Consumers order groceries online and receive an immediate confirmation. Shoppers see an ad for a shirt and order it with a few clicks. A money transfer app can send to a friend via a mobile device, within seconds.

With instant access permeating every aspect of consumer life, people now expect the same rapid speed and smooth experience in business-to-business payment technologies. But the reality is that most B2B payments are slow, cumbersome, and unintuitive, highlighting the need for change. Surprisingly, while consumers operate in an instant reality, businesses are often burdened with mailing paper checks, waiting for slow ACH payments, and making costly international payments.

As businesses increasingly see consumer-to-business tech operating quickly and seamlessly at home and in stores, they are demanding that B2B tech provides the same simple experience.

“Fundamentally, payments are becoming more instant, frictionless, and embedded within customer journeys – hence invisible. PayTechs will continue to drive transformation,” Ernst & Young noted in a report. Now, there is a need in the market for the ability to do business payments as effortlessly as consumer ones.

Latest trends in consumer payments

First, just look at the latest trends in consumer payments.

After analyzing how consumer payment behavior changed during the pandemic, the Federal Reserve Bank of Atlanta said the adoption of electronic peer-to-peer payment apps such as PayPal, Venmo, and Zelle increased. “Consumers who worked exclusively from home during COVID made significantly higher shares of their payments online or through mobile devices and were less likely to use cash at all compared with those who worked at least partly in person,” the report said.

In 2023, the Federal Reserve Bank of San Francisco confirmed the continued change and released a report stating that the percentage use of cash in payments had declined from 31% in 2016 to 18% in 2022. Over that same period, the use of mobile payment apps increased from 10% to 13% of payments.

According to McKinsey’s 2023 Digital Payments Consumer Survey, in the three and a half years since the pandemic’s beginning and despite a return to in-person commerce, gains in digital payments have been sustained and, in some cases, accelerated even further.

But with business payments, organizations often use one or more methods such as ACH payments (in the United States), wire transfers, credit card processing, and paper checks. These can take anywhere from a few days to several weeks to process because the amounts are far higher than most C2B payments, many occur across international borders, and there are often approvals to get and security checks to pass.

That’s not all. Users of B2B payments face many additional challenges. For one, it is time-consuming to reconcile invoices and payments coming from many different sources over various time frames. The mismatch between the time small and medium-sized businesses receive payments and the time they need to pay can cause cash flow problems, making it challenging for businesses to pay their vendors, especially when one company prefers a wire transfer but the payer wants to use a credit card.

The challenge of international payments

Everything is even more challenging with international payments. A large, international wire transfer generally costs a lot more than processing a credit card at the local supermarket, and that causes international business payments to eat away at margins, in addition to being slow and cumbersome.

Indeed, the G20 has been implementing a roadmap to increase the speed of international payments. The top three priorities are to improve payment system interoperability and extension, legal and regulatory supervisory frameworks, and data exchange and messaging standards. The G20 wants 75% of cross-border payments to be credited to the beneficiary within an hour. Of course, such plans take a long time to come to fruition.

Closing the gap between business payments and consumer payments is a necessity. After all, small business owners behave as consumers and have similar expectations. Hence, the ongoing “consumerization of B2B payments” is a trend that has taken off, especially since the pandemic. B2B payments are becoming as seamless and fast as C2B ones.

The real value is in not just making payments more quickly. The real payment revolution is enabling a business to make a payment using any method it wants – and for the receiving business to get the payment any way it wants. The former could use its business credit card, and the latter could receive the payment directly in their bank account. Or anything else. For example, businesses could pay vendors in monthly installments while the vendor receives the payment immediately thus solving cash flow challenges.

Flexibility

It is the same flexibility that consumers have always had. When people pay for something in a store, the cashier will usually say, “Cash or card?” Just imagine that the business world is that simple. These are the things that people see every day in their lives as consumers, and the B2B payment industry is catching up.

In addition to flexibility, small businesses need simplified, intuitive payment gateways and workflows. Small business owners often spend more time on admin tasks than on driving the growth of their business so automating these tasks should be a priority to increase productivity and efficiency. Same as consumers, the usability bar for business owners is much higher than it used to be when it comes to the tools they leverage.

Now is the time for businesses to assess the innovation enabled by PayTechs. As Ernst & Young wrote in the referenced report: “There is a significant opportunity to transform payment offerings to deliver better customer experiences, simplify back-end infrastructure in order to keep up with the pace of change, and leverage PayTech innovations to benefit both business and consumers.”

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