B2B Payments

Baby Steps In Digital B2B Payments

Corporations have been chastised in recent years as floods of new data reveal the ongoing prevalence of paper checks in B2B payments. This segment of payments is notorious for its skepticism and slow adoption of new tools — even if those emerging solutions can save a business time and money.

But if the financial services sector is going to actually service its corporate clients, then it must acknowledge that checks will remain in the mix — at least for the foreseeable future.

“It certainly has been a longstanding goal in the industry to reduce check payments, and they are decreasing rapidly in the consumer-to-business space,” explained Sam Robb, U.S. Bank’s head of receivables solutions for treasury management. The B2B payments space, on the other hand, not so much.

Offerings from FIs, like mobile banking and electronic payment support, can help encourage businesses to make the shift to ePayments, the executive said, but legacy payment technologies also need to be addressed.

U.S. Bank, for instance, has just rolled out the small business version of its mobile app to facilitate mobile deposit of checks.

A tool that allows users to snap a picture of a paper check with their smartphone and deposit it into a bank account — without ever having to visit a bank branch — is becoming commonplace for consumers.

“When you think about the proliferation of online banking and direct debit, those are apps or payment solutions that have been around in the consumer space for a while,” Robb said. “The B2B space has, historically, had challenges.”

That’s because businesses — including small companies — need an additional level of service when adapting a solution that’s already taken off among individuals.

The paper check has remained so ingrained in the payments processes of businesses because of the information that comes along with it, Robb explained.

“Today, a paper check is accompanied by a document that tells the suppliers what the buy is paying for — for these goods or for this invoice, etc.,” he said. “And, in the electronic world, many times, that information doesn’t accompany the payment.”

So, when a consumer deposits a physical check via mobile device, the funds arrive in the account, and the transaction is complete. For businesses, however, there need to be additional layers of information with that payment for the accounts payable and accounts receivable teams.

With data analytics technology enhancing the services available to those professionals, too, that information is also key for the enterprise in a broader cash management sense.

“We’ve done extensive interviews with clients,” Robb said in reference to what companies need when shifting from paper checks to electronic payments. “They’re familiar with it, and they need that information that accompanies the check in order to post to their accounting systems.”


B2C To B2B

The quick pace of adoption of new payments technologies among consumers can be crucial to the eventual adoption of these solutions for companies, Robb said. Mobile banking has especially evolved along this pattern.

“In the consumer space, the adoption of mobile technology has greatly outpaced the B2B side,” the executive stated. “Consumers can check balances, make transfers, P2P payments, mobile deposits, and they become comfortable with that.”

“The natural evolution,” he continued, “is taking that to their business.”

And while companies need modified — and often more sophisticated — versions of consumer banking services, they still want streamlined, more efficient, more cost-effective solutions that don’t require a trip to the bank.

“Every business is challenged by cost compression, market compression, time and cost savings,” Robb noted. “They’re trying to scrape as much out of a business as possible.” Tools like mobile check capture and depositing can overcome these challenges. “It allows a small business owner to more efficiently operate a business from their office, so they don’t need to make trips to the branch. They can focus on core competencies,” the executive added.


A Natural Transition

The natural transition of consumers adopting FinTech innovations into business owners doing the same is key, but it doesn’t happen all at once.

Providing a way to digitize a paper check for mobile banking purposes, for instance, is a representation of the inability for the financial services sector to force an all-digital revolution in the B2B payments world. It takes gradual change.

Robb said that U.S. Bank offers desktop scanners for those companies that prefer to scan their paper checks. But with Apple and Android in nearly everybody’s pockets today, the smartphone can be the most effective way to encourage electronic banking.

“The mobile phone is an easy way to make that transition from taking checks to a bank or ATM,” noted Robb. “Mobile deposit is a very easy way to adopt the technology in a low-cost means.”

It’s not about reprimanding a business for its continuing reliance on paper checks; it’s about making digitization of paper checks too easy to pass up for corporates.

“We realize that there will be paper checks, and there will continue to be paper checks, especially in the B2B space, for years to come,” Robb said. However, he added, “the phone is becoming the bank of the future.”


New PYMNTS Study: Subscription Commerce Conversion Index – July 2020 

Staying home 24/7 has consumers turning to subscription services for both entertainment and their day-to-day needs. While that’s a great opportunity for providers, it also presents a challenge — 27.4 million consumers are looking to cancel their subscriptions because of friction and cost concerns. In the latest Subscription Commerce Conversion Index, PYMNTS reveals the five key features that can help companies keep subscribers loyal despite today’s challenging economic times.

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