4 Steps For Optimising B2B Payments

by | Nov 11, 2021 | 0 comments

The pandemic and its aftermath have expedited the digital trend in B2B and B2C. Though many were initially hesitant to embrace the lifestyle that digitization provided, being digital-first is now an essential part of doing business. Making the switch to the latest technology is no longer a choice but a necessity. As a result, digital transformation is now more than a buzzword in most industries. While the industrial sector embraced it years ago, the service sector is also increasingly becoming more digitalized. One of the areas that have recently undergone massive digital transformation is payments.

The customer is always right

Pause and consider how we pay for our clothing, french fries, or a new coffee table? Many people make their payments over the internet today, especially with the rapid growth of online shopping and D2C brands.

As most retail customers demand easy, safe, and quick payment options, traditional banks, and digital experts have focused their efforts on developing procedures to meet the needs of their customers. While significant strides have been made to automate traditional banking procedures, little has been done to improve business-to-business payment experiences.

Business-to-customer (B2C) transactions are often considered to have reached record numbers, particularly during the pandemic. The truth is that they are still minuscule when compared to B2B transactions. As per a UNCTAD report, in 2019, B2C e-commerce was estimated to be around USD 4.9 trillion. On the contrary, global B2B e-commerce was valued at USD 21.8 trillion in the same year. This provides a clear indication of B2B payments and automation potential. Consequently, many new players have begun to work on ideas to develop and modernize payments for businesses.

Room for improvement in B2B payments

Before diving into how B2B payments can be automated, it is important to understand what differentiates them from B2C transactions. The following are some critical factors that significantly impact B2B payments.

1. The Number of People Involved in Decision Making

A single person has ever made no payment decision on their own in a business. Every business transaction has an indirect or direct effect on various stakeholders like customers, shareholders, managers, employees, etc. Therefore, on average, five to seven stakeholders are involved when any payment-related decision needs to be made.

2. Delays

With so many people involved in the decision-making process, there would inevitably be a delay reaching a final decision. Since B2B payments typically include the opinion of 5 or more stakeholders, decision-making takes a longer time. Delays in the payment cycle constitute a big problem for almost 30% of middle-market companies.

3. Volume

Unlike retail customers who purchase small quantities, businesses tend to buy in bulk from suppliers. Buying in bulk allows them to get trade discounts and enables them to sell large quantities to customers. As their purchases are in huge quantities, the transactions are worth several thousand dollars.


Whereas shoppers who visit physical stores usually do so when they have a specific need, businesses must always ensure they have an adequate stock to offer customers. That is why they make regular and recurring orders, as they also prefer to foster healthy long-term relationships with their suppliers.

5. Industry

The intricacies of B2B transactions and the particulars and circumstances that come with them vary from industry to industry. Each sector has its own set of legislations, regulations, and payment specifications. Every deal or contract is unique. The delivery method, quality assurance process, invoicing, payment, and other terms also depend on the industry’s customary norms. These details make B2B payments far more complicated than B2C payments.

Although these differences exist, the demand for faster and more efficient processes has also grown in the business-to-business sector. Now, business people and entrepreneurs also desire similar payment services that retail customers already enjoy. Digital payments would not only save them time and money, but it would also help them improve their other business operations. As a result, banks and fintech firms are working hard to close the gap and regularly provide valuable solutions to businesses’ payment issues. According to a 2021 Statista report, 34% of companies worldwide have expressed their willingness to switch to fintech solutions.

How to solve the pain points of B2B payments 

To understand how to automate B2B payments, we first need to identify the issues companies have been experiencing with the current system. Late payments, illegitimate transactions, time-consuming manual processing, and a lack of visibility are the most common problems with B2B payments. As a result, new digital payment solutions need to address and resolve these difficulties. The following are the most important B2B payment trends for 2021.

1. Transition from manual processing to automation

Many companies still process payments manually, leading to errors and a lack of security. Furthermore, it would take longer to manage all the payments manually. Rather than continuing to process payments inefficiently when done manually, it is better to invest time and resources in more efficient automated processing solutions.

B2B payment automation addresses practically all the issues related to manual processing. It provides more control and visibility over transactions while also saving operation costs and time. Adopting AR automation software, for example, allows a company’s accounts receivables team to automate repetitive and time-consuming processes while increasing their cash flow and collection efficiency. Instead, they can devote their time and energy toward more productive or strategic projects. Similarly, integrating a payment API (Application Programming Interface) with an ERP (Enterprise Resource Planning) software allows the company to manage payments and share banking data safely and efficiently. Electronic transactions are beneficial in B2B payments, as they make them more efficient, secure, convenient, fast, and instant. Digital payments give buyers and suppliers various growth prospects by allowing firms to focus their time and resources on more profitable areas.

2. Managing risk through multi-factor authentication

With e-commerce and online transactions on the rise, businesses are also increasingly falling victim to cyberattacks and payment frauds. One of the best ways to solve this problem and provide a more secure payment platform is Strong Customer Authentication (SCA). It is a requirement of the European Union that was enforced in 2019 and has already been implemented by most member countries. Two-factor and multi-factor authentication are formed on the basis of using multiple forms of authentication.

These are:

Knowledge: an element that only the user is aware of.

Possession: use of a device that only the user possesses.

Inherence: something that the user is.

The extra layer of protection provided by multi-factor authentication blocks the access of hackers and scammers to company accounts and thus, protects data and offers secure payments. Apart from these, multi-factor authentication has numerous benefits. Some of them are:

  • It builds customer trust and confidence in the business by offering customer security.
  • It offers extra protection to sensitive information that passes through a company. Thus, it reduces the risk of unauthorized access and hacks.
  • Extra security offered by multi-factor authentication reduces the risk of processing fraudulent payments.

3. Overcoming payment delays

As mentioned earlier, payment delays are a huge challenge that most mid-market businesses have to face. According to a study, 44% of B2B SMEs said late payments seriously harm their business performance. Such delays in payment impact the company’s cash flow and affect their reputation and relations with clients and suppliers. There could be various reasons for payment delays, such as insufficient funds available at a given point, extended payment terms, and outdated payment methods.

Digital payments make the process of payment processing simpler, swifter, and more straightforward. They allow companies to make rapid and error-free payments. Via electronic payments, they can keep track of late payments and also automate payment schedules.

4. Improving visibility

The vast majority of businesses do not have complete visibility over their transactions. This means they can only assume that their incoming payments are made on time and that their outgoing payments reach their destination before deadlines. However, by using digital systems, businesses can see every payment as it goes through the system. This gives businesses greater predictability and control over their cash flow, business relationships, and operations.

To summarize, automating B2B payments can provide many benefits, like improved security, faster processing, real-time updates, and end-to-end visibility. This allows businesses to offer a better payment experience for their customers and employees.

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