B2B Payments Need Tech and TLC to Reach Consumerized Potential

It’s time for the consumerization of B2B payments.

A quartet of payments professionals told PYMNTS in an On the Agenda (OTA) discussion that commercial payments are taking a cue from the everyday experiences of eCommerce — where Amazon and other platforms point the way toward a more streamlined experience as buyers transact with suppliers.

Panelists included Norman Marraccini, senior vice president and group executive of commercial and retail solutions at FIS; AJ McCray, global head of corporate banking at Bank of America; Sarah Billings, senior vice president and head of payment products, operations and strategy at PNC; and Fiona Hastings, general manager of Neo1.

Billings noted that the consumerization of B2B payments has gotten a “significant push” from the pandemic.

“It’s been a necessity in order to get business done,” she said.

Indeed, modernizing payments is critical for financial institutions (FIs) and corporations. Upgrading simplifies B2B payments, cash management and invoice reconciliation. It also provides access to supplier portals and real-time revenue reporting.

Do it right, and there are positive ripples up and down the supply chain. But only 30% of FIs said they’ve been successful at limiting B2B payments and cash management tensions. And 75% of FIs said corporate customers experience money management frictions when making B2B payments.

Banks have been investing in the opportunities that have presented themselves to make it easier for businesses — whether small or large — to move money in the way that has traditionally been seen in their personal lives, Marraccini said.

Addressing the Pain Points

The pain points in B2B, the panelists said, most glaringly include the proliferation of paper that exists throughout the system. Roughly half of B2B payments are still made with paper checks. Paper invoices and paper checks still dominate, and sometimes faxes are a means of getting documents where they need to go.

Hastings said that the marketplace model can “eliminate all the friction in the procure to pay process, not just payments. And that’s what smaller businesses want.”

For the FIs themselves, the panel noted that there is a correlation between resources and outsourcing at least some of the functions needed to modernize enterprise clients’ operations. Roughly 93% of large FIs with $100 billion in assets were able to handle things on their own, while smaller FIs struggled more. But the build-versus-buy debate gets complicated when and as FIs start to examine just how significant the time and money investments will have to be, if they go it alone.

PNC’s Billings said, “technology costs money, and you need to have somewhat deep pockets to keep up in this absolutely crazy dynamic world.”

Against that dynamic, partnerships can help solve a range of frictions, especially in a platform setting.

As McCray noted, companies can pay tens of thousands of suppliers every month, and the sheer scale of managing those suppliers needs to be made easier.

“Maybe supplier A wants to get an ACH payment, supplier B wants to get a wire, and supplier C is still getting a check but may not realize that there’s another option. How do you manage that whole process?” he asked rhetorically.

Hastings said technological innovations, including application programming interfaces (APIs), have made it possible for FIs to move beyond the traditional ways of digitizing clients, and instead can innovate end-to-end workflows and payments functions.

Billings added: “One of my biggest pain points is when providers assume that the whole market is just going to jump to a new technology. And I think it shows a complete lack of understanding of our clients, of their financial limitations and their technical limitations.”

Those advanced technologies can help create bridges that can assist enterprises in transitioning away from the paper check and improving back-end functions, with a flexibility and hierarchy of payments that had not been there before.

“There’s never one size fits all, and we have to make it easy for our clients to navigate between all of the choices,” she said.

In getting the enterprises to move away from the check, there’s a bit of handholding that is necessary, said panelists. But with the emergence of peer-to-peer (P2P) payments like Zelle, there’s a bit more familiarity with intuitive ways of sending payments from one party to another. Intelligent payments routing, said Marraccini, can help receivers accept payments in ways that are comfortable for them and that are cost effective.

No matter the business function being modernized, data underpins it all. And Hastings said that data can help firms improve both their accounts payable (AP) and accounts receivable (AR) departments, simultaneously. As she said: “It’s not just about how you are paying. It’s not just that piece. It’s a holistic view of how are you receiving money. How are you paying money?”

Marraccini noted that where we are, and where we were recently, in terms of B2B payments is markedly different than just a few years ago. And in the movement toward making commercial payments fluid, fast and digital, he said of solutions providers: “It’s up to us, and in our conversations with clients, to figure out the best ways to use and [show] people how to use those technologies.”