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The Role of Banks in Scaling B2B Payments Innovation

b2b payments, commercial payments

Banks provide the foundational infrastructure for financial transactions, offering a network that connects various businesses.

And, as expectations from their daily lives bleed over into their professional ones, business leaders are increasingly looking for their financial institutions to offer their organizations the same payments innovations and experiences they enjoy in other areas. 

That expectation is hampered because the majority of B2B payments are still reliant on legacy systems and rails.

Financial institutions that invest in B2B payments innovation are highly likely to reap the benefits of offering them. 

To stay competitive and meet the evolving needs of businesses, banks must invest in innovative technologies. This includes integrating cutting-edge technologies like artificial intelligence (AI) to streamline and enhance fraud prevention, credit underwriting and other workflows; offering faster payment rails like RTP® Network and the FedNow® Service; providing services that assist businesses in managing their working capital effectively; and exploring FinTech partnerships that can lead to the development of new payment technologies and platforms. 

The bottom line for financial institutions is that they must ask themselves what they are doing for their business customers to enhance the speed, transparency, security and efficiency of their B2B payment processes.

Although the path can be different for different institutions depending on their customer base, one thing is universal: if your institution isn’t rising to the innovation challenge within B2B payments, that means it is lagging behind.

See alsoBuild Now, Not Later: How Banks Can Seize the BNPL Opportunity

Offer Business Customers Payment Innovations – Or Risk Losing Them

Banks act as the backbone of B2B payments, offering the necessary infrastructure, services and expertise to drive innovation and streamline financial transactions between businesses. Their role is pivotal in fostering a secure, efficient and interconnected financial ecosystem for the business community. 

And while the B2B landscape may be mired in inefficient legacy processes like paper checks, which continue to make up a disproportionate share of commercial transactions, that doesn’t mean that financial institutions can sit still.

If they do, the landscape will almost certainly pass them by — and they will see their share of the profitable B2B segment dwindle as FinTechs and other competitors step in to fill the growing need for a better B2B payment experience, particularly as the ongoing digitization of the space continues to transform it.

Banks have realized this, as seen in this PYMNTS Intelligence report, which found that collaboration is essential. Upwards of three-quarters of banks have said that working with FinTechs is essential to meeting customer expectations, per PYMNTS Intelligence.

“The amount of paper that is still passed around in the B2B space continues to stun me, and it’s somewhat by choice, but more and more, I think businesses are looking for a better way,” Shawn Cunningham, managing vice president and head of Capital One Trade Credit, told PYMNTS.

However, the tides are starting to turn. In just one example, a collaboration announced Tuesday (March 5) between Regions Bank and Visa will let Regions Bank’s business customers use a commercial card solution from Visa, helping accelerate the shift toward digital B2B payments.

“By building on our digital wallet capabilities, Regions is reinforcing its commitment to helping our business clients grow and thrive,” David LaPaglia, head of commercial card products and strategy for Regions, said in a press release. 

See alsoEasing And Accelerating Payments From Business Customers

What Companies Want from B2B Payments 

One of the most valuable things financial institutions can offer their commercial customers is innovation based on real transaction data. Banks accumulate vast amounts of transactional data, and they use advanced analytics to derive insights. By analyzing payment patterns and trends, banks can offer valuable information to businesses, helping them make informed financial decisions.

“It’s workflows and data first, and payments second,” Ben Weiner, senior vice president and global head of B2B payments at Nuvei, told PYMNTS about the B2B payments landscape, emphasizing that commercial transactions are built on the back of workflows and data, with the payment itself bringing up the rear.

And older payment rails, especially the paper check, don’t provide nearly as much data as newer payment rails. For the majority of legacy-driven transactions, when a business pays another business, the remittance information doesn’t go along with the transaction. It goes in an email or is even sent through the mail, which makes it time-consuming for these businesses to complete reconciliation. 

Digital B2B payment innovations help solve for this long-standing friction, as well as provide increased security and transparency over money flows. Banks that realize this and support the innovations their B2B clients are asking for will be the ones best positioned to succeed in the future.

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