B2B Payments Transactions are Evolving to Meet Demands of Digital Commerce

B2B Payments Transactions are Evolving to Meet Demands of Digital Commerce

Impact of Covid-19 on Traditional Payment Methods

The Covid-19 pandemic significantly accelerated the shift to digital commerce for both businesses and consumers. Strict lockdowns forced many businesses to close their physical locations and shift operations online. This highlighted inefficiencies in traditional B2B payments transactions like paper checks which require manual processing. During the peak of the pandemic in 2020, businesses struggled to process invoice payments from clients and suppliers in a timely manner using legacy payment options. The restrictions on movement stressed the importance of digital and contactless payment options for B2B transactions.

Rise of Real-Time Payments

To address challenges brought by the pandemic, many businesses fast-tracked the adoption of online and real-time payment options for B2B transactions. Real-time payment networks saw a massive surge in usage as businesses moved payments to digital channels. According to a recent report, real-time B2B Payments Transactions volumes grew by over 35% year-on-year globally in 2020. Real-time payments allow funds to be transferred and settled almost instantly, providing much needed speed and flexibility. This has become crucial for business cash flows, especially for small businesses with tight budgets. The instant settlement feature of real-time payments also mitigates risks involved in traditional offline payment cycles.

Expansion of Payment Gateway Integrations

Businesses are now integrating online payment gateways directly into their order management and accounting software to streamline invoice payments. This allows clients and partners to pay invoices online using various digital payment methods without leaving the platform they are already familiar with. Major software providers are incorporating payment processing capabilities either through in-house developed solutions or partnerships with payment facilitators. The trend is set to continue as more SaaS platforms launch payment integrations and business websites incorporate payment acceptance functionality.

Adoption of Virtual Cards and Commercial Cards

Credit card networks are promoting virtual card and commercial card solutions tailored for B2B payments transactions. Virtual cards generated within payment or ERP systems allow businesses to make one-time payments to suppliers safely. Commercial cards issued to employees allow controlled spending and consolidated expense reporting. Expenses paid through commercial cards also earn reward points which can be redeemed. Nearly 60% of B2B payments were made using credit or procurement cards in 2020 according to a report. The share is expected to grow further with businesses recognizing rewards and convenience offered by card payments along with risk mitigation features like controlled spending limits.

Focus on Payment Security and Risk Mitigation

As digital payment volumes accelerate, businesses are prioritizing security while onboarding new payment solutions. Payment service providers are enhancing authentication, authorization controls and monitoring capabilities on their platforms. System updates focus on mitigating risks of fraud, chargebacks and data breaches. Tokenization which replaces sensitive payment data with unique tokens is being widely adopted. Third-party certifications help establish reliability for businesses evaluating digital payment providers. Standard data encryption, regular vulnerability testing and quick incident response are some key areas solution providers are strengthening to address security concerns of businesses.

Rise of Account-To-Account Payments

Account-to-account (A2A) payments which transfer funds directly between bank accounts are gaining traction for B2B payments transactions. Businesses can initiate payments by submitting remittance details through online banking, APIs or file-based uploads. A2A payments have clear cost advantages over cards and are nearly instantaneous offering speed and control. Players like PayPal and SumUp are bringing SaaS-based solutions that integrate with business accounts allowing suppliers to receive funds directly without fees. Major banks are bulkifying smaller payments to offer higher transaction limits and streamlined payment processing. Technological upgrades are positioning A2A as viable replacement for legacy options like checks

Opportunities for Payment Service Providers

The evolving B2B payments transactions landscape presents huge opportunities for payment service providers. Merchants are looking for integrated solutions that consolidate invoicing, record-keeping and payment reconciliation capabilities within their existing software environments. As digital payments boom, payment facilitators are investing in advanced platforms, wider acceptance networks and specialized solutions. Partnerships between payment firms and banks are helping create customized offerings. Real-time data and analytics are empowering businesses with actionable insights into vendor relationships and cash flow patterns. Payment facilitators play a crucial role as businesses prioritize flexibility, efficiency and control while transacting digitally with other businesses in a rapidly digitizing global economy.
 
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About Author:
Ravina Pandya, Content Writer, has a strong foothold in the market research industry. She specializes in writing well-researched articles from different industries, including food and beverages, information and technology, healthcare, chemical and materials, etc. (https://www.linkedin.com/in/ravina-pandya-1a3984191)