need.
- Tax and compliance simplicity: Sorting through the complexity involved in entering a new market requires significant investments of your time and money. Relying on a solution that can streamline tax and duty calculation for customers, as well as manage registrations, returns, and more, can free up your team to focus on your customers.
- Payment speed and transparency: Look for flexible, scalable solutions that deliver the B2C-like experiences your customers are after and support the payment methods that they want to use.
- SaaS support: If you sell digital goods and subscriptions, don’t settle for anything less than a specialized solution. Optimize billing, retain customers, and continue your global growth.
Digital River has both the technology and the experience to help you exceed B2B buyer expectations and eliminate the complexity of B2B ecommerce. Learn more about how partnering with Digital River can help you achieve speed to market, instant global scale, and global B2B growth when you connect with us today.