Finding the Real Value in Business Payments When Money Movement Is a Commodity

Technological advancements and a seismic, if in places incremental, shift towards digitization are transforming B2B payments.

And many payments industry insiders believe the innovation-led changes taking place today are a long time coming, trickling down to the B2B ecosystem after years of streamlined payment advances in consumer-facing payment settings.

“B2B payments is a very hot area right now,” Seth Goodman, chief revenue officer at Boost Payment Solutions, told PYMNTS for the new series “B2B Payments: Outlook 2024.”

“Our view, honestly, is that the movement of money is fairly commoditized. The real value add is in the automation and the reconciliation,” Goodman explained.

He noted that before the COVID-19 pandemic, over half of business payments were done by paper check.

“The thing with checks, is they were slow and manual. But they worked pretty well, and came with a little remittance slip in the envelope. What we’ve seen is that as folks have moved over to electronic payments, they’ve witnessed a lot of challenges around the remittance data,” Goodman said.

That’s why there is a growing need for payment solutions that can be positioned as a bridge, facilitating the seamless flow of payment and data between suppliers and buyers.

The Movement from Manual to Automated Processes

The migration to electronic methods for B2B payments underscores the significance of data and reconciliation capabilities in driving the adoption of innovative payment methods.

Still, as businesses strive to transition from paper-based processes to automated solutions, several challenges become apparent.

“Forty percent of B2B payments are still on check. Sixty percent are electronic, and obviously cards make up a portion of that. So, I think many businesses still don’t really understand the full benefits. There’s still a continuous need for education in the industry,” Goodman said.

Innovation in B2B payments is not just a buzzword; it is a dynamic reality that is reshaping the way businesses transact. But today’s cutting-edge innovations aren’t the only factor impacting the B2B payments landscape. Macro factors, from record-high interest rates to other top-line economic indicators, are increasingly informing the way that organizations approach their payment programs.

“Overall, our forecast industry-wide for 2024 is significant growth with commercial card volume,” Goodman said. “While there’s still some softening economically, there’s just such a momentum with electronification of payments.”

That’s because commercial cards and other virtual solutions can provide valuable insights into cash on hand, while offering innovative working capital options to help firms navigate macro landscape uncertainties.

Challenges and Opportunities in Digital Transformation

Goodman noted the variations in working capital preferences among financial professionals, with a growing emphasis on either reducing days sales outstanding (DSO) or expanding days payable outstanding (DPO).

Commercial cards, especially those that offer working capital benefits and rebates, are becoming integral to these discussions.

“If you think about it, every transaction on a commercial card provides the buyer approximately 45 days of working capital plus a rebate,” he explained. “It’s a win-win for both sides, which is really driving the industry.”

Still, many businesses remain unfamiliar with not just the benefits of electronic B2B payments, but also their cost structures and the ways in which they can be leveraged.

“We’re seeing a lot of confusion around the cost of cards,” Goodman said.

As economic conditions evolve, the cost-benefit analysis increasingly favors card acceptance, he explained, emphasizing the importance of considering factors such as the time value of money, inflation, and the soft costs associated with manual processes and security concerns.

Goodman added that considerable interest is growing around buyer-funded card models.

“Our goal is to find a way to push a hundred percent of a buyer’s transactions on the card, and to support the suppliers along the way…which is why we launched our Boost 100® product suite, which supports buyer paid, supplier paid, or shared funding models,” he said.

As for what the Boost Payment Solutions CRO sees the future holding?

Hopefully a transition from traditional cross-border processes to card-based solutions, he said, explaining that “cross-border payments are still very antiquated” and the ability to offer working capital benefits and rebates makes card payments an attractive option for cross-border transactions, even in global supply chains.

Goodman also noted excitement around the use of artificial intelligence, while cautioning that its applications and outcomes need to be “100% certain, 100% of the time” before it can be widely adopted for payments.

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