Digital B2B Payments Show Promise But Still Face Hurdles to Widespread Use

Both businesses and customers are reaping the benefits of improved payment processes through fintech innovations. A good example of this is digital B2B payment platforms that are now gaining popularity worldwide among businesses to efficiently collect payments from their customers. 

Fintech paves the way for better transparency, especially around B2B payments. The technology promises convenience, is lightning fast, and provides many payment options. Despite these benefits of digital payment platforms, many businesses still do not use them to collect payments from other businesses.

The rise of digital payments in B2B transactions

In 2018, paper checks dominated the payments landscape. ACH payments came in second, followed by wire transfers and card payments.

But everything changed in 2020: The Covid-19 pandemic forced banks to reimagine their operations, and governments mandated business teams to work from home. As a result, unprocessed paper checks piled up at banks. Businesses started looking for ways to optimise B2B payments for the new normal.

Many small and medium-sized enterprises started using fintech solutions to automate their accounts receivables, and corporations began leveraging managed treasury services for operational excellence.

Despite the growing popularity of digital B2B payment platforms, the question remains -could they address inefficiencies inherent to paper checks? If so, do digital payments have the potential to become the preferred payment method for businesses?

Why should every business seriously consider enabling B2B payments?

1. Cost-effective payments

Even before the pandemic, businesses worldwide are aware of the impact of digital payments in driving operational efficiencies.  In 2015, Deloitte conducted a study of 150 organisations in Australia and New Zealand. The respondents said that they find digital payments cheaper, faster and more convenient than traditional payments.

The study reported that digital payments could be at least 70 percent more cost-effective than traditional purchase order processes. Digital payments improved cash flow for most surveyed (73 percent) organisations. Around 68 percent of the surveyed organisations reported that process automation reduced manual administration.

With these numbers, it’s no surprise that more and more businesses are have now moved towards digital payments.

2. More payment methods

Aside from cost savings and improved productivity, the technology also allows for more efficient processing of various payment methods.

Take, for instance, credit card payments. Traditional payment mechanisms make credit card payments a challenge for B2B due to the nature of transactions and processes. But with digital payment platforms, credit card payments are logistically manageable – almost as efficient as transactions on the B2C space.

This capability for other forms of payment is the most apparent benefit of B2B digital payment platforms. Still, other benefits make it a powerful tool to improve the efficiency of entire business processes. 

3. Integration to accounts receivable systems

Most digital payment platforms are built within accounts receivable software that automate billing, collections and invoicing. Many even automatically send out late payment notices to debtors. This centralised system from order to cash makes it easy for businesses to manage their receivables and ultimately leads to a healthier cash flow. 

4. Modernises payments collections and reporting

In terms of practicality, businesses simply do not have to worry about lost or damaged checks with digital payment platforms. Advanced platforms store payment data that businesses can use to improve their reporting process. Flawless data reporting paves the way for better decision-making.

So what’s preventing digital payments from going mainstream?

Many businesses realise the benefits of digital payment platforms and are working on plans to redefine their B2B accounts receivables with digital payments. However, the mass adoption of digital payments will take time.

Many businesses, especially those offering healthcare and legal services, are unwilling to adopt digital payments due to inherent security issues. Several businesses still rely on paper checks and may not want to switch to digital payments as their vendors and partners resist change.

Many businesses have found a middle ground. They use digital systems to process paper checks. These businesses still have to annotate wire transfers and ACH payments manually.

What do digital platforms need to do to promote digital payments?

Digital payment platforms need to address security concerns (such as information theft and online fraud) associated with digital payments. Measures such as two-factor authentication and SSL encryption provide additional levels of security that can ensure safe transactions. 

Digital B2B payment platforms must also adopt automation designed to transfer non-digital payments – which are still standard payment methods for most businesses – into automated payment solutions.

Conclusion

AR innovations have paved the way for accessible digital payments in B2B. The technology behind digital payments resolves the pain points often found in traditional payment methods. However, businesses must also take into consideration the security and flexibility of the platform they choose to maximise the benefits of digital payments.

Interested to see how a digital payment platform can get you paid faster? Talk to us today to get started with Simplypaid.