Next-Gen Commercial Banking Tracker: FIs Can Lead the Way in Digitizing B2B Payments

The digitization of the business world accelerated at warp speed in the past couple of years, thanks in large part to the COVID-19 pandemic. While manual operations were becoming less common and were headed for the dustbin of history, tech adoption sped up in myriad ways during the outbreak.

With their staffs scattered around the world and unable or unwilling to travel as the coronavirus spread across the U.S. and around the world, CFOs and other business leaders were left with little choice but to take their payment experiences digital — in many cases faster than they expected or even wanted.

One recent study found that more than three out of every four accounting and finance leaders (76%) said the global health crisis fast-tracked their accounts payable (AP) digital transformation initiatives.

That transformation to more online channels means vendors, suppliers and industry partners need to innovate both their consumer-facing and B2B transactions, including bill payment. Recent reports predicted that U.S. B2B eCommerce sales will exceed $1 trillion by the end of this year.

Financial institutions (FIs) can become the leaders in the digital revolution and better engage and retain corporate customers by offering these solutions. One recent PYMNTS study found that almost one in every four large firms’ B2B payments (24%) are still made via paper checks.

“Enabling access to seamless bill pay can help break companies’ lingering reliance on manual payment methods, freeing up both time and resources as well as helping to boost corporate clients’ loyalty toward their financial partners,” according to the April 2022 edition of the Next-Gen Commercial Banking Tracker®, a PYMNTS and FISPAN collaboration.

This month’s Tracker examines the latest trends and developments shaping the next-gen commercial banking space and how FIs can serve business clients’ changing needs through adaptable payment APIs.

While the digitization of the business world has certainly made serious inroads in the past couple of years, that doesn’t mean the job is complete and there’s no more work to be done in that regard. Many companies continue to depend on legacy B2B payments infrastructure that adds untenable costs and frictions to the process.

A recent PYMNTS study found that 31% of banks’ corporate clients cited a lack of payment options as a significant problem for their organizations, and another PYMNTS report found that businesses still struggle with payment delays.

The pandemic heightened this challenge, our research found, with almost three out of four companies (74%) that generate annual revenues between $25 million and $100 million saying that the health crisis worsened their delayed payments volume.

“Companies have moved to innovate their AP and AR processes accordingly, but many still face challenges in digitizing operations with the speed necessary to keep up with their competitors,” according to the Tracker.

Recent PYMNTS data showed that almost three-quarters (73%) of companies in the wholesale trade industry are now using more automated clearing house payments, but CFOs in another PYMNTS report cited severe barriers to payments innovation as the reason they’re still doing things manually.

Reasons cited include a lack of an enterprise resource planning (ERP) or treasury management system that can support disparate payment solutions and failure to find the right technology partner to help them move their digitization efforts forward.

“Banks have a key opportunity to stand out in the digital payments marketplace by offering API-powered bill payment solutions to help companies overcome these barriers,” according to the Tracker. “Tapping APIs allows FIs to provide the tailored, digital-first bill pay experiences their clients need both swiftly and seamlessly.”

That’s one reason FIs are investing more these days in APIs. Recent PYMNTS data shows that almost half of banks and credit unions (47%) had invested in the technologies by the end of 2021, up from 35% in 2019 — and another 25% planned to invest in APIs this year.

Our research also shows that banks see APIs as drivers of future revenue, with 90% of the FIs we surveyed planning to use APIs to generate further revenue among their existing customers. FIs will want to prioritize finding the right technology partners to help them keep up with their business clients’ growing needs for streamlined bill pay and other digital-first experiences.