B2B digital payments are gaining momentum as banks, payment networks, and fintech providers expand the tools available to businesses. Recent developments from American Express and Lloyds Bank reflect a broader movement toward modernizing commercial payments, automating processes, and connecting businesses more effectively to digital financial services.
The shift is particularly important for small and midsize enterprises, which historically have had fewer practical alternatives to check-based payment processes. As more accessible digital solutions emerge, businesses have greater opportunities to improve payment efficiency, integrate financial workflows, and gain better data about their transactions.
The title of the piece appearing in Payments Source suggests a digital shift may be underway in the B2B space given some recent deals and new capabilities at Amex and Lloyds. We would suggest that an overall shift has been underway for some time, and that acceleration is now underway.
‘Digital connections’ is one of the major themes of our research both last year and this year. We pointed out this ongoing trend a number of times over the past couple of years, most recently in a report several months back titled Fintech in Corporate Banking: Digitize or Miss the Boat.
The article on Amex and Lloyds starts with a couple of recent events mentioned in the title:
“In just the past few days, Lloyds Bank in the U.K. upgraded its commercial bank as part of a major push to get businesses on board with digital supply chains and American Express on announced an agreement to acquire acompay, a digital payment automation platform, from ACOM solutions.”
We are bit more familiar with the company solution from ACOM, a mature fintech based on Long Beach, Calif. and less so with the particulars of the Lloyds changes, but we believe this is just more examples of the ongoing B2B modernization pushes at banks and payment networks.
The improvement in SME targeted solutions during the past several years is another driver. Previously, SMEs just did not have the choice, knowledge or wherewithal to reduce check-based processes. Many more solutions that can be more easily integrated to their financial environment are now available to SMEs. These are often underappreciated benefits of a changeover to digital payments,
“These companies still have to convince businesses, particularly smaller ones, to adopt digital payments for supply chains. There’s signs that’s happening, especially for larger businesses that fit into the small-to-medium sized category, according to Peter Reville, director of primary research services at Mercator….Businesses with annual company sales between $5 and $10 million use digital options such as wire transfers 200% more than the general small business average (for $100,000-$10 million). That total market uses wire transfers only 9% of the time; and larger small businesses use business credit cards 135% more than the entire small business segment, which uses credit cards for 52% of payments.”
A number of other digital changes and collaborations that have occurred (and will continue to occur) are pointed out. The importance of process efficiencies and data to improve business performance is included.
“UMB focuses on what Uma Wilson, the bank’s director of product management, describes as “quality” to encourage businesses to automate supply chain finance. While that sounds obvious, “quality” refers to “what” the payment is for more than “how” the payment is being made….“The businesses are hungry for automation and are open to changes, but it has to be more of a conversation than saying you have a new process that does ACH instead of checks,” Wilson said. “It’s more like if you are issuing 500 checks per month, I have an alternative that automates that and also drives all of these other efficiencies.”
The continued expansion of B2B digital payments represents more than simply replacing checks with electronic transactions. Banks, networks, and fintech providers are increasingly focused on solutions that automate broader financial processes while delivering better information and operational efficiencies.
As digital tools become easier for businesses of all sizes to adopt, the transition is likely to accelerate. Providers that demonstrate how automation can improve the entire payment process—not merely change the payment method—will be better positioned to encourage businesses to move away from traditional, manual workflows.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
