“Smart” technology is rapidly becoming the norm in many industries. From brick and mortar to online shopping as well as manual labor to automation, these advancements are cementing themselves as the new standard across the workforce.
Business-to-business (B2B) payment methods is an area of business, however, that has been struggling to keep up with the times. While customer-to-business (C2B) payment had no trouble adapting, it has taken a little longer for B2B payment turn the page. Here is a glimpse into how B2B payment has been making strides into this new era.
First off, B2B payments are transactions between two businesses. Depending on the term specificities, payments can be recurring or a one-time deal. This includes, but is not limited to, manufacturers, distributors, wholesalers, and retailers.
In the B2B market, purchases are often made in bulk and can be quite costly. Compared to C2B transactions, these can be arduous and stressful. Purchase volume, transaction history, and the relationship between the buyer and seller all go into the timeliness of delivered products.
Because of this, manual and paper-based processes are still being heavily relied on. There has been a shift toward automated cloud-based payment systems in recent memory, though. B2B buyers and suppliers are introducing digitization methods that makes the transaction process a breeze while efficiently delivering payments on time.
While not the sole cause, the COVID-19 pandemic did factor into this digital transformation push. 68% of small businesses reportedly decreased their paper check and cash usage to change to the new digital way of the future. By 2025, it’s estimated that 80% of B2B transactions will be done digitally.
Cost-effectiveness is another attractive aspect to smart payment methods. A report discovered that electronic invoice payments typically cost 60% less than their paper-based counterparts. 35% of businesses report high processing costs as a major roadblock. Average accounts payable (AP) organizations must pay about $8 to process one payment.
Cryptocurrency and blockchain technology are new payment methods still in their infancy. In 2019, only 8% of firms used cryptocurrency for business transactions. While not a main method in the U.S. yet, international businesses are quickly adopting them as viable. Potentially, the future could see global transactions decrease 75% with crypto payments when compared to the usual wire transfer.
Cash still rules the B2B payment world at 45%, but smart and electronic disbursements are the way of the future. For more information on B2B payment methods and the emerging trends, please see the accompanying guide.
Guide created by CardConnect