Change comes slowly first, and then all at once, as the adage goes.
And that’s certainly true for the ongoing and remarkable advancements in the business-to-business (B2B) payments space.
“There has been so much innovation … we’ve seen a proliferation of so many different payment options around things like speed, terms and visibility,” Pat Dillon, CFO at Flock Freight, tells PYMNTS for the “B2B Payments: Outlook 2024” series.
The challenge, Dillon adds, lies in providing a comprehensive dashboard view of these options and customizing payment solutions for individual businesses.
“It’s certainly a good problem to have,” he says.
As we approach 2024, the B2B payment space is undergoing a profound transformation, marked by innovation, increasing demand for efficiency, and the adoption of real-time payment solutions.
Dillon explains that for payments innovation to really take flight, education is essential, as many companies may be unaware of the range of payment options available.
“There’s been so much innovation and capital coming into the space that has delivered real-world value and results around being able to know with a great deal of precision what our cash balance is every single day. These are things that have improved from where they would’ve been even two or three years ago,” he says.
2024 is also shaping up to be the year of efficiency, as CFOs buckle down to focus on effectively balancing growth with profitability in the light of the ever-rising cost of capital.
“The word of the day, right now, is efficiency. Everyone is tightening their belts,” Dillon says.
The focus on efficiency extends to all aspects of business operations, including working capital management.
“In a higher-rate environment where the cost of capital has increased, every penny is valuable. And that includes having good visibility and managing your working capital to the highest degree of precision possible,” Dillon explains.
“Real-time payments and other payment innovations are certainly a critical part of being hyper-focused around efficiency and the ROI [return on investment] of every dollar,” he adds.
Dillon’s organization, Flock Freight, operates in the logistics and freight transportation space — relying on a vast network of independent carriers — and he emphasizes that the ability to predict when these carriers will be paid is crucial for building trust and efficient operations.
“It goes beyond a convenience factor. It is something that is a requirement for us to build up a network of transportation providers that we rely upon,” Dillon says.
And while real-time payments have provided unprecedented visibility and precision in their financial transactions, adoption and collaboration are crucial to their continued success and impact.
“We operate in a highly transactional business in freight transportation, and so the volume of payments is quite high,” Dillon says. “And I think there is a good understanding and shared mission among all of the participants in the space, including some of the FinTech and payment providers, that better connectivity and visibility amongst the different participants goes beyond table stakes. It can actually be quite meaningful in terms of which partners you’re going to choose to work with.
“It’s hard, it requires integration, and none of it is as quite as easy as you would hope it to be — but it is definitely an area where there is a consensus that moving the ball forward is a win-win for everyone,” he adds.
And real-time payments aren’t the only innovation reshaping the dynamics of the B2B space.
Artificial intelligence (AI), specifically generative AI, is increasingly playing a bigger role across business payments.
Dillon emphasizes that advanced AI technologies like GPT models, optical character recognition and natural language processing have a role to play both now and in the future in streamlining business payments, bringing automation and efficiency to an industry traditionally reliant on manual processes.
The higher interest rate environment has made payment terms more critical, and various options are available, including quicker payment alternatives and factoring solutions.
“The rate environment has changed quite a bit in the last 24 months and that has been an important development in terms of how people value a couple of days here or there in terms of payment terms,” Dillon says.
“Having the flexibility and having the precision to be able to dial in when payments are going out, the visibility allows you to develop, to some degree, customized solutions that really thread the needle for both sides the best way on some of these payment terms … and drive a lot of efficiency and a lot of savings,” he says.