PYMNTS MonitorEdge May 2024

Interoperability and Extensibility Will Define New Era for B2B Payments

Interoperability, Extensibility Will Define New Era for B2B Payments

As the world gets increasingly globalized, the ways that businesses transact become more important.

With the Bank for International SettlementsCommittee on Payments and Market Infrastructures emphasizing in its June report that a key priority area for cross-border payments is payment system interoperability and extension, multinational buyers and suppliers across the global B2B marketplace are increasingly honing in on those innovation guideposts as well.

B2B payments, and businesses in general, may have the most to gain from embracing digital innovation and payments modernization. Due to their roles in enhancing efficiency, reducing costs, enabling global transactions and fostering innovation, payments interoperability and system extension are poised to play a role in the future of B2B payments.

With the proliferation of digital B2B payments and the impact they are sparking across evolving business models, system extension ensures that B2B payment platforms can integrate with emerging payment technologies and provide advanced features like real-time transaction tracking, automated B2B payment processing and enhanced security measures.

At the same time, B2B companies often use a variety of financial systems and payment methods, and this diversity can lead to fragmentation — where different systems struggle to communicate with one another — making interoperability another fundamental element of B2B growth.

Taken together, payments interoperability and system extension allow businesses to seamlessly integrate various payment systems, scale operations, and stay adaptable to technological advancements and market changes. As a result, businesses that embrace these trends are likely to experience smoother transactions, better data management and improved overall performance in their payment processes.

Read also: 15 Experts Explain the Strategic Side of Payments Modernization

The Role of Technology in Future-Proofing B2B Payments

In today’s global market, the ability to conduct business across borders without technical barriers is crucial. Interoperability enables businesses to easily transact with international partners, facilitating global trade and expansion. This capability allows companies to enter new markets and forge partnerships without being hindered by incompatible payment systems.

“Not every buyer is going to pay all of their suppliers the same way … unlike traditional consumer payments, where there’s a standardized way in which consumers pay and merchants get paid — within the B2B arena, no two buyer-supplier profiles are the same,” Boost Payment Solutions founder and CEO Dean M. Leavitt told PYMNTS in March.

By enabling different payment systems to work together, businesses can eliminate the need for intermediaries, which often come with high transaction fees. Additionally, interoperability can minimize currency conversion costs and reduce administrative overhead associated with managing multiple payment systems. These savings can be substantial, especially for businesses engaged in high-volume or international transactions.

When payment systems can communicate directly, transactions are processed more swiftly, improving cash flow and operational efficiency. This seamless integration reduces the time spent on reconciliations and minimizes the risk of human error, allowing businesses to focus on core activities.

WEX Chief Strategy Officer Jay Dearborn told PYMNTS in May that bringing B2B payments fully into the digital age needs a global platform with three elements — payments, data and software — working concurrently to help simplify commercial transactions.

“The network of buyers and sellers is incredibly complex,” Dearborn said. “When I think about modernization, I’m always trying to think about our largest customers and our smallest customers. What are the use cases that payments will help them unlock, creating more ease in the way that they do their business?”

See also: How APIs Bridge Modern and Legacy B2B Payment Architectures

Staying Ahead of the Trends With System Extension

While B2B payment interoperability focuses on enabling different systems to work together, B2B payment system extension is about expanding the capabilities of payment systems to meet evolving business needs. System extension ensures that payment platforms remain flexible, scalable and adaptable to future changes.

Every business has unique requirements, and a one-size-fits-all approach rarely works. System extension allows businesses to customize their payment systems to better fit their specific processes and workflows. This customization enhances overall efficiency and user satisfaction, as systems can be tailored to address the unique challenges and opportunities faced by each business.

“One of the biggest things that organizations are looking for is, ‘How can I use my current infrastructure and the partnerships that I have?’” said Aaron Le Hew, director of invoice-to-cash at Esker, in a conversation with PYMNTS posted May 23.

System improvements designed around extension don’t commonly require massive investments or rebuilding a technology stack from scratch. The PYMNTS Intelligence report “The Treasury Management Playbook: Technology Strategies and Best Practices” found that finance teams that may be behind the curve today can improve by implementing several relatively low-cost, low-effort upgrades.

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