Payments - Pay for SMBs

Introduction

It's no secret that the global economy is shifting. And as a result, banks must adapt and change their roles to remain relevant and competitive. As we've seen repeatedly, many of these changes have been driven by technology – mainly digital technologies like smartphones, social media channels, and online payment platforms. One area where technology has tremendously impacted how businesses operate is in payments – SMBs. They can now make payments more quickly than ever, thanks to new alternatives such as cryptocurrencies, blockchain technology, and even simple PayPal transfers (among many others).

B2B payment landscape

The B2B payment landscape is changing. Small, medium, and micro businesses (SMBs) are the economy's backbone and are increasingly adopting digital channels to conduct business transactions. This trend continues, driven by new technologies such as cloud computing, mobile internet access, and social media.

With their small size and limited resources, most SMBs do not have a dedicated payment system when making payments for goods or services.?

While the B2B payments landscape is changing, there are still many challenges for SMBs. For example, many have limited resources and do not have a dedicated payment system when making payments for goods or services. Therefore, they must turn to alternative payment methods that enable them to receive funds from other entities without having a dedicated system. With their small size and limited resources, most SMBs do not have a trustworthy payment system when making payments for goods or services. However, they cannot afford to miss out on opportunities due to non-payment issues.

SMBs & B2B payments

SMBs are facing many challenges.

• They need to focus on their core business, which means they can't be distracted by the headaches of payments.
• They need to focus on their customers and ensure they're happy. The best way to do this is by offering them flexible payment options that work with how they want to pay.
• They also need to focus on their vendors, who may not be familiar with all the different payment types and options available today.
• And finally, SMBs need to ensure that their finances are in order so that when invoices come due, there's no question about whether or not they will get paid on time!

Small businesses' inadequate access to capital is driven by the cumbersome B2B payments value chain, which is manual, error-prone, and reliant on legacy systems. Procurement-to-pay and order-to-cash workflows remain opaque and intermediary-driven, sending payments and information via email, mobile, and paper checks. Furthermore, the fragmented accounts receivable and payable landscape limits value-added services development, making the process inefficient and costly. Unlike B2C payments, a B2B payment is synchronously finalized by validation and consensus from several stakeholders. Even though this increases overhead costs by as much as 5% per transaction due to poor interoperability between parties and manual tracking and communication, it significantly delays settlements.

?The global B2B cross-border payment market will likely reach USD35 trillion in 2022.

The rise of alternative payment options

Traditional payments like cards, credit transfers, and direct debit payments accounted for more than 83% of non-cash transaction volume in 2021, while new payment types accounted for nearly 17%. By 2026, the new payment methods (Sources Capgemini WPR-2022) will account for almost 28% of non-cash volume, while traditional payment methods will account for just under 72%. The rapid rise of mobile payments has led to the proliferation of new payment instruments, including quick response (QR) code payments, tap-and-go (NFC), digital wallets, and account-to-account (A2A) payments.

The rise of alternative payment methods is due to the growth of digital payments, e-commerce, and m-commerce. For example:

• With e-commerce, customers can buy from a company's website without visiting its brick-and-mortar store. Therefore, they don't need cash or credit cards.
• Mobile phones are becoming more popular; mobile payments have increased by almost 50% annually since 2008. People use their smartphones for online purchases instead of visiting stores with cash or credit cards.

The popularity of mobile payments is likely a result of the convenience and security they provide. With a smartphone, users can pay for goods and services with just a touch of their finger (or voice command if using Google Assistant). The transaction is completed in seconds without pulling out cash or credit cards.

The importance of building trust

When it comes to SMBs, trust is the foundation of any successful business relationship. Trust is built through open communication and transparency. It's made by demonstrating a willingness to help and by demonstrating a willingness to listen. And banks need to adjust their services accordingly to build even more trust with their SMB customers—ultimately leading them down the path toward increased revenue streams for their bank or credit union.

How can banks adjust their services? First off, they need to be more customer-centric than ever before: every single customer has different needs, goals, and financial circumstances—and as such, each one deserves individualized attention from the bank's staff members! This means that employees need ongoing training to keep up with industry trends (and changes in legislation), which will ultimately give them greater insight into what makes an ideal target audience for each campaign or marketing initiative undertaken by the bank itself."

Second, banks need to be more transparent with their customers: they should regularly communicate with them about their accounts and offer up the opportunity for these customers to ask questions about their finances.

Banks need to be more SMB customer-centric.

While you may think it's the most efficient option, credit cards aren't always the best payment method for SMBs. Many small businesses find that cash is king in their industry or don't have customers with credit cards. For these reasons, banks need to be more SMB customer-centric regarding payments.

To build trust with your SMB clients and offer them flexible payment options that are convenient for them:

• Explore alternative methods of payment
• Offer same-day funding without waiting three days on a business account (or even an online checking account)
• Consider offering debit card solutions so businesses can accept plastic without worrying about funds being withdrawn from their bank accounts.

Explore alternative methods of payment. Credit cards are not the only way to accept payments. There are many other digital and non-traditional payment options that SMBs can use. For example, you may consider offering a prepaid debit card solution for your clients who want to accept credit but don't have the funds available in their business accounts. This solution is beneficial because it doesn't impact your client's bank account or require them to wait three days for funding on a business checking account (which may not even be available).

Banks will continue to play a critical role in helping SMBs manage their finances and reduce the risks of working with unfamiliar buyers.

With alternative forms of payment becoming more popular, banks need to understand their customers' needs and ensure that they provide flexible and convenient services.

The growing importance of B2B payment

Recently, there has been an increasing focus on moving from B2C to B2B payments. However, even though this trend is widespread, most banks have not adapted their business strategies accordingly. They still often think of their product lines as consisting primarily of products aimed at individuals (such as credit cards) rather than businesses—yet despite this lack of strategic foresight, these institutions face intense competition from other players in traditional online payment methods such as PayPal or Square Cash; fintech startups like Stripe; or blockchain-based platforms like RippleNet or Stellar Lumens. In addition, many institutional investors have already begun investing heavily in these companies because they believe they will emerge victorious over banks when it comes time for consumers and businesses to select which financial institution provides them with financial services."

This shift is because B2B payments are more than just a way for businesses to send money to their suppliers and contractors. They can also be seen as an important channel for companies to grow their business—and even increase profits through loyalty programs or other incentives.

Conclusion

In conclusion, payments are a vital part of any business. Whether you're an SMB or a large enterprise, it's essential to have a means of accepting payments quickly and efficiently. This can be achieved through various methods such as APIs, plugins, or hosted services like Stripe or PayPal.

Small businesses have primarily been on the sidelines as consumer payments innovation occurs because B2B payments have not yet been affected by FinTech innovation. However, PayTechs are now slowly penetrating the B2B value chain. With BigTechs (Apple, Alibaba, Google, Amazon) and FinTechs (PayPal, Stripe, Block, Revolut, and Starling Bank) entering the mix, the highly competitive SMB market segment is becoming a battleground.