Failing Grade: Only 30% of Businesses Believe Current B2B Payment Solutions are Very Effective

business finance

Consumers’ growing adoption of digital tools is prompting business leaders to reexamine their business-to-business (B2B) payment processes and how they can make the jump from manual to digital methods.

In many cases, they’re finding that complications linger. In fact, only 30% of businesses believe that their current B2B payment solutions are either “very” or “extremely” effective in solving key friction points, according to the Embedded Finance Tracker, a PYMNTS and Galileo collaboration.

Get the report: Embedded Finance Tracker

As they look to serve their B2B customers better, the decision makers at many companies are contemplating how they can apply embedded digital-finance solutions to their B2B finance practices.

Addressing the Sources of Payments Friction 

“Digital B2B payments are rapidly transforming businesses in many ways,” Galileo CEO Derek White said recently when announcing a collaboration with B2B Payments Firm Global Rewards.

Read more: Global Rewards Taps into FinTech Galileo’s Platform

PYMNTS found that the two most cited sources of payments friction are invoice reconciliation and the inability to offer supplier portals. Just over 40% of financial institutions (FIs) say these are either an important problem or the most important problem for corporate clients when making payments to their suppliers.

Between 30% and 35% of FIs cite working capital management, slow underwriting and lack of payment choice as problems. Between 22% and 29% point to spend management, real-time cash flow management, data that’s not provided across all areas of the organization, payment integration with enterprise resource planning (ERP), inability to share data across all functions and real-time reporting.

Smaller percentages of FIs name several other sources of payments friction: inability to manage with mobile apps, having an integrated system between accounts payable (AP) and accounts receivable (AR), lack of digital check collection, slow transaction confirmation and late or incorrect payments.

Bringing Embedded Finance Tools into B2B Processes 

Embedding finance tools into B2B processes can help companies streamline their payments and reduce key friction points, especially as these transactions typically happen in real time.

Embedded finance helps companies integrate payments into previously nonfinancial processes or platforms and allows them to offer sophisticated payment and banking services directly to their customers and suppliers.

Implementing embedded finance could enable businesses to offer their suppliers streamlined, frictionless access to digital payments without the need to send them to third-party portals or platforms as well as financing or extended warranty options, making the B2B payment process more efficient and less costly for both parties.

The value of the embedded finance market may also be driven by the growing number of businesses looking to move to digital channels to meet their B2B payment needs, especially as manual processes become more costly.

Embedded finance is especially attractive for small and medium-sized businesses (SMBs) given the opportunities for decreased costs, increased liquidity and improved supplier relationships.

Finding the right partner can help businesses easily bring embedded finance into their B2B and internal payment processes.