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Three steps to end late B2B payments using the Big Tech approach

by | Sep 9, 2022 | 0 comments

What do Big Tech companies such as Google, Amazon and Microsoft have in common? Aside from their impeccable brand power and excellent products, they have minimal issues with late payments. Some are so successful that people are paying them well before even building the product (e.g. Tesla and their $100 upfront for the CyberTruck).

But what makes these tech giants successful at capturing payments? And what can B2B organisations learn from their approach? 

Biggest changes in payment technology

To fully understand why Big Tech companies are successful at capturing payments, first, we must look at how payment technology (PayTech) has changed over the last decade.

1. Acceleration in change and adoption of new payment infrastructure

The pandemic has supercharged the adoption of real-time contactless payment systems around the globe. Fintechs globally are innovating to fill gaps in this landscape, developing products and services to automatically integrate securely with business systems.

It is safe to say that faster, more secure, and data-rich PayTech is changing how we pay and get paid.

2. Behavioural changes in payments

Covid greatly impacted the existing business collections process. According to a Mastercard survey, 53% of merchants plan to expand their payment methods this year into more digital-first channels. 

The behaviours of clients and consumers have been forever changed now by the pandemic. They are no longer suspicious or sceptical of digital payments, which has impacted B2B transactions. By 2025, Gartner predicts that 80% of B2B sales interactions between buyers and suppliers will occur in digital channels.

3. Optimised payments experience

In response to these changes in behaviour, the user experience is now at the forefront of the payment process. Consider B2C firms such as Amazon with their “One-Click” payment option or Netflix’s simple and easy subscription. Based on their success, we can see that a simple purchasing process leads to more sales, particularly when consumers use mobile devices.

4. AR and AP working together

For too long, B2B payments have been characterised by distinct and fragmented approaches to accounts receivable (AR) and accounts payable (AP). These pain points include high costs, manual processes, lack of payment data, poor visibility into upcoming payments, late payments, and cash flow challenges.

Payment technologies are now focused on a collaborative approach – meeting the needs of both AR and AP regarding payments.

bigtech approach to payments infographic

How are Big Techs approaching payments?

1. System integrations and automation

For tech companies, every payment process step must be simple, and all should work together to create one cohesive system. 

Credit risk assessment is part of any business’ customer onboarding strategy. The common method is through trade references. However, there are many other factors that you should consider when assessing your potential customers’ credit risk. An easier way to access that crucial business information is through business credit scores.

What is a business credit score and other FAQs

    2. Leveraging data

    Big Tech companies love data and use it to help make informed decisions that minimise risk and provide personalised customer services. Using live data from multiple sources helps them determine creditworthiness and payment terms. It also enables them to segment customers to further streamline processes whilst customising services.

    3.Upfront authorisation

    Capturing data early in the sales process allows Big Tech companies to get payment authorisation even before delivering products and services. The key is to build trust in the platform or payment system so customers can provide authorisation confidently and, simultaneously, give them visibility and control over how they want to pay.

     

    infographic showing the three approach used by big tech to eliminate late payments

    Three steps to apply the Big Tech approach in B2B payments

    1. Best practice customer onboarding

    Experiences with payment delinquency during the pandemic have prompted many businesses to be wary of extending credit terms. The general sentiment now is businesses want assurance that they can get paid, and having that direct debit authority can help. However, direct debit authority (or any payment term agreement for that matter) only works if there is mutual trust between businesses and customers.

    Creating a transparent, convenient and secure payment collections system is key to getting customer onboarding right. And this can be done by:

    1.  Digital credit application

    Digital credit applications provide convenience and transparency on the customer’s end and allow you to capture data securely. 

    How an enhanced credit application process can protect your business from bad debts

    1. Using data to minimise risk and segment customers

    Access to a customer’s business credit score can help you make better decisions in extending credit to customers. Data captured from onboarding allows you to segment customers and offer reasonable payment terms. Integration of credit scores in your AR automation also helps you gain better insights in managing credit risk of existing customers.

    1. Direct Debit Authority upfront

    By providing the option for customers to give their direct debit authority, you get a head start to further streamline payment transactions down the line.

    2. Introduce automation earlier in the process

    Businesses must simplify the payment process to minimise the risk of late payments. And this is what Big Tech companies have perfected over the years: when customers subscribe to their products or services, they get paid immediately. They do it efficiently, so customers realise that paying on time benefits them too.

    Electronic Direct Debit Authorisation (eDDA) unlocks possibilities that can get B2B companies as close as possible to how B2C and Big Tech companies are approaching payments.

    Here’s how we’re doing that in ezyCollect:

    1.  Collect Now (on-demand) – Manage over-the-call payments on a single platform, even without eDDA.
    2. Collect Now (Sales Orders) – You can bring sales order data from your ERP* into the platform and take payments via Direct Debit.
    3. Scheduled Payments – You can plan to schedule collections for all outstanding invoices in a single go. Payments will be automatically debited from your customer’s account on a set future date agreed by both parties.
    4. Auto-Collect: The system automatically schedules the Direct Debit transaction based on the invoice due date, further streamlining your collection process.

    Five reasons why you should use Integrated Direct Debit

    2. Seamless integrations

    A streamlined payment process won’t be as efficient if you work with disparate systems. Every part of the process must be in sync with other software you use – whether it’s your online ordering software or stock management system. Simply put, payment data has to flow from one platform to the next. And more importantly, data must integrate into your accounting system to achieve one single source of truth. 

    Duplication and errors often result from having to input data manually from one system to another. System integration ensures every part of the AR and AP process is seamless and transparent. Everyone knows their responsibilities, so each step in the process goes as planned.

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    The future of payments technology

    With technology moving quickly, we expect more variety and speed with B2B payments. Emerging trends in the B2C space, such as QR code payments, digital wallet services, and gamification of payments, signal more sophisticated yet simplified payment systems for those in the B2B space. 

    The seamlessness and simplicity of the payment experience are the defining features of Big Tech’s approach to payments, transforming how B2B firms will get paid in the near future.

    To learn more about how you can start applying PayTech to eliminate late payments in your business, let’s chat, and we’ll walk you through the options for your business.

     

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