Real-Time Credit Decisioning Helps B2B Payments Feel as Seamless as P2P

Taking the friction out of payments means taking the friction out of doing business.

That’s why business-to-business (B2B) payments represent such an exciting space for innovation.

And providing customers with instant credit qualification represents one of those exciting innovations, a game-changer for facilitating seamless transactions. That’s what Dave Haase, president at ChemDirect, tells PYMNTS for the series “B2B Payments: Outlook 2024.”

“Being able to qualify folks in real time when they sign up for an account has been a big innovation,” Haase explains, noting that the typical line of credit being underwritten for commercial customers is in the ballpark of $10,000 to $20,000.

However, Haase notes the growing need for higher lines of credit, especially for transactions in the six figures, which pose a challenge in today’s high-interest-rate environment.

As a result of this environment, ChemDirect has adjusted its terms, incorporating bank or credit card validation to ensure faster payments. Haase emphasizes the importance of adapting pricing structures and qualifying processes to manage risks effectively and maintain a cost-effective approach amid economic shifts.

“It’s just more expensive to extend credit. That’s definitely been something where we’ve adjusted even our margin structure as a company to make sure that we can afford to give terms right at the end of the day, even on 30-day terms that can take a material chunk out of our margins,” he explains.

“But the upside is that the value of providing these payment options is higher than it has ever been,” Haase adds, noting that real-time qualification for terms is a “need to have” in the chemical industry, where infrequent purchases and complex credit processes can hinder transactions.

Technology’s Impact on B2B

The rise of digital payments has brought with it a host of new opportunities for businesses and payment ecosystem players to engage with their customers and optimize the relationships they have with each other.

One of those new opportunities is the emergence of real-time payment rails, which for some businesses and industries have proven to be a disruptive force in B2B transactions.

“We’ve built it into our checkout, and we see high participation. That’s our way of measuring how valuable it is, and I think the engagement shows that it is valuable,” Haase says.

Other technical innovations, including artificial intelligence (AI), are not just transforming payments but have become integral to various aspects of enterprise operations.

“We use [generative AI] all across our site to provide more relevant results and to enrich the information we have in our catalog and reduce the clutter on the site as customers search for items. Search is central to our customer experience, given the sheer volume of products,” Haase says.

He adds that other applications, like natural language interfaces for data queries, are additional areas where AI plays a pivotal role in optimizing workflows and decision-making.

“We can see all sorts of information very quickly, like which customers are growing the fastest or which customers haven’t ordered in 30 days … by using AI we can improve our retention numbers and our experience for first-time buyers,” Haase says.

“Relevance is absolutely critical in something like chemicals, where the right information at the right time is what’s most important to the customer experience,” he adds, explaining that if the customer is a lab buyer, then they likely won’t want to see products meant for industrial applications.

Evolution of B2B Payments

Speed of payment isn’t the only area where velocity has a role to play in B2B transactions. Real-time access to information is also critical.

“Having very quick access to information about qualifying buyers and seeing a great deal of information that allows you to make decisions quickly on risk and identifying fraud [is so important throughout the process],” Haase says. “In order to get better results and continue to grow and perform as a business, managing risk throughout the process until you receive payment is critical.”

The overall focus within B2B innovation remains enhancing the overall customer experience, making payments seamless, and staying competitive. Haase says that many small and midsize companies are looking for value around areas like better customer service and faster delivery.

“We’ve seen a boom in the smaller market with smaller order sizes, and financing is a key part of providing that segment with the ability to buy quickly and buy more,” he says.

And smoothing out frictions that can slow down a first buy are crucial to standing out in a competitive ecosystem where B2B customers tend to just keep buying what they want from where they are already getting it.

“It’s a lot of manual work to set up those relationships. But when those relationships are set up, it’s not has hard to go back and reorder,” Haase explains. “That’s why our biggest competition is where people are buying from today. … Many folks don’t want to buy from 30 or 40 different vendors. They want to be able to consolidate that with a few vendors, as few as possible.

“To differentiate ourselves we have to make it truly seamless to buy, and to have a pricing structure that is completely transparent,” he adds. “We’ve got a really high bar that we need to match in terms of just expectations for shopping online.”