B2B payments: The revolution must be business led
It’s becoming increasingly obvious that the payments ‘revolution’ is occurring at a vastly different pace for B2B payments than consumer payments. Consumers have been benefiting from new, more convenient options for years, with adoption from both retailers and consumers continuing at lightning speeds. However, when looking at B2B payments, businesses seem to have chosen to be both dissatisfied with current options, and slow to change. In fact, there is a general disconnect between satisfaction with a B2B payment method and its popularity. Checks, for example, continue to be the most commonly used payment method, but ranks fourth in overall satisfaction.
While large scale change is often difficult and occasionally painful, it is unlikely that the cost of moving to new, digital B2B payment options could be higher than the slow, manual, error prone options most businesses currently rely on. Most importantly, if businesses truly desire new options, it’s not enough to simply request them, businesses must be willing to act on this desire and lead the revolution.
We feel your pain
It should come as no surprise to hear that large corporations and small businesses suffer from different pains and unmet needs. Large companies are typically more concerned with the use of paper and manual processes, while SME’s are typically more focused on cost and convenience. However, there are various areas in which all businesses suffer due to unmet needs:
Payment delays: Many businesses suffer from slow payment processing time, which can be the result of processing methods, but also from a supplier/buyer not paying on time. According to a Deloitte report it takes approximately 30 days on average to complete a payment, and nearly HALF of suppliers are paid late for their services.
High costs: 35% of businesses report high processing costs as a major challenge with traditional payment methods, with the majority of costs stemming from labour (accounts payable). In this day and age, manual processing is far too typical and far too costly for a task like payment processing.
Limited visibility: Visibility is one of the largest challenges businesses face. Limited end-to-end views, especially considering the use of multiple different payment methods, results in hidden costs, chargebacks, and more.
Manual reconciliation: As previously mentioned, manual processes increase costs, but also contribute to delays, issues in visibility, and overall, inefficiencies. Businesses often lack automation capabilities for accounts payable (AP) reconciliation, with physical invoices, paper checks and a lack of IT resources. Additionally, many businesses use different file formats or may be missing invoice data in their files.
These are not the only areas in which businesses are hurting. Concerns like fraud (both external and internal) also continue to be at the forefront when considering the move to digital solutions. However, all the above mentioned pain points are better addressed by digital solutions than by the likes of paper checks or ACH/EFT.
It’s not enough to plan, it’s time to act
According to a Mastercard report, 33% of companies plan to roll out real-time payments innovations by the end of 2021, and 32% plan to introduce innovations related to automated payables. Of course, real-time payments can only be implemented in countries like the UK, that have those capabilities available, however, planning and implementation are two very different things.
One of the largest concerns with the slow move to improve B2B payments is the disconnect between businesses claiming to be dissatisfied and planning to upgrade, and businesses actually making the move to implement new systems and processes. Processes surrounding reconciliation seem to be so deeply ingrained, with the use of ACH and checks being practically universal, that organizations are not prioritizing change. In turn, this results in loss of hours, manual errors and unnecessary costs…but most businesses see this as the status quo.
2020 should be a wake up call to businesses around the world, that the move to digital payment alternatives are necessary–convenient, cost effective, and efficient. This must be an industry led initiative, with leaders viewing checks and ACH as the exception, not the norm.
As Jamie Notter said, “Innovation is change that unlocks new value.” This quote is particularly poignant when looking at B2B payments, in which organizations continue to suffer through unnecessary, arguably voluntary pain, all due to the continued use of outdated, replaceable payment methods. We can do better. We must do better.
