Integration-to-Impact Window Gets Tighter for B2B Payments Innovation

Innovations wouldn’t be deemed as such if they didn’t change things in a transformative way.

And the world of B2B payments — characterized by complex workflows, intricate data requirements and entrenched manual processes — is finding this out in real time, as businesses across various industries seek to modernize their financial operations to optimize efficiency and unlock new avenues for growth.

“There are a lot of changes happening across a lot of outdated or antiquated industries. We’re in a good space right now to see a lot of change,” Priority Head of Commercial Court Toomey told PYMNTS.

This transformation is not confined to a single industry but is happening across the board, albeit at varying paces.

Industries like retail, eCommerce and manufacturing have been more amenable to adopting these innovations, Toomey noted, explaining that they are interested in leveraging digital tools to streamline their supply chains and financial processes. These sectors, having already embraced digital transformation in other areas, are now extending those efficiencies to the back-end of their operations, integrating new financial products that enhance payment processing and working capital management.

“Anyone who was at the forefront of having a digital presence are who we see as being more willing to test out new products, work with new FinTechs on different solutions around the actual financial products used to pay their vendors or finance some of their purchasing,” he added.

For example, in the food and beverage sector, the presence of a few key players on both the supply and distribution sides has created a universal standard that simplifies the adoption of new technologies across the industry. This standardization, Toomey said, allows restaurants, hospitals and schools, among others, to integrate new payment solutions into their operations, improving efficiency and reducing costs.

Read more: Priority Completes Acquisition of Plastiq and Combines B2B Offerings

Catalysts of Change in B2B Payments

However, not all industries are quick to embrace these innovations. Sectors like healthcare and freight logistics are often more hesitant, primarily due to regulatory compliance concerns and regional fragmentation.

In healthcare, Toomey explained, the heavy oversight and stringent regulations can act as barriers to adopting new financial tools, slowing down the pace of change. Similarly, the freight and logistics industry faces challenges due to the disparate operational standards across different regions, from the Mediterranean to Asia. This fragmentation makes it difficult to implement a one-size-fits-all solution, causing some players to stick to their traditional methods rather than risk potential disruption.

“It’s ironic that one of the areas for most companies that is the most outdated are their financial tools, when just a small investment from that same team can go a long way in improving efficiency and also cost savings,” Toomey said. Change management, therefore, plays a critical role in the implementation of these innovations.

For businesses that do decide to take the plunge and adopt new technologies, the fear of disruption is a concern.

At the same time, the time investment required for these transformations is often overestimated. While many companies fear that implementing new solutions will take months or even years, the reality is that with the right resources and commitment, the process can be completed in a matter of weeks. This shortened timeline, coupled with the long-term benefits, makes the case for embracing change even more compelling.

Benefits of Innovation

The benefits of modernizing B2B payments extend beyond cost savings. By reducing the disparity between days payable outstanding (DPO) and days sales outstanding (DSO), Toomey said that companies can optimize their working capital, ensuring they have the cash flow necessary to support day-to-day operations. Additionally, these innovations can improve supplier relationships by speeding up payments and enhancing overall supply chain efficiency and visibility.

“One change can affect three or four different parts of your business,” he said. “There’s no need for a large manufacturer to have to send out 10,000 rebate checks to every individual retailer that’s selling the product on a quarterly basis when there is a much more efficient way to do so, as long as they work with it within their supplier network or their buyer network in order to implement that change.”

Toomey also pointed to the potential of spear-tip innovations like digital wallets and real-time payments to further transform the B2B landscape. Traditionally seen as consumer-focused products, these tools can be repurposed for B2B transactions, offering more efficient and secure methods for handling payments.

Still, for B2B innovations to achieve widespread adoption, several trends and behavioral shifts need to occur.

Toomey emphasized the importance of larger financial institutions in leading the charge. These institutions need to be proactive in introducing new products to their clients and guiding them through the adoption process. However, they must also be willing to collaborate with FinTechs, embracing the changes that these partnerships bring. Without this top-down support, many companies may struggle to navigate the crowded marketplace of FinTech solutions, leaving them hesitant to invest in new technologies.

Ultimately, he added, as more businesses recognize the benefits of modernizing their financial processes, the pace of change is likely to accelerate.

“Be open to change and embrace change,” Toomey said. “If you have internal check processing, if you’re doing manual check runs still, there are certain hard costs associated with that that can be reduced at scale by outsourcing to a new provider or just eliminating them altogether.”