B2B payments comprise an increasingly large portion of the economy. The U.S. B2B market alone grew 40% from a payment volume of $16.5 trillion in 2014 to $23.1 trillion in 2020.
With the prolonged scenario of pandemic-induced remote work, many B2C payment trends are fast carrying over to B2B.
Businesses are now favoring cashless and digital routes to manage their payments process more efficiently, resulting in quicker and more secure transactions.
This year, everything points to the B2B payment ecosystem getting faster and more transparent, leading to a new norm in the way payments are carried out. Here are four emerging B2B commerce trends to look forward to in 2021 and beyond.
1 – The Rise of Flexible Digital Payments
Digital payments in B2C have already been embraced as the preferred method of payment because they are quick and convenient. The B2B space, with lower-volume and higher-value transactions, is lagging behind — still relying heavily on traditional payment methods like cheques and purchase orders.
Now, it goes without saying that these traditional payment methods are slow and inefficient, but thanks to the COVID-19 pandemic, the past year has seen an accelerated shift from physical to digital payment methods like Automated Clearing House (ACH), online payment portals, credit cards (also debit and virtual cards), and other contactless real-time payment options.
Digital payments — one of the many great digital transformation examples across industries — enable numerous benefits, such as:
- Faster and more secure transactions
- More payment transparency and convenience
- Richer and real-time payment information available to both parties
- Automated payments and reconciliation
With technology advancements and startups offering cost-effective solutions, more and more businesses will be prompted to make the switch to accepting digital payments.
2 – Cheques Will Soon Become Completely Obsolete
As the B2B sector heads towards digital payments, the use of cheques will decline sharper and may ultimately reach a point where cheques will no longer be an accepted form of payment.
Even though cheque usage in B2B transactions has fallen to an all-time low of 42%, according to a 2019 survey, they remain the most popular payment method.
Cheques have always been a reliable B2B payment mode as people know how to handle them and executives have never been keen on such legacy systems modernization.
But as remote work continues to take center stage, with the pandemic accelerating the shift to fully remote, cheque usage is bound to fall even more sharply. Slower processing times, high manual (in-person) effort, and processing costs don’t help either.
Many companies have already moved away from cheques completely. A third of respondents in the AFP 2020 survey said they are very likely to convert the majority of their B2B payments to suppliers from cheques to electronic payments.
3 – Enablement of Cross-Border Payments
In a recent report titled “A vision for the future of cross-border payments,” SWIFT and McKinsey found that B2B cross-border transactions accounted for around $125 billion in revenues in 2018, outweighing consumer-to-business cross-border payments which accounted for $54 billion.
This number is expected to grow fast and to address this growing opportunity, new solutions are emerging.
For example, as a global payment automation platform, Apruve enables enterprise partners to focus on higher revenue-generating customers across the world while gaining cash flow predictability, speed, and an optimized customer experience. The platform enables your business to implement intelligent payment automation and drive operational efficiencies.
Now, contractors, self-employed, and other smaller businesses still receive B2B payments via wire transfers and correspondent banking networks. This can be tedious and may often lead to payment clearance issues and unpredictability due to fluctuating exchange rates, transfer fees, and so on.
Besides, an increasing amount of work in developed countries is being outsourced to the workforce from developing countries, so the need for a seamless payment experience across multiple geographies, currencies, and languages is opportune.
In fact, cross-border payments can be streamlined and completed in a matter of minutes by leveraging modern technology like distributed ledgers, the technology behind Blockchain, and cryptocurrencies…
4 – Increasing Adoption of Cryptocurrency
As you know, the blockchain revolution is disrupting a variety of industries, including fintech — so B2B payments are no exception.
Blockchain — the technology behind Bitcoin and other cryptocurrencies — offers a promising solution to B2B payment issues. With its decentralized approach, blockchain does away with the middlemen (such as banks) and facilitates faster and secure payments.
While cryptocurrency payments have just entered the testing scene for most businesses, there are several benefits of using blockchain and cryptocurrency into the B2B payment ecosystem, such as:
- Fraud reduction
- Meeting AML compliance requirements
- Minimal paperwork and faster international settlements
- Higher efficiency and transparency in payment processing
- Quick digital identity verification
In fact, it’s predicted that by the end of 2021, at least 25% of the world’s top organizations will use blockchain as a foundation for digital trust and data security. And by 2023, blockchain networks will enable over $60 billion in cross-border payments.
So, with the rise of stablecoins (cryptocurrencies whose value is tied to an outside asset like the U.S. dollar or gold) and institutional buy-in from major financial companies like PayPal, it’s safe to say that the world is heading towards adopting blockchain for B2B payments.
Final Thoughts for B2B Payment Trends
B2B payments worldwide have seen a slow but steady transition from physical to digital transactions. Given the typical value and volume of payments in B2B, it’s only natural that the switch to digital, automated payments will take longer than B2C payments.
But with emerging innovations and fast-evolving tech, B2B companies soon will have no option but to adopt the new digital ways of payment and operations.