The pandemic-driven shift to digital payments in eCommerce is making rapid inroads in the B2B space, with many organizations now realizing the benefits of digitizing legacy B2B payments processes for their suppliers and vendors.
Nearly one-third of organizations already were using digital B2B payments as of 2020, according to one survey, and nearly twice that share reported being “very likely” or making it a “priority” to switch most of their B2B supplier payments from checks to electronic payments. Key benefits of digitizing B2B transactions include cost savings when distributing funds and being able to better predict times to settlement.
Some businesses are getting a head start in this direction, with PYMNTS research revealing that those in the energy and advertising sectors are taking the lead in automating their B2B payments processes. This promises to garner significant cost savings for these businesses, as organizations are bullish about B2B spending in the coming year. An American Express survey revealed that U.S. spending is on the upswing in all core B2B categories, including advertising, with automation expected to be the fastest-growing segment in technology spending. More than three-quarters of U.S. organizations are optimistic in their B2B forecasts for the next 12 months, with almost half planning to automate or further automate their B2B payments within that time.
The following Deep Dive examines how digital B2B payments adoption is simplifying the payments and collection processes of businesses across a wide range of industries, with advertising standing to benefit strongly from this trend.
B2B Payments, Automation on the Rise
B2B spend, which concerns the goods and services businesses buy from other businesses to keep their operations running, is an important economic indicator, and its anticipated growth bodes well for the economy as a whole. The Centre for Business and Economic Research (CBER) estimated that B2B transactions make up about half of every dollar spent in the U.S. economy. U.S. companies predicted that their B2B spending in the second quarter of 2021 would be 3.4% higher than in Q2 2020, translating to growth of $140 billion.
About one-third of U.S. business spend still relies on antiquated systems and physical payment methods, however, which can create friction and slow payment processes. The pandemic appears to have served as a wake-up call for companies in this regard, as one survey revealed that businesses worldwide are investing more to digitize, automate and streamline these payments. The U.S. is leading this charge, having the highest level of automation of six countries surveyed across the majority of B2B functions. About half of U.S. companies said they mostly or fully automate business spend, and another 46% plan to do so over the next 12 months.
B2B Payments Automation’s Benefits for Advertising, Other Core Categories
Spending in the online advertising B2B category has shown strong growth, advancing twice as quickly as money spent on print advertisements each quarter. This boost likely reflects the drop in in-person events for B2B marketers during the pandemic but is positive news for ad platforms. Companies expected to spend 2.6% more year over year on advertising, marketing and sales in Q2 2021 to acquire new business relationships. Other research showed that B2B digital advertising is up 23% this year. Some predict that B2B marketing may never return to what it was before the pandemic began, so these expenditures likely will continue their upward trajectory.
Marketing professionals see a bright future for paid media. A Gartner survey found that 74% of industry leaders foresee more spending on digital advertising, and 66% predict the same for paid search.
Virtual cards are one way advertising agencies can streamline payments for advertisements on websites such as Google or LinkedIn. A number of agencies currently use credit cards to cover ad campaign-related expenses, but virtual cards give marketing departments better insight into clients’ budgets as well as a superior level of customization. Clients will set a specific budget for each card, loading that allotted amount onto the appropriate card every month. When the value of the card reaches zero, ad spending will discontinue until the funds are reloaded the following month. Virtual cards have strong defense systems for protecting users against fraud.
PYMNTS’ research shows that advertising firms with automated accounts receivable (AR) processes have lower delinquency rates and better days sales outstanding (DSO) than companies that rely on traditional, paper-based methods. Eighty-seven percent of these firms see these improvements as significant advantages, and more will follow suit as digital innovation of the B2B payments space continues. These investments are poised to pay off for advertising and other core B2B functions in the very near term.