Strategic Treasurer and Bottomline Technologies recently published a joint report, sponsored by Bank of America Merrill Lynch, on the B2B payments landscape: B2B payments + WCM Strategies. Their 2017 survey contains data points that all point to one conclusion: Companies are forced to reshape their payment strategies thanks to a combination of factors, including the rising threat of payments fraud, increased globalization and high payment volumes.
But how businesses reshape their payment practices varies. From shifting use of various payment rails like ACH and cards, to deployment of FinTech technologies, to changing supplier payment habits, the report offers a glimpse at the current state of B2B payments – and where the industry may be headed. PYMNTS dives into the report to examine the biggest data points.
Nearly a quarter of survey respondents said they were doing business in each of the 10 key markets identified by the survey, with the vast majority operating in North America. Two-thirds said they operate in more than one country, and a third said they have a presence in more than 20 countries.
Globalization brings new opportunities for businesses but gives rise to new complexities, including cross-border payments, compliance, risk mitigation and accounting.
Combine that with the finding that B2B payments are becoming increasingly complex, with two-thirds of respondents saying they originate payments with at least three banks. More than a fifth said they’re working with 11 or more banks, and 13 percent said they work with 21 or more banks. That means initiating payments in multiple currencies with multiple partners.
“As corporate conduct larger amounts of business globally, there is a need to establish bank relationships and open additional accounts to service new regions or countries,” the report concluded. “As more banks and bank accounts must be managed and new currencies and regulations come into play, the complexity faced by corporates with their payments operations grows.”
ACH is the most preferred payment rail for corporate payers, according to Strategic Treasurer and Bottomline Technologies. The survey found that 54 percent of companies said ACH was their most preferred method of payment. Interestingly, the same figure (54 percent) said checks were the least-preferred method.
That finding could speak volumes, considering separate research had found an uptick in check use for B2B payments. This report, however, suggests that not only is ACH most preferred, but it is viewed as the most efficient payment method; 80 percent of banks surveyed in the report said they support NACHA as their standard payment origination offering.
Interestingly, cards are also not a preferred method of payment for businesses, but corporate card programs are on the rise, the report said. Forty percent of survey respondents said cards were their second-least preferred payment method (just 15 percent said they were their most preferred), but 43 percent report already having a purchasing card program in place. More than a third said a T&E card is in use, and nearly the same amount said they have deployed an all-in-one corporate card program. More than a quarter said they plan to spend more on their corporate cards this year than they did in 2016.
Supplier Payment Practices
Card use is on the rise, but Strategic Treasurer and Bottomline Technologies note that the success of corporate card growth is dependent on suppliers’ willingness to accept them. Analysts described suppliers’ card acceptance levels as “promising” despite the admission that cards are not their top choice when getting paid. About half of companies surveyed said they are very satisfied/satisfied with vendor adoption rates for ghost cards (virtual cards issued to specific company departments), while even more (59 percent) said they are satisfied with supplier acceptance of their AP cards.
But fostering strong vendor relationships is not on the top of AP professionals’ priority lists. Just 10 percent said vendor relationships are the key driver behind adopting AP automation tools, behind cost-savings and boosting efficiency and productivity.
Analysts said they expect use of check to pay suppliers will decrease as companies deploy more efficient, electronic payment tools. “At the same time,” the report added, “corporate payment practices such as participating in discount or rebate programs are expected to increase, while the practices of delaying payments and pushing lengthier payment terms onto vendors should see reduced use.”
Suppliers could be crucial to promoting faster payments, too: More than a third of vendors said they would be willing to accept a fee or extend a discount program if it meant they would get paid early. Meanwhile, 38 percent of businesses said they regularly require extended payment terms from their vendors, suggesting delayed supplier payments are fairly common, a practice that some companies may resist giving up.
According to Strategic Treasurer and Bottomline Technologies, the data is clear: B2B payments are more complex as they grow globally, and as businesses adjust their B2B payment practices to be more strategic in terms of cash management and vendor relations. Electronic corporate payment technologies are expected to continue to increase, too, the report said. Cooperation and collaboration will be critical to making this happen.
“As payment complexity continues to pose a significant problem for corporates, it is expected that the number of corporates using financial technology payment solutions or other third-party systems for managing payments will continue to increase,” the report concluded. “However, banks are a critical piece of the puzzle, providing insight and advice to their corporate clients and often leading the way with R&D along the payments front.
“Moving forward, banks, financial technology providers and their corporate clients must work together to reduce the complexity that is bogging down the payments landscape.”