As physical locations closed or access to them became otherwise restricted during the pandemic, companies had to pivot to digital channels to survive. Even stores that remained open had to evolve. With health concerns swirling, for example, the use of contactless payment options took off. As a result, the pace of merchants’ digital transformations increased from a saunter to a sprint.
Although merchants were forced to accelerate their modernization and digitization efforts due to the pandemic, this evolution will continue into the future. Not only will companies need to adopt digital solutions to keep up with customer demand; the implementation of such solutions can significantly benefit merchants in a variety of ways.
Digital Payments Can Help Address Legacy Solutions’ Shortcomings
Payments digitization can help overcome the pain points inherent in legacy payment-based B2B transactions. In a PYMNTS survey, small- to medium-sized business (SMB) payers identified an average of five issues they usually encounter when making B2B payments, revealing just how frustrating the B2B payment process can be.
Among the top concerns were the need for manual review and time-consuming procedures — issues that modern payment systems can alleviate, especially since the use of technology can promote efficiency. This explains why 92% of financial institutions are innovating or planning to innovate new digital solutions to reduce B2B payment frictions.
PYMNTS found that 91% of CFOs said digitization improved efficiency and 84% said digitized systems improved the management of working capital. Notably, the survey also revealed that these benefits were the most sought-after objectives of companies that set out on digitization efforts. In addition, an even greater share of CFOs — 96% — said improvements to accounts payable and accounts receivable management were very or extremely important to creating a healthy balance sheet.
Merchants Are Modernizing to Keep up With Consumer Demand
On the consumer-demand front, merchants are — and will keep — expanding their digital capabilities to accommodate changes in consumer behavior. In 2022, 89% of Americans used some form of digital payment method, according to a McKinsey report. Digital wallets are particularly popular, especially for online shopping. PayPal alone accounted for nearly 14% of consumers’ online shopping spend, according to a PYMNTS report.
Merchants are aware of consumers’ spiking interest in digital payments and fear that a failure to meet this demand will harm business. Indeed, according to PYMNTS research, more than 75% of merchants said consumers would be at least very likely to switch merchants because retailers are not providing enough modern capabilities, including alternative payment methods in stores.