For over twenty years, B2c transactions have embraced digitized payment for goods and services. Paypal emerged in 1998, was acquired by Compaq in 1999, and now has 361 million active users around the world. 87.5% of online buyers use this platform. It’s entirely unimaginable that consumers in 2022 would make an online purchase, and then post a check to make a payment.
So, why is it that 60-70% of North American B2B payments are still made with a paper check? The B2B payments market is infinitely larger than b2c, with significant amounts of money changing hands every day. In 2018, Goldman Sachs estimated that B2B payments accounted for a staggering $120 trillion USD, and they anticipate this number to continue its ascent. By 2028, they forecast B2B payment volume being five times that of B2C.
B2B payments put simply, are transactions between two businesses. B2c by comparison is business to consumer. A B2C transaction involves a consumer buying a product from a store. One person, one (usually one-off) transaction, one price for all of the customers purchasing those goods or services.
B2B transactions are often a part of a supply chain. A business manufacturing cars, for example, will purchase tires from one supplier, electronic components from another, and paint from yet another.
Then, consider that these tires, electronics, and paint also need to be manufactured. The raw materials have to be purchased from somewhere too before they can have value added and become a marketable product. Tires are made from as many as 200 raw materials—natural rubber, synthetic rubber, steel, nylon, and silica to name a few. Electronic components contain copper, lithium, tin, silver, gold, nickel, and aluminum. There are many moving parts involved.
B2B payments have traditionally been processed using old-fashioned processes—manual invoicing, long payment cycles, paper checks, or expensive money and wire transfers. When most of these transactions were happening within a city or a state, these methods were fine. You knew your suppliers/providers, you could drive across town and meet with them. You were trading in the same currency and kept the same hours.
The globalization of trade, especially in B2B, has transformed the marketplace entirely, and as a result, the way we do business needs to transform accordingly—including payment systems. Fintech solutions designed specifically for global trade make things happen far more quickly and efficiently than a pen and paper ever could.
Emerging software platforms that automate and integrate every step of a purchase, from procurement to B2B payment processing, are changing the face of B2B operations. Aside from the obvious benefits of removing multiple barriers to a seamless workflow (errors, lost paperwork, misdirected communication, the potential for fraud and loss), automation frees up staff to engage in more innovative and exciting projects, which in turn leads to growth for your business. Add in dynamic discounting and supply chain finance, and your accounts payable department becomes a driving force in revenue generation.
Fintech (financial technology) is the rapidly expanding sector changing the face of the B2B payments space. With smart and intuitive software, accounts payable automation solutions are no longer the domain of huge companies with a team of financial wizards at the top. Small to medium businesses are able to harness technology to improve their working cash flow and drive growth without a huge financial outlay, total replacement of their software, or extensive staff training.
Digital point of sale solutions are available to even the smallest business. Mobile payment platforms, like Square or Stripe, mean a contractor can immediately accept payment on site. No need to wait on a check in the mail, or hope the customer will remember to swing by the office to pay their invoice. Integrated invoicing software offers the same benefits via email—options to pay can be embedded in an electronic invoice, and the customer is just one click away from settling their bill.
These fintech solutions are designed to integrate with existing AP software, eliminating the need for a massive overhaul. This is a real bonus for every small business owner without the resources to change up all of its existing systems. Suppliers and clients can be easily onboarded via self-serve solutions, making the adoption of automated and e-commerce solutions seamless—and often eliminating the need to work with the cumbersome demands of traditional financial institutions.
One great example of a fintech company solving B2B payment challenges and making transactions easier is Resolve. A branded payment platform for each of their clients is part of their standard offerings (and one that allows for easy payments using anything from credit cards to checks).
But what really makes Resolve stand out is their net terms and credit management solutions. With a few easy steps, businesses can run discrete credit checks on customers that give them credible information on how much credit to extend to each client, and what net terms to offer (30, 60, or 90 days). Once this is complete, Resolve will process payments to businesses of up to 90% of each invoice within one day, and customers still have their full net terms to make payment.
Especially in a small to medium business with a small workforce, freeing up your talented staff to drive growth and innovation is far more beneficial than having them manually process invoices and payments. Automated order purchasing, ease of use, real-time payments (with dynamic discounting and automated systems to highlight errors or inconsistencies), and solutions like supply chain finance keep the supply chain moving, keep cash where it can be used most effectively, and keep your staff actively engaged in growing your business.
As the B2B sector ventures into digitized accounts payable and receivable, the market opportunity for fintech startups is enormous. The diversity of the B2B payments landscape means there are many niches to be filled and these emerging businesses have the skills and vision to fill them.
Payment infrastructure, like automated clearing house (ach), puts instant real-time payment within the reach of small to medium businesses. Legislation is coming into play that supports and protects online transactions in the global marketplace.
There are options to fulfill whatever payment needs your business may have—whether that’s accounts payable automation, accounts receivable automation, simply accepting electronic payments/ach payments, or to streamline a full procure to pay system that takes you from the beginning to the end of the transaction.
These advances in fintech remove the complication and uncertainty from cross-border payments by enabling parties to easily issue and pay invoices in their preferred currency at mid-market exchange rates. Dynamic software opens the way for functionality and easily providing personalized solutions to specific customer subsegments.
Previously these carefully curated and tailored solutions would have involved countless hours of staff input, costing a huge amount of money, and taking staff away from other beneficial projects. Intuitive software creates the space for your workforce to innovate and advance growth.
The fintech startups targeting the small to medium business sector of the market are attracting significant investment as the business world begins to take notice of the opportunities technology has to offer. Venture capital investors are seeing the impending exponential growth in the fintech sector and putting themselves in the picture.
Some of these startups are acquired by other tech giants before they even go public—this is the state of the playing field right now. The sector is exploding with companies reshaping the B2B tech landscape: point of sale, infrastructure, mobile payments, accounting software, cross-border transactions, marketing, mastercard, security, crypto, and blockchain. The ways in which these startups will change global trade are, frankly, astonishing. Legacy systems have so many roadblocks like transaction fees, delays, and complications. These are eliminated when businesses harness the constantly evolving technology on offer today.
Payment startups are a subset of the fintech industry that is making a huge and significant impact on the B2B sector.
Perhaps the most challenging aspect of trade in the past has been receiving payment. We no longer live in a world where people walk around with a wallet filled with cash, checks are notoriously prone to fraud and human error, and wire bank transfers are expensive. We do business with people in other cities, other states, and other countries, and traditional B2B payment systems and forms of payment won’t cut it.
What was previously a complicated and exhausting paper trail, fraught with processing fees and time delays, has become instant, secure, and seamless thanks to fintech payment providers, startups, online payments, and payment gateways.
As both B2B and B2C worlds shift to online platforms, fast and secure digital payment options have become a fundamental need. The applications built by these innovative companies are able to centralize payment methods (credit card payments, using bank accounts, electronic funds transfers (efts), e-wallets, and other financial services) into one seamless smart card or app. Simple. Fast. Secure.
Other factors come into play here too. Developing countries with fragmented banking infrastructures can utilize fintech APIs, to centralize the transfer of funds both domestically and internationally. By providing solutions like these, fintech payment startups are building a space where developing countries can more easily participate in global trade, and in turn, strengthen their economies.
Extremely rapid growth can create hiccups in any industry. Fortunately, fintech companies are quick to find solutions to any payment needs. Payment security and online privacy is, of course, a concern for both consumers and businesses. These dynamic businesses build in authentication, encryption, blockchain, secure code and architecture, AI, and tokenization to keep data secure, prevent cyber-attacks, and stop fraudulent activity. Automated systems use intuitive programming to quickly identify and flag any suspicious activity. By constantly being on top of any security concerns, safety is guaranteed.
Globalization has changed the way we do business. Business-to-business payment startups are making these transitions smooth and accessible to everyone doing business, whether they’re on the same block or across the world from their vendor. The world really can be your oyster.