Amex Says Too Much Liquidity Trapped in Existing B2B Payments Process

On paper, B2B payments are ripe for digitization.

The only problem is that so many B2B payments remain, ironically, stuck on actual paper.

It’s the 21st century, after all. Yet around 4 in 10 B2B payments made in the U.S. rely on paper checks and other outdated hoops to jump through.

“These are highly manual processes and lead to a lot of cost inefficiency,” Pavan Krishna, vice president of B2B Products and Partnerships at American Express (Amex) told PYMNTS.

Beyond that, there are multiple steps that a buyer and a supplier need to go through before a payment is made.

As Krishna explains, “these are often again manual steps” such as invoice management, purchase order management and more, all of which entail a high degree of both effort and time.

“It’s important not to try to solve for buyers and suppliers’ processes independently — to make electronic B2B payments work, it’s important to close the loop on both ends,” Krishna said.

Closed-Loop Solutions Solve for Both Sides

While the pandemic accelerated the adoption of digital tools across industries, institutional inertia has kept the B2B space more manual than consumer-facing environments where meeting behavioral expectations through digital payments solutions can make or break a business.

But there is a growing awareness that the closed-loop automation of electronic B2B payments can lead to better cost efficiencies and operational efficiencies for firms.

And within today’s frothy operating environment, every competitive edge counts.

“Late payments in B2B can cause operational inefficiencies, lead to higher costs, and most importantly, tend to result in a strained buyer and supplier relationship — particularly across certain verticals like construction and healthcare,” Krishna said.

He explained that one of the main reasons for late payments is the manual approval process for invoices, which involves multiple stakeholders and steps.

Additionally, with today’s increasing interest rates and low availability of liquidity, Krishna said there’s real pressure on buyers for access to credit and other alternate liquidity options to make their payments to suppliers.

That’s why investing in digital tools and automation solutions to address these challenges and speed up the procure-to-pay cycle, while adding flexibility to it, is crucial for sustainable success.

Not only that, modern digital and automated B2B solutions can help unblock the mission-critical working capital stuck in the back-and-forth of historically manual payment procedures.

Visibility and Transparency Help Connect the Buyer-Supplier Dots

Credit digitization has been cited as creating improvements by 77% of surveyed CFOs, and now 82% of companies have investment plans for working capital and credit technology,  according to the B2B and Digital Payments Tracker® report, a PYMNTS and American Express collaboration.

The report also shows that nearly half (45%) of U.S. businesses that automated payments during the pandemic are already seeing improvements in terms of cash flow management and across other performance indicators.

Krishna said American Express is investing in a lot of solutions that help bridge the gaps between either side of the B2B transaction, helping to increase and enhance the trust between the parties involved as well as help with operational efficiencies, and provide for better management of costs involved in many historically manual steps.

“Our strategy is very much to create one unified platform where buyers and suppliers can transact with each other and make it easy to do business with one another,” he said. “One common theme we hear is that businesses like to operate ideally in one system or in as few systems as possible.”

As businesses modernize their systems in different stages, there also exists the risk of fragmentation where various platforms end up talking past each other, or in different operational languages altogether.

Because Amex provides a frictionless, closed-loop network, Krishna said it’s possible to offer solutions to buyers and suppliers together, helping incentivize buyers to pay sooner and helping suppliers receive money in a digitally automated way, while removing many historical — yet ongoing — delays, like the need to manually match invoices and purchase orders.

“Still, the importance of visibility and transparency between a buyer and supplier goes beyond just knowing where your payments are,” he said. “It is really all about ensuring that the various data elements that are important to make a payment happen are exposed in a secure, compliant way to buyers and suppliers.”

That’s why, as reported by PYMNTS, Amex recently acquired Nipendo, a leading provider of procure-to-pay solutions, to provide automation and flexibility in buyer payments with different modes of payment and seamless communication of data elements.

Krishna emphasized that, at the end of the day, alleviating the gaps and pain points that exist across today’s B2B payments landscape boils down to just two things: providing flexibility in the way a buyer wants to make payments, and allowing for a seamless flow of data communication that removes the need for manual interventions.