The Foray Of Credit Cards In The B2B Market

What you’ll learn

  • Learn how faster payments reduce DSO in receivables
  • Learn how to reduce transaction interchange fees using credit card payments
  • Learn how virtual credit card turns an expense area into a revenue stream

Watch the Summary Video

Credit cards in the B2B payments sector

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.

Why is the B2B market slowly but surely adopting credit cards?

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:-

  • Streamline purchases
  • Improve payment reconciliations
  • Give greater visibility to overall cash flow

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.

The obstacles faced by credit cards

The obstacles faced by credit cards

Card payments leave suppliers and buyers in a predicament for several reasons:

  • Interchange fees
    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.
  • Manual Intervention
    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.
  • Operational Expenses
    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.

    What features can be unlocked by implementing credit cards?

    Increasing the acceptance of credit card payments for all transactions allows B2B companies to:

  • Reduce risk in cross border payments.
  • Accelerate cash flow
  • Skip long invoicing procedures
  • Receive payment instantly
  • Avoid the high cost of manually processing checks
  • What does the future hold for B2B payments?

    Virtual credit cards
    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.

    Electronic adoption
    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.

    Accounting efficiency
    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.

    Better decisions
    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.

    Increased vigilance
    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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