Tech-Savvy Corporates Rewrite Business Payments Playbook

The preference for digital banking is making its way into the B2B environment.

AJ McCray, managing director and head of global corporate payments at Bank of America, told PYMNTS in an interview that there has been some cross-pollination taking root — and commercial transactions will see a dramatic trend toward consumerization in the months and years ahead.

“The consumers that have been digitizing, well, many of them have been working for businesses, too, and in their businesses lives, they have faced the same things they have in their ‘consumer lives’ in terms of not having access to some of the tools they’ve needed for their day-to-day activities,” he said.

That includes making payments to and receiving payments from other firms.

At the same time, technology has improved, in ways that are spurring companies to lessen their reliance on paper checks, to more efficiently manage their relationships with suppliers and digitize back-office functions.

APIs Are Game Changers

Drilling down into the specifics of that technology, he said that application programming interfaces (APIs) have existed for a long time, but they’ve just started to make significant inroads in banking and payments. And it is the APIs that have enabled companies to have easier, quicker and more transparent interfaces with each other and their banks.

Add in artificial intelligence (AI), he said, and workflows and reconciliation — the information and activities surrounding the payments — are faster and more secure too. That isn’t to say that consumerizing B2B payments is easy — far from it. McCray said deploying those tools in B2B offers a starkly different set of challenges than in the consumer and retail space.

“There’s a difference in the sheer scale when you think about consumer versus B2B,” he said.

To illustrate, he noted that a consumer paying their bills or thinking about digitizing their interaction with their bank or companies that are billing them are paying an average of around 20 bills a month. In B2B, a typical business — even a smaller one — might be paying hundreds or thousands of monthly bills.

Larger firms see their challenges compounded by the fact that they might have thousands of suppliers across the globe. Depending on the markets in which they operate, these suppliers may have different ways of sending invoices, prefer local payments and even rely on faxes to get business done.

Providers — Bank of America among them — can help provide the automation their client firms need to keep track of and manage their supplier bases.

“We can help convert them from paper based to digital mechanisms” step by step, he said.

There is also a demographic shift that will help give a tailwind to the consumerization of B2B payments, said McCray.

Demographic Shifts

Sixty percent of millennials — those in their late 20s to 41 years of age — are now in management positions and are responsible for company operations such as payments.

“The millennial generation is used to interacting with technology in a different way and used to a much more digital world,” he said. “They’re going to take those interactions in their nonwork life, into their work life. The demographic change will help companies overcome at least some of the inertia that has been in place, particularly surrounding paper checks and invoices.

Looking ahead, we’ll see a wider embrace of real-time payments and mobile banking as real and viable options in commercial payments, McCray said. The positive ripple effects will be felt up and down supply chains and improve companies’ operating margins. Fewer payments will be rejected, and finance and sales teams will spend less time on the phone trying to determine where payments are and when they will settle.

“The more you automate, the more it will reduce your operational risk,” he told PYMNTS, adding that “this all translates to better relationships with your customers and your suppliers because there is less churn, and B2B payments becomes a happier experience.”