Digital payments have grown rapidly as a preferred payment option among consumers, but not so quickly among businesses. Often slow to advance to new technologies due to lack of knowledge about the benefits, business owners stick with their tried and true payment methods like checks, cash, and credit cards.
Over the course of the last few years, the B2B payments space has expanded. According to Deloitte, global B2B payments are set to reach $23.1 trillion by 2020. With that growth, businesses still want to make sure they are getting the best services, pricing, and security for those transactions.
Seeing the cost and time savings, businesses are now more willing to consider digital payment options. And, as more vendors and business service companies add those digital payment options, these payment types begin to climb. Here are the trends and statistics that show how much is pointing to a B2B digital payment environment.
Business Checks are Declining in Use
One of the first signs of the evolution in B2B payments was the decline in businesses using checks. The Association for Financial Professionals reported that 81% of B2B organizations used checks in 2004. As of 2016, this was down to 51%. While that still seems like a lot, the decrease shows that businesses are heading toward digital at a rate that is expected to grow even more in 2018 and beyond.
Data from NACHA and the Credit Research Foundation report that 32% of B2B payments are now ACH and are set to increase to 45% by 2020. Their survey also found that AR executives expect checks will decline to 34% by the end of this decade. This will be due to more companies migrating to digital B2B payment methods, including credit, debit, and wire.
Prime Movers are Shaping Behaviors
The U.S. government is helping to set a precedent for B2B digital payments. As of 2018, all invoicing for business-to-government payments will only be accepted as electronic payments. That means no more paper checks. Their experience can provide a best practices model for why it makes sense to migrate to B2B digital payments.
Others are following suit, such as property management companies that are using digital B2B payments to handle rent payments and HOA fees. They are also using these digital B2B payment platforms to pay for vendors that do work on those properties, such as maintenance personnel, gardeners, and swimming pool technicians.
Collaboration and Partnerships are Growing
Part of the reason it's been slow going on digital B2B payment adoption has been numerous concerns. These include errors, complexity, security, and a rough implementation process. More banks and financial services companies are beginning to collaborate with technology startups and enterprises. These partnerships are generating digital B2B payment solutions that address these issues.
For example, banks and other financial platforms are adding API-enabled interfaces to generate faster, more secure B2B transactions. These partnerships are enabling more cross-border B2B payments. There will also be more options for next-day payments that help businesses meet their cash flow expectations.
New Technology and Innovation is Propelling Digital B2B Payments
One new technology is virtual credit cards. These one-time-use card numbers can be used to pay for goods and services. As one article noted, it "allows them to monetize their A/P spend in the form of interchange rebates. That’s something every chief financial officer wants to hear: how to turn an expense area into a revenue stream."
Other innovation is adding significant improvements. For example, a 2015 Institute of Finance Management survey reported 31% of businesses have received fewer calls from customers related to lost invoices. This is because of self-service portals. These save on postage, paper and printing costs, as well as decrease tasks for greater time savings and speed up the invoicing process.
Also, there is growth in mobile B2B transactions. According to Deloitte, mobile payments provide more convenient payment methods for customers similar to how it's benefited the B2C world. Industries like transportation or food supply may find this digital B2B payment option very useful. For example, a driver could accept an order and payment beyond the customer’s usual standing order. Getting that immediate payment will improve cash flow for that business and add efficiency across the organization.
These emerging solutions, including a greater use of blockchain, can deliver speed, security, efficiency, and transparency to B2B payments. This will encourage more businesses to move away from other traditional payment forms like business checks.