The year 2021 could be summed up in one word: digitalisation. While the COVID-19 pandemic has inevitably acted as a trend accelerator in this respect, digital transformation touches all sectors. Payments are no exception. Many of us can recognise that the way we pay for things has rapidly evolved over the last few years. Whether it’s books, bills or burgers, an increasingly large chunk of consumer payments is now done over the Internet.
The customer is always right
Understandably so, retail customers now want user-friendly, fast, and secure payment options. While traditional banks have been channelling their efforts to meet these needs, notably by providing a range of international payment options and precise bank account identifications, they have done little to improve the payment experience of businesses. Yet while B2C transactions may have reached new heights with the pandemic, they are still dwarfed by the B2B sector. According to a UNCTAD report, B2C ecommerce was estimated at $4.9 trillion in 2019 while global B2B ecommerce reached $21.8 trillion the same year. Accordingly, new players in the field have started to tap into this potential and intend on modernising B2B payments.
Room for improvement
Unlike consumer payments, B2B transactions are generally complex. That is because they are impacted by many factors, including:
- The number of people involved – In a business, payment decisions aren’t taken by a single person. On average, 5 to 7 stakeholders must have their say before signing-off on a payment decision.
- Delays – Involving an average of 5 stakeholders inevitably results in longer decision-making. Delays in the payment cycle represent a major issue for an estimate 30% of middle market businesses.
- Volume – Businesses tend to buy in bulk and sell large quantities with transactions worth several thousand.
- Frequency – Businesses often prefer establishing lasting buyer-seller relationships as they tend to make regular and recurring transactions.
- Industry – Every industry has its specific payment terms. Drawing up contracts, agreeing on a delivery process and conditions, verifying the quality before proceeding with the payment and invoicing, all contribute to making B2B payments that much more complex.
Nonetheless, our expectations as consumers have carried over to the B2B payments scene, with business owners and entrepreneurs now wanting the same improved services. As a result, fintechs are bridging the gap and offering solutions to traditional pain points. In fact, according to a 2021 Statista report, 34% of companies worldwide are ready to turn to fintech solutions.
The pain points of B2B payments and how to solve them
Some of the major pain points that afflict B2B payments include delays, manual processing, fraud, and visibility. New business-to-business payment solutions aim to overcome these issues. Here are four of the main B2B payment trends to look out for in 2022:
Going from manual processing to automation
Because many companies still manage payments manually, they are subject to slow processing methods. All the time and manpower spent manually processing payments could arguably be put to better use by adopting automated processing solutions.
B2B payment automation provides control and visibility over payments while reducing operating costs and saving time. Integrating a Payment Application Programming Interface (API) to an Enterprise Resource Planning (ERP) software provides a seamless solution to managing payments by safely sharing banking data and enabling electronic payments. In the B2B payments ecosystem, electronic payments are a game changer: fast, efficient, secure, convenient, and instant, electronic payments are a considerable growth opportunity for buyers and suppliers alike.
Managing risk through multifactor authentication
As online transactions continue to grow, the risk of payment fraud and cyberattacks is also an increasingly real threat to companies. The solution to protect payments and ensure more security is Strong Customer Authentication (SCA), an EU requirement that entered into force in 2019 and has gradually been implemented by Member States. Two-factor (2FA) and multifactor authentication (MFA) are based on the use of multiple methods of authentication categorised as knowledge (an element that only the user knows), possession (use of a device only the user possesses) and inherence (something the user is). This extra layer of security protects access to accounts and acts as an additional barrier against hackers and scammers.
The benefits of multifactor authentication are numerous:
- Ensuring customer security fosters trust and confidence in the business.
- Bringing extra security to sensitive information transiting through a company reduces the risk of system breaches and unauthorised access.
- Extra security reduces the risk of processing fraudulent transactions.
Overcoming payment delays
According to an online questionnaire, 44% of US business-to-business SMEs said that late payments represent a challenge that seriously affects their business. They impact a company’s cash flow, not to mention its business relations and reputation. There are many reasons that contribute to late payments, including insufficient available funds, long payment terms and long processing times in the case of cross-currency payments. Going digital simplifies the entire payment processing chain, making it possible for companies to automatically send invoices error-free, automate payment schedules, and track late payments.
Most businesses lack an end-to-end view of their transactions meaning they can only hope their incoming payments are on time and guess when their outgoing payments arrive at the destination. Having visibility over every payment as it moves through the system provides greater predictability, and better control over things like operations, cash flow, and business relations.
As a way of optimising the payment cycles in the B2B world, iBanFirst’s Payment Tracker provides real-time updates on international payments. Embracing all the B2B payment trends and more, iBanFirst is among the new players that aim to improve the future of B2B payments. As a licensed payment institution authorised to manage accounts and initiate electronic payments, it provides an array of secure banking services intended to help businesses optimise their international payments.
To find out how iBanFirst solutions could help your business, speak to an iBanFirst expert today.