While digital payments in B2C transactions have become more commonplace over the past few years, the COVID-19 pandemic has influenced far more B2B adoption of paperless invoicing and payments. Application Programming Interfaces (APIs) are making these entirely digital transactions fast, secure, and seamless—a truly user-friendly experience.
B2B payments—payments between two businesses, rather than a business and a consumer—have historically been pen and paper transactions. An invoice is written, discounts and incentives are calculated, and the invoice is either mailed or handed in person to the customer. Theoretically, the customer simply writes a check and gets it to the business within the prescribed time frame. But this is slow, prone to human error, and expensive. Time is wasted following up on overdue invoices, talented staff are frustrated with tedious tasks, and there’s a significant cash flow gap between the goods being provided, and the payment coming in.
Because B2B payments are often a part of the supply chain, these roadblocks are incredibly detrimental to your business. If you’re waiting on payment, you don’t have the cash available to run your own business—and if we’re talking about supply chain, with multiple vendors and suppliers in a global marketplace, this gets messy.
The emergence of APIs has disrupted these legacy invoicing and payment processing systems—and their reliance on traditional financial institutions. In addition to streamlining the messy and clumsy paper trail, they are driving new revenue and growth both with existing customers, and potential new ones. New and existing customers reap the benefits of digital invoicing and payments platforms that easily integrate with their own ERP (enterprise resource planning) systems, making your company very appealing to do business with.
Digital payments offer a vast array of functionality and general benefits over manual checks. Aside from avoiding the obvious pitfalls like check fraud and human error (which often leads to losses or delays), centralizing your AP data allows you to analyze it in ways you simply couldn’t have easily done before. This information provides you with valuable insight into your customers: who are you doing the most business with, what are they spending, and what can you do to ensure they feel valued and stick with your company in the long term.
Additionally, as the supply chain reaches beyond your geographic vicinity and e-commerce increases in demand, digital payment solutions provide the option to do business with companies anywhere in the world. A small but impressive start-up in a different country? Sure thing. Fintechs have used their innovative and intuitive technologies to move money easily and quickly around the world, and in doing so, drive growth in small businesses in up-and-coming locations. Although this was previously a domain occupied mainly by capital finance companies, traditional banks are getting on board and further transforming the landscape.
In addition, new banks and financial services are emerging which are fully licensed and secure, yet lack the legacy systems which have turned business owners off in the past, and are what drew people away from traditional banking and towards fintech solutions.
Integrated tools are transforming the way banking is done by embedding banking services into a company’s ERP systems and having them interface smoothly. For example, using a solution from Xero means all of your financial information is in one place and can be accessed immediately. Bank statements, payment portals, invoicing—all of the information that keeps your business running smoothly.
One fintech solution that includes an element of embedded banking services is Resolve. In addition to providing a seamless B2B payment solution, Resolve allows companies to conduct discreet (or ‘quiet’) business credit checks on any current or potential customer or quickly and easily. This credit check leads to quick decisioning on how much credit to extend to each customer, and what net terms to offer (30, 60, or 90 days).
With more B2B customers demanding net terms, Resolve gives companies the tools they need to reach new markets and expand order sizes while offering a better customer experience for the end buyer. For every approved customer, Resolve advance pays up to 90% of each invoice into the business’ bank account within just one day. Eliminating the waiting game for cash payments from accounts receivables (and removing the need for invoice factoring) helps businesses expand their growth plans while resolving immediate cash flow needs.
In addition to the new players, long-established names, like Visa and Mastercard, are also establishing themselves as digital B2B bank portals and not just credit card companies. Visa B2B Connect’s non-card-based network facilitates transfers between bank accounts in over 100 countries, and customers are able to connect via Bottomline’s universal aggregator—meaning there is no huge technology adjustment needing to be made. Importantly, Visa’s digital identity feature tokenizes all of the client’s identity and banking information. A unique identifier is attached to each organization, keeping their vulnerable data secure.
When a B2B fintech solution is integrated into your accounts payable and accounts receivable system, high-value corporate payments, including cross-border payments and global payments, become seamless digital money transfers from one bank account to another. This frees up working capital, and streamlines payment systems. Payment data is securely encrypted, and protected by many additional layers of security with automation.
For example, in the United States, Automated Clearing House (ACH) payments also go through a clearinghouse which keeps all bank account information confidential. Digital fingerprints are associated with all of these transfers and makes tracking payments and funds transfers from beginning to end, in real-time, easier. If anything goes awry, APIs are intuitively designed to flag suspicious transactions immediately.
By having funds go directly from one bank account to another, inconvenience, wasted time, and fraud are eliminated. Whether in the B2B ecommerce realm or in more traditional business-to-business environments, these payment methods are transforming the way companies do business with each other.
There are many digital payment providers in the payment technology ecosystem. They all have niches and offer different payment options. The key is deciding which is going to work for you and the way your business operates.
The offerings focused on small to medium businesses (SMBs or SMEs) are of particular interest. Not long ago, offering automated invoicing and digital payments was the domain of large companies, with a CFO and a team of IT wizards. This is no longer the case. More and more solutions for SMBs are emerging, with software that integrates into existing ERP software. These new offerings don’t require staff to be highly skilled users of technology as interfaces are cleanly designed with workflows that are easy to understand and operate.
When deciding which provider is right for your organization, there are questions you need to consider. The Bank of America has a concise list which is a great place to begin.
- Do they have enough staff to keep things running smoothly? People who can manage any exceptions that arise?
- How large is your network of suppliers who will accept digital payments?
- What are your security and fraud prevention protocols?
- How much work will it be to set up these systems?
- How will the system integrate with your current ERP/API?
- What does the future look like with regards to investment in the ongoing improvement of digital payment platforms?
- Are the software updates going to keep up with an evolving landscape (including potential regulatory changes)?
- What is your roadmap for the future of digital payments?
Obviously, a small business with a staff of two is going to have different needs than a medium-large enterprise with many moving parts, but there is a digital payment solution for everyone.
ERP stands for Enterprise Resource Planning. It is the software at the very heart of your business—your accounts payable and accounts receivable, procurement, supply chain, manufacturing, operations, and human resources. Everything that makes your organization tick.
Historically, ERP software was clunky, slow, and difficult to use. It didn’t interface terribly well with anything. While there is no perfect software system to seamlessly integrate every single thing, modern solutions are significantly better than they have been in the past and real-time payments have become a reality in many situations.
Integration of intuitive AI opens the way to insights that human oversight could miss, enabling better decision-making, improved performance and the opportunity to optimize your payment systems. Having all of your data centralized and able to be pulled at a moment’s notice means time isn’t wasted collating data—it’s all there and ready to be analyzed. The dynamic nature of these platforms vs a more stationary legacy software package allows for agility, and the ability to change track as the market changes and adaptations are needed.
Digital B2B bank portals ideally should fit right on top of your existing ERP software, without the need for an expensive system overhaul, or time-consuming staff training.
The best digital B2B bank portals will connect to multiple clearing systems around the world, and allow you to connect from various platforms. This way, you can choose the one most suitable for your organization’s unique needs.
A portal with established connections to clearing systems worldwide is going to remove any friction associated with cross-border B2B payments, and make global trade a smoother ride for everyone.
Some will offer access via an API, connecting you directly to national clearing schemes and shifting money quickly and easily. Web access via a client portal allows you to access tools with no need for any change at all to your existing systems if development or integration is of concern. SWIFT is another way to access cross-border B2B payments, a well-established cross-border communication network that directs global transfers to where they need to be.
Digital B2B bank portals are yet another tool organizations need to adopt in order to stay ahead of their competition, drive growth, impress the customers that they already have, and attract new ones. The more smoothly you’re able to do business, the more appealing it is to do business with you. Don’t let your competitors charge past you as you stick with legacy banking systems. Be flexible, adopt this dynamic technology, and enjoy the benefits.