The B2B payments discussion often centers around innovators’ efforts to kill the check.
Unfortunately, simply introducing an electronic alternative to paper checks is not enough to kill this sticky and popular payment method.
Innovators must consider a range of factors, from the size of the company making the payment to the infrastructure constraints of the firm receiving it. There is no straight line to killing the check, but in the path to B2B payments innovation, a plethora of possibilities emerges.
Today, some of the industry’s biggest players will converge in New York City at this year’s PYMNTS B2B Payments Executive Forum, with Visa as presenting sponsor. The forum is a call to action for key industry stakeholders to tackle friction in the $125 trillion-worth of global payments volume flowing between businesses around the world. And, it’s an exploration among experts as to why — despite years of innovation and technological advancements — the inertia of paper and manual processes continues to stunt B2B payments technology adoption.
Ahead of the forum’s kickoff, PYMNTS looks back at some of its speakers’ thoughts on the biggest trends in B2B payments, with Visa’s Head of Global Business Solutions Kevin Phalen setting the stage in his opening keynote about what it will take to ignite innovation in this massive segment of global payments.
B2B Payments’ Innovation Agenda
One of the biggest B2B payments conundrums today considers the adoption challenge: There are better technologies available to businesses today, so why do paper-based and manual processes persist?
The answer is complex because B2B payment solutions must be multifaceted and flexible enough to meet an array of needs. According to Phalen, that includes speed, transparency and global scale.
Speaking with Karen Webster just ahead of the launch of Visa B2B Connect earlier this summer, Phalen noted the functionality under the hood of B2B payment tools is just as important as what lies on the surface. Solutions like Visa B2B Connect are able to address both the need for ease-of-use and access to data through measures like adoption of the ISO 20022 messaging standard, which enables seamless exchange of payment data.
Tokenized data also allows for secure transmission of information, Phalen noted, allowing payment instructions to safely move between institutions and corporates.
A surge in B2B payments adoption has also introduced a new challenge: overwhelming choice, making cross-platform integration a headache. As a result, innovators need to fit in the bigger puzzle piece of corporates’ back-office systems.
“Our customers don’t want to use their IT resources to stitch together third-party solutions,” Billtrust’s CEO Flint Lane told Webster of businesses’ need for holistic B2B payment solutions that address both accounts payable and accounts receivable needs, all while working in harmony.
Luckily, said Bill Wardwell, VP of Strategy at Bottomline Technologies, the new narrative of B2B payments is overwhelmingly digital, which will make cross-platform integration easier — so long as service providers embrace collaboration.
“We are seeing some progress in this space where ERPs are now recognizing the fact that they need to provide payment capabilities that are not necessarily native in their systems, and they are actively partnering with banks and FinTechs to do so,” Wardwell told Webster in June.
Getting the Supplier On-Board
A critical piece of this integration puzzle, Wardwell added, is looking beyond the immediate end-user.
“Historically, solutions have been created to solve the needs of one party in the payments transaction,” he said, solutions that “haven’t necessarily thought about the needs of all parties within that transaction.”
Through a decade-plus of B2B payments innovation, one of the biggest lessons the industry has learned is that payment solutions cannot be designed solely for the payer; they must also keep the supplier in mind.
B2B vendors often carry the burden of B2B payments friction. While a corporate may want to embrace electronic payments, it’s the supplier often stuck investing in infrastructure and procedural changes to accept that payment method — not to mention, suppliers also carry the burden of trade credit agreements when payment terms extend to months on-end.
It’s often a case of “He who has the gold, makes the rules,” as PayMate Founder and CEO Ajay Adiseshann told Webster in a conversation last July.
Vendor acceptance is a particularly large hurdle when it comes to commercial cards, according to Boost Payment Solutions CEO Dean M. Leavitt, who told Webster last month that “there is a direct relationship between cost of acceptance and likelihood of acceptance.”
Boosting adoption means lowering the cost of acceptance for B2B vendors, although barriers also exist in terms of vendors’ ability to shift back-office procedures, adopt the right infrastructure, and manage the rise in cross-border corporate transaction volume.
Easing Friction Across Borders
According to Leavitt, tackling global payments friction means service providers must make cross-border transactions feel like a domestic payment for both buyer and seller.
VertoFX Co-Founder Anthony Oduwole said that’s easier said than done, however, telling Webster last month that businesses are increasingly operating with less familiar currencies as they broaden exposure to emerging markets. Aside from a lack of familiarity, scarce liquidity, high FX fees and regulatory measures make international operations an expensive, friction-heavy process.
“It’s a layer of bureaucracy and inefficiency,” said Oduwole about the effects of governments’ inflation and other financial measures that can limit a company’s ability to operate in a given market. And with businesses rarely able to access the resources and know-how to build localized relationships with banks around the world, Oduwole noted financial services and FinTech players must be the bridge not only connecting businesses to each other, but to service providers around the world.
Speed Takes Center Stage
In the payment rail wars, speed is also emerging as an essential component for end-customers — and that doesn’t exclude business payers, despite what skeptics have historically believed. The faster payments value proposition is going from “nice to have” to “must-have,” according to Drew Edwards, CEO of Ingo Money.
“We’re not talking about whether we’re going to hit this tipping point in the future,” he told Webster in May, highlighting payroll and employee payouts as a particularly large opportunity for faster payment rails. “We’re talking about when, and we’re talking about in the next couple of years.”
‘Small Business’ No Longer Means ‘Small Value’
Payment service providers and FinTechs have begun to target the small business payer, not only acknowledging SMBs as a potentially lucrative customer base, but also the massive gap in service quality that has historically plagued this segment.
Among SMBs’ biggest B2B payments hurdles is a lack of resources to streamline payment operations. As Bento for Business Founder and CEO Farhan Ahmad told Webster, that could mean a lot of second-guessing of vendor payment preferences, or a lack of transparency and cash flow control.
But with SMBs’ often lacking the ability to seamlessly and affordably adopt high-tech solutions, Bento for Business said exploring tools that SMBs already use — like email — can drive B2B payment efficiencies and lower costs.
While SMBs have unique constraints limiting their ability to embrace B2B payments innovation, companies large and small often face similar hurdles in the fight to ditch paper.
PYMNTS’ Tipping Point Playbook, a collaboration with Mastercard, put some numbers behind this issue: A survey discovered that nearly one-third of businesses indeed plan to embrace accounts payable automation technology. Unfortunately, that figure also signals that they have yet to make the adoption leap from wanting, to doing.
After years of innovation, what industry experts agree on is that simply introducing a digital tool is not enough to drive adoption. As industry stakeholders will debate at this year’s B2B Payments Executive Forum, how to juggle the factors that will push the adoption needle remains a complex conundrum.