The average consumer has long discarded their cheque book in favour of the convenience of digital payments. Shockingly, though, business-to-business (B2B) transactions have only recently been moving into the digital realm.
The average consumer has long discarded their cheque book in favour of the convenience of digital payments. Shockingly, though, business-to-business (B2B) transactions have only recently been moving into the digital realm.
A surge in the uptake of digital payment methods is fuelled by various factors – advances in technology and digital payment platforms and an increased need for security measures as well as improved convenience for businesses on both sides of the transaction.
Here we explore the most significant benefits that digital payments deliver within B2B.
Streamlined Efficiency
One of the main drivers behind the adoption of digital payments in the B2B space is the remarkable efficiency it offers. In the US alone, $3 trillion is estimated to be tied up in a business’s outstanding accounts receivable (AR). The average business has 24% of its monthly revenue held up in AR, payment terms, or trade credit.
This lag represents more than just money in limbo. Traditional payment methods, such as paper cheques and wire transfers, can be cumbersome, time-consuming, and prone to errors. Conversely, digital payment platforms allow for seamless, real-time transactions that enable businesses to streamline their financial operations while also reducing the risk of errors. Digital payments, such as P2P and mobile payments, streamline the accounts receivable process, too, because transactions include encoded information that helps accounting teams easily track where the money is coming from and which invoice it is going to.
Cost Savings
Switching to digital payment methods can result in substantial cost savings for businesses. Traditional payment methods often incur additional expenses, including printing and mailing costs for checks, transaction fees, and manual processing charges. Digital payments eliminate many of these expenses, offering a cost-effective alternative. In fact, a cheque costs at least four times more to process than a digital transaction, while some platforms offer no-cost digital payment processing, instead opting for a transaction-as-a-service model.
Enhanced Security
Cybersecurity is becoming increasingly important in an era of heightened scams and hacking. Historically, security concerns have been a major barrier to the widespread adoption of digital payments in the B2B space, but advancements in encryption technologies and robust security measures have significantly bolstered the safety of digital transactions. Stringent regulations have also helped to earn the trust of businesses – 83% of respondents to a McKinsey survey about payments in the B2B secretary globally cited enhanced security features as a critical factor in their decision to adopt digital payment methods.
Global Reach
An equestrian store in rural England may have dealt exclusively with local customers a mere decade ago but today – businesses like this are increasingly looking to local and global e-commerce opportunities to increase their market share. Life in general in 2023 reaches across international borders, so it’s no surprise that payments have had to keep pace with this change. According to the Bank of England, the value of cross-border payments is estimated to increase from almost $150 trillion in 2017 to over $250 trillion by 2027, equating to a rise of over $100 trillion in just 10 years. This is made possible because digital payment solutions enable seamless cross-border transactions, eliminating the barriers posed by currency conversions and time zone differences.
Integration with Business Systems
Digital payment platforms are increasingly offering seamless integration with a wide array of business systems and accounting software. This integration enables automated reconciliation of transactions, simplifying the accounting and bookkeeping processes for businesses and boosting departmental efficiency.
“Integrated AR solutions can deliver immediate B2B payment wins by accelerating order-to-cash processes, leveraging automation in support of high-level invoice reconciliation accuracy, centralizing AR management processes to ensure faster payments, and promoting enterprise resource planning (ERP) integration that turns rich AR data into actionable insights.”
Reads a report by PYMNTS.
The growing trend of digital payments in the B2B space is more than just a passing fad; it represents a fundamental shift in how businesses interact financially. From streamlined efficiency and cost savings to enhanced security and global reach, the adoption of digital payment methods offers an array of benefits that traditional payment methods simply cannot match. As businesses continue to embrace the digital revolution, those who leverage these innovative payment solutions are better positioned to thrive in an increasingly competitive and interconnected global marketplace.
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