Businesses that trust each other, grow together.
That’s why when it comes to digitizing the commercial payments ecosystem, solving for behavior is just as important as solving for capability — particularly when innovating within B2B payments.
Familiarity, whether between buyers and sellers or in their own entrenched and often manual workflows, fosters a sense of trust and control. In sectors where there is ongoing hesitancy about using technology or changing the way that things have always been done, decision makers lean on this trust and familiarity’s pivotal role in ensuring the smooth flow of operations.
But while the $145 trillion B2B ecosystem remains mired in legacy and often interpersonal, relationship-based processes, commercial buying and selling across industries has become increasingly complex, fragmented and digitally driven.
For businesses that believe that a long-standing relationship built on trust and flexibility is crucial to sustainable success, generating that foundation of trust is becoming more challenging as the goal posts move.
And this eroding trust factor causing these relationship-driven firms to take slower approaches to B2B payment innovations, as newer digital solutions are frequently seen as unfamiliar and untested for processes like accounts receivable (AR) and accounts payable (AP).
That’s why for firms looking to innovate the commercial transaction, reducing complexity as businesses grow and payments scale represents just half the battle. Solving for trust is what unlocks the next dimension of growth.
When businesses have faith in each other’s reliability and integrity, they are more likely to establish efficient payment processes. This can lead to the reduction of delays, disputes and errors in payments. Trust enables businesses to create standardized payment terms and agreements, eliminating ambiguity and streamlining financial transactions.
“If technology just makes it easier for one side of the transaction and not the other, then it is not the right solution,” Ben Lamm, chief operating officer at Capital One’s Trade Credit Business, told PYMNTS.
When businesses trust each other, they are more willing to prioritize payments and adhere to agreed-upon schedules, or even offer flexibility when needed. This, in turn, improves cash flow management for both parties, allowing for better financial planning.
That’s why certain payment options like text to pay are growing more popular for commercial transactions, but mostly between two parties that are familiar with and trust each other.
After all, electronic payments not only make reconciliation easier for both sides of the transaction, but they also eliminate the uncertainty of “when will I get paid” inherent to waiting for a physical check in the mail, or refreshing an account to see whether one has been cashed yet, Ernest Rolfson, CEO and founder of Finexio, told PYMNTS in June, despite emphasizing that “checks are going to continue to die the slowest death.”
While the old ways of buyers and sellers being matched up through manual processes comprising phone calls, emails and in-person interactions typically work well enough for the firms that use them, the macro realities of transacting across a global marketplace may soon consign those methods to history.
“The market changes over the past few years have really accelerated the adoption of digitized B2B payments, which in turn has accelerated the innovation in the industry,” Chris Lolli, vice president and general manager of B2B product, partner and client management, at American Express, told PYMNTS.
PYMNTS Intelligence finds that nearly nine in ten retailers (89%) that make commercial payments using real-time innovations say they have built stronger buyer-supplier relationships, and 76% of those that receive such payments say the same, according to “Corporate Changes in Payment Practices: The Retail Industry is Ramping Up Real-Time Payments,” a collaboration between PYMNTS and The Clearing House.
Companies that trust each other are more likely to commit to repeat business, leading to a consistent and stable revenue stream.
And as payments become more immediate and real time, they no longer serve only a back-end function but also deliver benefits at the front end by becoming “a satisfaction tool,” Sarah Billings, senior vice president, head of payments and international product operations and transformation at PNC, told PYMNTS in an interview posted in September.
The importance of establishing trust in B2B relationships is here to stay, and by acknowledging and supporting it, commercial payment innovations can help drive a connected future built on the same thing commercial relationships have been relied on since they began: confidence in the counterparty.
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