B2B Payments

Slow Going, But B2B Mobile Poised to Pick Up Steam

In the excitement over the changing face of consumer payments, where mobile devices become wallets and wallets (you know, the ones that hold cash and cards) may be on their way to becoming artifacts, the business to business potential of mobile payments gets relatively short shrift.

But there are reasons to believe that might be changing – especially as enterprises get up to speed on the benefits of going mobile. As a blog post earlier this year from Go Canvas stated, some of the most basic features of mobile payments can help businesses thrive.

With mobile B2B, companies can manage working capital more efficiently, according to the Canvas blog. As a quick primer, working capital is the cash on hand needed to run the business on a day to day basis – and for many enterprises, the cash cycle can be a long one, or at least longer than business owners would like, requiring more funds on hands to deal with sometimes unexpected events.

Canvas cites a statistic form the Georgia Tech Financial Analysis lab, whose research among public companies found the average days payable went from 35 days in 2009 to 46 days last year. The higher the payables number, the longer it takes for cash to hit the account of a company that has already provided goods or services. The longer a company must wait for cash, the more it must dip into its own reserves to fund operations.  Relying on invoices and checks – in short, a paper based way of doing business – can stretch the process out longer than is necessary.

Mobile payments offers a way to shorten, or eliminate, funding gaps as fund transfers are made in real time, regardless of the method used (such as check or credit card). Invoices and payments can be created, tracked, and completed without the need for paper, or sending that paper in the first place.  The streamlined nature of mobile B2B payments helps cut down on administrative tasks, notes Canvas.

Studies have also shown some real movement to embrace digitally-driven payments. In 2004, a sizable majority of B2B payments were made by check – as much as 81 percent.  That number had dropped to around 50 percent by 2013, according to an AFP survey conducted that year.  One key impetus has been technology’s embrace of the cloud, and the acceptance of storing data offsite, and in digital form.

In fact, the movement to digital payments also allows for better record keeping. The aforementioned AFP research stated that e-mail has become among the most preferred ways to get remittances between businesses.  And mobile payments can sync well with e-mail-based system to communicate services rendered and payments sent – and creating a digital form of receipt that is much harder to lose than paper-based renderings.

And of course, security remains top of mind in this electronic age. Headlines may be dominated by the news of brazen hacks stealing sensitive data from retailers, banks and government agencies.  But smaller enterprises remain vulnerable too, says Canvas.  The AFP study notes that 60 percent of organizations have been hit by fraud payment attempts (and of course, in many cases, those attempts have succeeded).  Key avenues for fraud included checks, the favorite avenue of criminal activity at 82 percent, followed by debit and credit cards.  Key payment systems, such as PayPal and other upstarts including Square feature encrypted card readers, and in some cases limited liability programs.

Even as recently as last month there have been indications from banking heavy hitters that B2B is an undeniable trend. HSBC said in June that its own B2B payments service, launched in 2011 and known as HSBCNet, has shepherded $15 billion in payments, with $1.2 billion of that tally coming in 2015’s first quarter.  In the meantime, the U.K. is shaping up to be what might be termed an “early adopter” of mobile B2B, as the U.K Treasury accounts for as much as 22 percent of the service’s users.

The utility of mobile B2B was underscored by comments made at the time of the U.K. findings. HSBC’s global head of PCM eCommerce, Nadya Hijazi said that businesses may be a bit slow to embrace the new technology – but the benefits are clear and swift o be recognized. “Digitizing payments also enhances visibility over the workings of a business,” said the executive. “More comprehensive, accurate payments information can be captured and retained. Finance directors can, at a glance, better gauge the financial position of their subsidiaries, trading partners and contractors, enabling them to make more informed buying or credit decisions.”


Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out the February 2019 PYMNTS Digital Fraud Tracker Report

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