B2B Payments

Tokenization Sets B2B Payments On A Path To Security, Speed

Payments security is an increasingly critical component for businesses on both sides of a B2B transaction today.

WEX’s Payments Pulse Data report published last year found payment security to be suppliers’ No. 1 priority, according to accounts payable (AP) professionals, cited by nearly three-quarters of respondents. Separate research from TD Bank and Strategic Treasurer published last month found that businesses will focus their innovative efforts in payments around security, as 74 percent said they view the increase in cyber fraud as a growing concern for 2018 and beyond.

Both of these reports confirmed that for businesses, security trumps speed when it comes to payments.

But these surveys also revealed that faster payments are not completely off corporates’ radars: According to WEX, 68 percent of AP professionals said speed of payment is most important to their suppliers. Strategic Treasurer and TD Bank, meanwhile, found more than a third of businesses agreed the speed at which a payment settles was more important than the accessibility of payment data.

With payments accelerating, businesses will have to balance both of these priorities to meet the goals of their financial teams and address the demands of their supplier bases.

According to Crystal Stranger, co-founder of PeaCounts, a new entrant to the small business bookkeeping industry, there are technologies today that can address both of these priorities. With PeaCounts poised to release its solution from beta phase later this year, the company is looking to tokenization and blockchain as key drivers of B2B payments speed and security.

“We are tokenizing payments to employees and vendors,” she explained. “This way, we can speed up transaction times by creating our own system that will verify transactions quickly and accurately.”

PeaCounts is preparing to introduce its small business services that include features for bookkeeping and expense management capabilities. Underlying the solution is blockchain technology to enhance the security of data stored and accessed by the solution: Cryptographic tokens will facilitate decentralized payment verification, Stranger explained, limiting access to sensitive account and payment data.

Corporates are undoubtedly in need of enhanced payments security. Sift Science released research last year that revealed a spike in cybersecurity investments by businesses as various forms of payments and account fraud knock on their doors. Separate analysis from the Association for Financial Professionals concluded corporate payments fraud hit record levels in 2016.

But while cyberattacks and fraud schemes land in the headlines, Stranger said a recent incident she experienced highlighted just how fragile corporate security can be.

“I ordered new business cards from a leading business card company, and they sent me 700 of my cards and 300 of another company’s,” she explained. It may seem like a benign mistake, but Stranger warned that the situation has broader implications for corporate security.

“Not only is this giving out intellectual property to another, it is sharing sensitive personal information,” she said. “Business cards are even an identity document at times, as you can use them for access to events or to show who you are when making a purchase.”

“Sensitivity about private data is even more extreme in the financial software world,” Stranger continued, citing the backlash from the Equifax breach last year and, more recently, the #DeleteFacebook movement related to the release of user data.

“Privacy of financial matters is something that most people are concerned about,” said Stranger. “If we can use blockchain to verify identities with additional accuracy and prevent even one misuse of inappropriate access to data, all the work we have put into this is justified.”

PeaCounts’ roadmap includes an eventual rollout of B2B payment capabilities that similarly deploy blockchain and tokenization technologies to enhance security of employee and supplier payments. The solution will also aim, though, to accelerate transaction speed as the global payments industry continues its acceleration.

While corporate payments security is a no-brainer, faster B2B payments are less certain in businesses’ futures.

When NACHA introduced Same Day ACH in the U.S., the service facilitated nearly 2 million transactions in its first 11 days. Only about 6 percent of them, however, were B2B transactions. While there is some discussion about the potential for faster payments to gain widespread adoption in payroll and freelancer payments, companies typically take advantage of delayed payment schedules and therefore may not have a desire to pay suppliers immediately.

Stranger noted that there is, indeed, an opportunity for accelerated payments in the B2B space, though it is likely to look differently than consumer and P2P payments acceleration.

“The speed of life continues to race forward,” said Stranger. “In the B2B payment space, there also is room for improvement as a company that purchases on Net 30 terms can benefit from faster payments.”

In this scenario, she continued, companies can schedule a payment to transfer on the 30th day, allowing them to still take advantage of extra time to make payments without having to wait for paper checks or autopay drafts to clear and show up in accounts.

“When you can schedule the time it drafts more precisely, it allows you to manage every dollar in your account and safely put more capital to work,” said Stranger.

There are implications of faster payments for other types of business transactions too.

“You could pay employees at the end of each day for the work they do, or at any period you want,” Stranger noted. “A consignment shop could structure their sales where a payment is made automatically to the good’s owner when sold, rather than having to track this and issue payments at month’s end.”

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