What B2B Payments Providers Get Right — And What Still Needs Work

B2B payments continues to enjoy its moment in the innovation spotlight, but the industry still has a long way to go if it’s going to beat the race against paper and manual processes.

However, accounts payable (AP) service providers have more on their plate than simply making it easier for companies to pay their invoices digitally. Today, their technologies must communicate with existing infrastructures as systems migrate to the cloud, address the points of friction before and after payment, and support the needs of not only the corporate payer, but of the payee, too.

ACOM Solutions SVP of Core Business Division James Scott says there are a few things that the B2B payments industry is certainly getting right today. But, he told PYMNTS, there are a few areas where the industry should perhaps reexamine its approach.

Overall, the space is taking a positive approach to change. ERP, accounting and other financial systems are migrating to the cloud, and with digitization now at the forefront, Scott said that businesses — particularly in the middle market — are ready to digitize their payments, too. Branching off this trend is the rising importance of data sharing between those cloud-based platforms, including ePayables.

“[Data sharing] is very important in this industry, and open APIs are becoming more and more commonplace,” Scott said. “Even the banks are opening up their APIs. Significant investments have been made by organizations in their ERP systems and critical applications. They’re expecting them to be able to talk and work with other cloud-based applications.”

The commercial payments space, including AP technology providers and financial institutions (FIs), has embraced the open API trend that is taking off in other jurisdictions as a result of regulatory requirements. In the U.S., even without regulatory pressure, Scott said he expects this trend to continue.

Behind that support of data sharing is service providers’ pursuit of usability for corporate customers. Focus on the customer experience has emerged as a top driver behind the B2B payments industry’s efforts to improve, and according to Scott, those efforts have paid off.

“The industry has gotten past that complex software — hard-to-use, a lot of training, a lot of customization required,” he said. “Cloud-based solutions have addressed usability, and they’ve really caught up in terms of function. Today, it’s entirely possible to take advantage of payment rails, and for a company to pay their vendor any way they want.”

Unfortunately, while the possibility is there, the B2B payments service provider space hasn’t necessarily made it a reality for all corporates. Indeed, while businesses today have a wide array of payment rails from which they can choose for their accounts payable processes, implementing those rails into existing systems isn’t always easy. Scott noted that one of the biggest reasons why is service providers’ failure to adequately address vendors’ needs in the accounts receivable department.

“While organizations want to move to electronic payments, there is quite a bit of manual effort required to do outreach to suppliers,” he noted. “Each one has to be contacted. A typical company may have 500 vendors, or 5,000, and companies want to move them to electronic payments. But it requires contacting each and every one of them, getting authorization, updating vendor information.”

Scott said this should be a top focus for service providers today, as FinTech firms and FIs have the power to liaison with vendors, automate onboarding and promote vendor acceptance of ePayment rails, while supporting the reconciliation and data management needs of both sides. Unfortunately, he added, this opportunity remains largely untapped.

“I think where things fall short is really on the supplier side,” he said. “Most solutions have been geared [toward] the buyer. We have a lot of solutions making it easier for the buyer, but [for] some electronic solutions for the vendor (like virtual cards), there is some pain, and maybe cost.”

He pointed to electronic data entry automation in vendor accounting systems as one area of B2B payments innovation in which “there’s still work to be done.” And though there are clear areas that need work in B2B payments digitization, not all aspects of the industry have a clear path to improvement. For example, the B2B payments space has similar needs to the B2C and P2P arenas in terms of functionality, user-friendliness and data sharing requirements. But in other areas, like payment speed, the paths of B2B innovation and consumer payments won’t necessarily run parallel.

According to Scott, when it comes to AP speed, companies need to be able to capture early payment discounts and avoid late fees, not necessarily to pay same day or in real time.

“I would say [faster payments] are coming,” he said, “but the B2B world has different requirements than the peer-to-peer world.”

This poses a challenge for B2B payments and AP innovators, left without a blueprint from the B2C world on how to innovate. However, Scott added that the market benefits from strengthening competition, and the future is bright.

“As a whole, you’ll see a lot of innovation in the industry,” he concluded. “There is a lot more competition in this space, and you see more and more innovation coming. You’ll see better interoperability, more capabilities, particularly when it comes to payments technology and how it links to other capabilities like credit utilization.”