The business-to-business payments market has quietly been going through an incredible digital transformation that is affecting all players in the ecosystem, including accounts receivable and accounts payable departments, banks, credit card brands, payment processors, and providers of software, including enterprise resource planning systems for managing back-end business operations like financial records and customer accounts.
The B2B payment landscape is undergoing a massive shift as B2B payments continue to increase over time, and big names have their eye on this ever-growing payment segment.
Automation can increase process time and greatly decrease the number of labor-intensive tasks necessary to facilitate payment.
With the rapid change of payment processes, enhanced payment technology is quickly replacing antiquated, outdated methods, and accounts payable automated solutions are popping up everywhere. B2B payment interactions have historically been a high pain point, constantly lagging behind consumer payment technology. Therefore, reliable technology that will lessen the burden for both sides of B2B transactions is in high demand, and automation is set to make payment more efficient and accurate than ever before.
Why is Payment Automation on the Rise?
Automated payment has major cost-savings potential for businesses of all size. The B2B payment process classically demands countless manual interventions to resolve error and update information, which drag the process out much longer than necessary, often delaying payment or allowing for more error. New automation payment technology eliminates unnecessary steps, optimizes efficiency, and provides far-reaching benefits. It also allows invoices to be paid in one day versus up to two weeks or longer for traditional payment processing.
Automation isn’t just for the big players. In 2019, we can expect to see FinTech solutions for small- to medium-sized businesses, which will benefit suppliers as well as other companies in the financial landscape. Although small businesses produce less frequent invoices, more and more FinTech companies are showing interest in the SMB market, which incorporates around 5 million businesses, a growing revenue stream that can no longer be ignored by financial tech companies.
The B2B payments market, estimated at more than $38 trillion, is still dominated by paper checks, so the changes that we’ve seen already were inevitable. But we’re still early in the process, and there are significant changes still to come. Here are a few.
Virtual credit cards
Accounts payable (A/P) departments have been responsible for the majority of paper checks issued in the B2B payments space. Namely, simplicity and universality are all you need i.e. a billing address and a payment method that is accepted by everybody across B2B payments.
The last five years have seen dramatic changes in A/P departments with the introduction of virtual credit cards. These have become popular as they help in monetizing A/P spends and that’s something every chief financial officer wants to hear: how to turn an expense area into a revenue stream.
More and more often, businesses feel the need to respond to the customer’s desire for fast, efficient and easy service. Because of this, creating an electronic adoption strategy is another trend to watch out for. It not only helps a business receive and process invoices faster, but it addresses customer demand.
A survey found that 31% of businesses identified receiving fewer calls from customers regarding lost invoices as the biggest benefit of electronic adoption. The use of self-service portals in an electronic adoption strategy reduces the costs associated with a customer service team getting inundated with these types of low-value calls. Additionally, paper delivery costs a fortune in comparison to electronic delivery. Moving these processes online saves postage, paper, and printing costs, not to mention the time to manually complete those tasks.
In 2019 we can expect businesses to turn their focus inwards and finally bring their billing practices into the 21st century.
A third area to watch is growth in mobile transactions. The US B2B payment market is growing at an annual compound growth rate of 5.8%. Mobile payments are a great way for companies to provide more convenient payment methods for their customers and create extra value. It has been a trend in the B2C world for a while now, but it is starting to catch on for B2B payments. Industries such as consumer packaged goods, where payment could be made outside of a customer’s usual standing order, would benefit from the autonomy that a mobile solution provides. Companies will begin to roll out more mobile-friendly websites and payment portals for their customers, giving them even more flexibility and automation in the process.
Overall, 2019 is projected to be an exciting year in the B2B payments space. We can expect to spot new technologies to continue to develop as the value of the B2B payment market is realized. 2019 is set to be the year that businesses wake up to the payments revolution with new market entrants stimulated by regulations to offer better options.
The implications of new techniques and technologies are broad, reforming everything from accounting to corporate treasury approaches. And while 2019 will see the emergence of a handful of these new solutions, it is likely to be the start of something far bigger.
For decades, businesses have spent significant time and money on reconciling payments with invoices and purchase orders. But new value-added services emerging in the industry offer the potential to put an end to reconciliation headaches that have persisted for years and open the doors for vast improvements to standard accounting practices.
The arrival of more sophisticated artificial intelligence and machine learning techniques will increasingly help businesses get more from their payment data and processing patterns, resulting in an enriched experience, great transparency, and improved visibility
The data-rich, changing landscape creates opportunities for cybercriminals to learn, and exploit any flaws that there might be in financial flows, so it will be more important than ever to stay ahead of the fraudsters.