While much has changed in the world of consumer payments, the business-to-business (B2B) payment landscape has evolved at a much slower rate. Currently, 67% consumer payments are made electronically while checks still constitute 64%. In a world of direct deposit, instant transfers, and digital disruption, tons of businesses are still relying on a payment mechanism that’s over 250 years old!
Credit cards hold only a fraction of the overall B2B payments market, but that fraction is quickly increasing in size as the demand for this payment method is on the rise.
Businesses see value in faster payment technologies such as Same Day ACH and conversion from checks to card-based payments. By adopting faster payments, businesses have more flexibility to make last-minute payments and reduce DSO significantly. They also present an opportunity to:-
As per the latest market trends, businesses across industries have been transitioning towards a more reliable and quick payment method. Security and speed are two key drivers in evaluating different payment methods.
Card payments leave suppliers and buyers in a predicament for several reasons:
Card payments typically require the merchant (the supplier) to pay an interchange fee on every single transaction. Interchange fees vary widely based on the card type used to make the purchase, but as per a study by ValuePenguin, this costs suppliers an average of 1.81% per transaction.
The other issue with card acceptance revolves around process inefficiencies. Specifically, a lot of these A/P-centric card programs automatically email suppliers with card information and remittance details. As a result, the supplier’s A/R team is left to manually retrieve the card number and remittance information, process the payment through their card terminal, and manually apply the cash in their ERP system.
And finally, the third card acceptance pain point is security. Maintaining PCI compliance is costly for many suppliers, and accepting more card payments opens up businesses to data breach risk.
Despite all the hindrances that are stalling complete automation of B2B payments, the latest trends are pointing towards localization of the concepts at a steady rate by SMBs and large companies alike.
Increasing the acceptance of credit card payments for all transactions allows B2B companies to:
The last five years have seen dramatic changes in A/P and A/R departments with the introduction of virtual credit cards. These have become popular as they help in monetizing A/P spends and that’s something every CFO would like to hear: how to turn an expense area into a revenue stream.
More and more often, businesses feel the need to respond to the customer’s desire for fast, efficient and easy service. Because of this, creating an electronic adoption strategy is another trend to watch out for. It not only helps a business receive and process invoices faster, but it addresses customer demand.
For decades, businesses have spent significant time and money on reconciling payments with invoices and purchase orders. But new value-added services emerging in the industry have the potential to put an end to reconciliation headaches that have persisted for years and open the doors for vast improvements to standard accounting practices.
The arrival of more sophisticated artificial intelligence and machine learning techniques would increasingly help businesses get more from their payment data and processing patterns, resulting in an enriched experience, greater transparency and improved visibility.
The advent of new technologies has opened up doors for credit professionals to cash into. These technologies provide the right ammunition to make the whole cycle easier and more secure.
The complete adoption of credit cards in the B2B payment sector is still a dream and might seem intimidating at first, yet what most business professionals fail to realize is how redundant processes and techniques are slowly chipping away an organization’s revenue. Going by the trends seen in the market recently, it can be easily deduced that a digital wave is coming.
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HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.