Less Than Half of Businesses Make Payments Via Credit Card

Payments are seemingly the biggest barrier keeping many business-to-consumer (B2C) merchants from crossing into the business-to-business (B2B) market. Many retailers lack the necessary infrastructure to accommodate potential business customers’ payment needs.

It is not unheard of for businesses to make B2B payments with credit or debit cards — the payment methods commonly used for retail purchases — but these methods are used nowhere near as often as paper checks and automated clearing house (ACH). Interchange fees are one reason for this. These fees may seem small — as they are usually less than 1% — but even a fraction of a percentage of B2B transactions can rapidly add up when payments themselves total $10,000 or more.

This is partially why only 48% of businesses make payments via credit card, and just 19% make them via debit card, according to the Innovating B2B Retail Payments Playbook, a PYMNTS and TreviPay (formerly MSTS) collaboration.

Get the study: Innovating B2B Retail Payments Playbook: Optimizing Payment Solutions For Business Customers

“If retailers can’t support the processes and methods of payment preferred by B2B buyers, they run the risk of losing the opportunity to serve this market,” TreviPay CEO Brandon Spear told PYMNTS.

Expanding Into the B2B Market 

Expanding into the B2B market requires retailers to quickly and digitally onboard customers and find ways to accept their business vendors’ preferred payment methods.

The methods consumers typically rely on when making retail purchases — credit and debit cards — contrast sharply with those most frequently used for B2B payments. PYMNTS research shows that the most common ways in which businesses pay each other are via paper check, which is used by 81% of firms, and ACH, which is used by 64% of them.

That so few businesses leverage the payment methods to which retailers are accustomed can be a major roadblock for merchants hoping to expand into the B2B space.

Not only are B2B and B2C payments typically made using different methods, the former also follow an entirely different process than the latter. B2B payments are initiated when products or services are exchanged between two companies. The parties then discuss the exchange’s terms, including the time frame during which payment must be received as well as additional contractual requirements. Buyers typically make payments only after such invoices are received.

Accepting Businesses’ Preferred Payment Methods 

But B2C retailers can implement digital accounts receivable (AR) innovations to seamlessly transact with other businesses without derailing existing payment workflows. Digital AR innovations that leverage technologies such as artificial intelligence (AI) and machine learning (ML) can further reduce B2B transaction costs while providing business customers with easier and more convenient payment experiences that closely resemble those in the B2C market.

“Retailers can either offer in-house credit and add staff to AR department or outsource to third parties,” Spear said. “By outsourcing credit and AR functions, B2C companies can capitalize on automated credit, invoicing, receivables and cash application processes, and get help with collections.”

There is no telling how many businesses would use retailers as suppliers if only the latter accepted their preferred payment methods, and digital and automated AR solutions can make it logistically manageable and cost-effective for retailers to do so. Investing in AR innovations like these represents the first step on a new path toward market growth.