B2B Payments: Digital and Essential

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82% of American consumers are using digital payments. Yet only 25% of B2B payments are digital. While many businesses still prefer to make payments through check, wire transfer or ACH (automatic clearing house), millennial decision-makers and changing trends in the consumer payments landscape together indicate that the time when businesses could receive payments only via traditional methods is long past.

Today, businesses with flexible B2B payment processing solutions are at an advantage over their more rigid competitors, the corporate credit card market is projected to have a compound annual growth rate (CAGR) of 7.3% by 2026, and the adoption of digital payments in the USA and around the world is increasing. After all, these payment methods are quick and convenient, and business buyers are already using them for purchases made in their personal capacity.

So if you have a B2B retail business, it makes sense to expand the payment processing options on your eCommerce website, to accept multiple payment methods. In our latest blog post, we discuss the B2B payment process and payment gateways.

How do B2B payments work?

While consumer businesses are receiving digital payments as their number one payment source, B2B businesses are still largely using traditional payment methods such as checks. Since the buyer is a business, documentation is important.

1. The buyer raises a purchase order with specifications
2. The seller approves the sale and terms
3. The seller raises an invoice and shares it with the buyer, along with payment terms
4. If the buyer is late to make payment, agreed-upon late payment fees are applied
5. The seller receives payment against the invoice
6. The seller reverts with a payment receipt acknowledging the payment

In addition, in case of high-ticket purchases, the buyer is likely to also go through a comprehensive quotation phase, during which the buyer and seller may negotiate on the terms multiple times. Some purchases, such as annual web hosting packs, are recurring and need to be negotiated accordingly.

What’s wrong with the traditional way of accepting business payments?

Traditionally, the seller would offer one or perhaps two ways by which the client can make payments - typically check or wire transfer. There are a few problems with this.

1. Millennials are?rising through the workforce, and are increasingly in decision-making positions. As a generation, they are much more comfortable with digital payment methods. By equipping your eCommerce website to receive digital payments, you increase their comfort level and willingness to work with your organization.
2. Not every customer wants to pay in the way that you want to receive your payment. If you want to receive payments by wire transfer, but the buyer doesn’t want to absorb the fees, it’s a good idea to offer multiple options with different transaction fees to be borne by the customer.
3. Check and wire frauds can occur, while digital payments are usually instantaneous and are at less risk of non-payment.
4. Traditional payment processing can be inefficient and there is low visibility into the business’ financial health at any time. It’s also time-consuming to monitor payments and reconcile them against accounts. This can result in resource-intensive working, and higher expense.

The roadblocks to using only digital payments for B2B transactions

At the same time, there are certain drawbacks to restricting payments to modern digital options alone.

1. Businesses - especially traditional or family-run organizations - may be used to making payments through traditional means. In such cases, they may not have a PayPal account or a corporate credit card, for example. Younger buyers or more modern businesses, on the other hand, may be equally acclimated to using digital payments alone.
2. Digital payments can involve hidden charges which you need to add to the buyer’s bill, in the form of transaction fees. This can put off the customer, or result in impacted profits if you absorb the fees. A possible workaround could be to offer multiple payment options, allowing the customer to choose their preferred avenue.
3. Usually, B2B negotiations and payments are personal. Seller involvement is not possible when purchases are made directly on your B2B commerce website. With electronic invoicing, you can allow your buyers to negotiate directly with your team, and still pay online.
4. Payment gateways were initially designed for B2C businesses, and are now being adapted for B2B commerce - some necessary features may not be available. In addition, customization may not be possible. This could mean that the features available on your payment program are not perfectly suited to your needs, and a certain amount of compromise may be required. However, B2B payment gateways are evolving, and chances are that you will find a good fit.
5. If you’re working with a SaaS-based payment gateway, you are committed to the monthly fees and features offered by the service provider. In case they go out of business or change their offering, your company could face issues. Do your research before picking the right payment gateway, and select a reliable and long-established brand.

Choosing the right payment gateway

The first thing to do is define the feature set that you require from your B2B payment gateway. Do you need to allow direct purchase from the site, as with a traditional B2C eCommerce site - can your customers add products to cart and simply check out? Or are you planning to send an e-invoice to your customers with an embedded link for online payment of the specific amount? Do you need to set up automatic recurring debits, and if so, would that be on a periodic basis or triggered by some other specific event? What currencies do you need to accept? What about cryptocurrencies? Do you need to accept payment from global bodies?

You can choose the right payment gateway based on your answers to these and other questions. Choose a user-friendly gateway with a proven track record of reliability, and one that can integrate easily not just with your eCommerce website but with your other accounting and business management tools. That way, you’ll be able to get a complete financial picture, pulled automatically from the payment processor.

Top B2B Payment Gateways

There are dozens of payment gateways on the market, most reputable and many seeming to offer the features that you need. So which one is right for you? Here are some of the top gateways for your consideration.

PayPal

One of the world’s most trusted payment service providers, PayPal was one of the early digital wallets and has great brand recognition. With more than 400 million active users worldwide, PayPal helps businesses accept payments online and in-person, making it a good fit for omnichannel commerce businesses.

It’s ideal for B2B businesses whose clients or vendors are already on this extensive payment network.

Square

Millions of businesses and consumers are using Square for their online payments. It’s one of the industry heavyweights, and supports almost all payment solutions for B2B commerce companies, including credit card and invoicing. In addition to online payments, they offer seamless in-person payments through their Square hardware POS terminals. Unlike PayPal, customers cannot pay via a linked bank account.

QuickBooks

QuickBooks is a popular accounting software provider and offers services tailored to small companies. QuickBooks B2B payment solution, QuickBooks Payments, is a very popular B2B payment solution.

It allows users to set up recurring payments, and stands apart from the competition as incoming and outgoing payments sync automatically with accounting statements recorded and managed on QuickBooks software.

Due

Due offers end-to-end full-scale payment solutions, from electronic invoicing to mobile payments to digital wallet development and project management, to time tracking. Since Due’s processing fee is not too high, it’s suitable for bookkeepers and law firms.

Due provides a single platform for all payments, including tracking of payments against due date.

Mastercard Track Business Payment Services

Mastercard has acquired Transpay to offer an online B2B payment processing service that leverages the advantages of Mastercard-verified partners and IDs. International payments in 60 currencies, to and from 200 countries, are more cost-effective using this tool.

It’s ideal for smaller businesses with a large international client base, as it offers much lower international transaction fees. It uses the trusted Mastercard network.

Automating payments, accounts, and finances

Banks, card providers and fintech companies are working together to manage data, customers and cashflow, through collaborative commerce. This enhances the process by analyzing B2B payments, identifying common building blocks, simplifying and automating each.

Payment automation can also help accounts payable teams follow up and receive payments on time, without error. According to American Express, “firms that depend on manual processes take 67% more time to follow up on overdue payments than firms that use automated accounts receivable”. The B2B eCommerce payment sector uses AI and ML to “assess accounting data, learn trends and make suggestions to help speed up the payment process”.

Every business is different, and there’s no single solution that suits all requirements. That’s why it’s so important to analyze your needs, the available options, and choose a payment gateway that’s a good fit for your unique business demands.

Identify which payment methods you need to accept, and what features are important to your requirements. And speak to our experts to discuss how to integrate the selected payment gateway with your existing or new eCommerce website. Talk to us now.

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