The 5 Key Themes That Defined Business Payments in 2021

While everyone in the business-to-business (B2B) space would like to see transactions become as simple as those they experience in their lives as consumers, companies have their own hurdles to overcome when creating fully digitized, seamless experiences for buyers and sellers.

During PYMNTS’ B2B Fireside Chats, a month-long series that focused on efforts to reimagine business payments in the digital economy, experts acknowledged the challenges and proposed solutions. Overall, there was a sense of inevitability, as the benefits to both buyers and sellers will drive the continued adoption of digital tools in the B2B space.

The Aim is to “Consumerize” B2B Payments

The trend toward the “consumerization” of business finance stretches back to at least the 1990s, but the pandemic is forcing key players to reimagine processes that have been in place for decades, said Darren Parslow, global head of Visa Business Solutions.

“B2B payments are just not where they need to be,” he said. There’s a fragmentation among payables and receivables systems, a lack of data standards and low overall interoperability between buyers and suppliers.

Consumer/retail payments are the north star pointing to what B2B payments could be. Payments are immediate, efficient, convenient and secure, no matter where they occur across online or physical channels.

Read more: Visa’s New Head of Global Business Solutions Sees a ‘Network of Networks’ Strategy for B2B Payments

B2B Payments Are Going Digital

With the rise of accounts payable (AP) automation and online experiences and expectations, the tide may be turning away from the paper check that is commonly used for ad hoc B2B payments, said Drew Edwards, CEO of Ingo Money. Engaging with suppliers on a one-to-one basis — and on a transaction-by-transaction basis — costs time and money.

With firms like Ingo, Edwards said, “There’s actually technology in place with a one-to-many payments solution, where a company can choose to say, ‘Hey, let’s get more efficient here. Let’s get more modern here. Let’s engage digitally with our suppliers and find out how they want to get paid and pay them.”

Read more: Inefficient and Often Late Ad-Hoc Payments Account For 38% of SMB Sales

As more information is digitized and sent with payment requests from suppliers, and automated clearinghouse transactions and virtual cards become more prevalent, the move to real-time payments (RTP) will accelerate, said J.P. Jolly, head of payments at JPMorgan. It will be more intuitive and represent less of a cultural leap than moving directly from paper checks to RTP.

“One of the reasons why businesses still use checks in this market is the beneficiary details that surround the information that comes along with the check. And that’s why clients still use that payment method.”

Read more: JPMorgan: Real Time Payments Will Speed B2B Payments, But ACH Has Staying Power

Those real-time payments serve a noble cause: helping customers and large corporations change their business models and create products and solutions that “speak better” to a digital economy, said Manish Kohli, head of Global Liquidity and Cash Management at HSBC. Real-time payments allow instant redemption and a range of other value-added experiences.

“The enhanced information of real-time payments, converted into an interactive experience embedded with” application programming interfaces [APIs], can power new business models that monetize speed and payments choice, Kohli noted, adding that “the biggest form of monetization is client delight.”

Read more: Banks Must Have ‘Relentless’ Focus on Cost, Speed, Convenience and Transparency of Business Payments

Automation Speeds Up AR

On the accounts receivable (AR) side, the marriage between automation and invoicing has been accelerating in a meaningful way, where companies realize the need to “chase the long tail of accounts” in ways that sidestep inefficient, manual processes, said Steve Pinado, president of Billtrust.

The recent linkup between Billtrust and iController, Pinado said, fits into broader AR automation in the bid to “apply cash correctly, whether it’s billing quickly and efficiently, whether it’s gathering remittance quickly and efficiently turning ‘almost’ cash—things that you have sold successfully, customers you have acquired — into actual recognized revenue.”

Read more: Billtrust/iController Deal to Eliminate B2B’s ‘Almost Cash’ Problem

Buyers and Suppliers Are Negotiating Terms

Together with the actual payments, there’s the issue of terms in the B2B space. In navigating the ebbs and flows of B2B commerce, ideally, there should be a “slider” function built within financing programs that lets buyers and suppliers align on the terms and discounts and payment period that work on a case-by-case basis, said Rob Rosenblatt, CEO of Behalf. A million different transactions could conceivably have a million different sets of terms, aided by a robust stream of data points, analytical technology and platforms.

“In theory, there should be a financing vehicle for every single transaction out there,” Rosenblatt said.

Read more: Data Key to Supplier-Driven Payment Terms, Working Capital Control

Businesses can also cooperate with B2B partners by offering payments options. As more chief financial officers start to think about customer experience, much-needed change is coming, driven by the pandemic-induced digital shift in business processes, said Craig O’Neill, CEO of Versapay. Versapay and other expert solutions are available to help businesses turn business payments digital and away from checks altogether.

“If you can find a way to connect with your customer, make it easy and flexible for them and deploy technology that supports that, you can really get outsized results,” O’Neill said.

Read more: Going Digital is ‘Harder than Checks’ But Essential for CFOs

Businesses Are Seizing New Opportunities

As brands that had been purely B2B began selling direct to consumer during the pandemic-driven move to eCommerce, some took a longer view of the opportunity and explored using their products as platforms for lifestyle-based marketplaces, said Shahrokh Moinian, managing director at JPMorgan Chase.

“Companies were thinking, ‘What else can I add?’ Not necessarily my competitor’s products, but what else is required if I buy shoes? I may also need socks or T-shirts or shorts,” Moinian said. “And if I’m not the producer and manufacturer of [a] product, can I get other merchants to come in and sell those on my marketplace so that I can have a captive marketplace, versus just selling my own [single product]?”

Read more: The Shift to a More Digital, Ecosystem-Driven Model Is Here — Corporates and Their Transaction Bankers Have to Adapt

Another opportunity is the application of cryptocurrency to B2B and other transactions. Supporters of cryptocurrency believe it to be a secure and efficient modern mode of payment, but regulators are concerned about potential risks to financial stability. If nothing else, Congress’ increased focus on cryptocurrency and Big Tech regulation is a clear reflection of how entrenched and important these assets have become.

U.S. Rep. Patrick McHenry, Republican leader of the House Financial Services Committee, told PYMNTS, “With the acknowledgement that the existing regulatory regime has done well so far, but for us to be the leader in the next generation of internet technology, we need a new regime built around the nature of digital assets — the current law and existing regulatory structures does not match the unique nature of those assets.”

Read more: US Rep. Patrick McHenry: Rushed Crypto and Big Tech Regs From Congress ‘Will Be Horrible’