Business-to-business (B2B) payments refer to the transfer of funds between two commercial entities. Typically, B2B payments are made in the form of invoices, and they can be processed online or through traditional methods such as checks or wire transfers. In recent years, fintech companies have begun to develop new ways to process B2B payments, which has led to a transformation of the financial operations of many businesses. These new fintech solutions often offer faster payment processing times, lower costs, and greater transparency than traditional methods.
This piece appears in The Paypers and discusses a theme that we have been covering for many years, one that has accelerated during the past two-plus years; that is the increasing reliance upon fintechs by FIs in terms of modernizing capabilities to meet the growing corporate (and government) demand for better financial operations. A big part of that collaboration is of course payments, which incorporate both the payables and receivables aspects of company systems and processes, then expands beyond those into procurement and financing options as well.
‘Over the past decade, there has been an increasing digitalisation of B2B payments and processes, and fintechs have significantly contributed to this digital transformation. Even though paper cheques are still widely used for B2B payments in some markets like the US, there has been a strong shift towards more innovative and, most importantly, digital solutions facilitating B2B processes and payments…
Fintechs have targeted specific pain points to create innovative and digital value propositions that bring significant benefits to both SMEs and corporates. This article analyses how fintechs are changing B2B payments across different use cases and have become key enablers to boost B2B payment growth.’
The author goes on to point out some of the shortcomings associated with non-digital systems and processes, which remain emblematic in large pockets of U.S. corporate financial operations, as evidenced by the continuing reliance upon paper checks for B2B payments (in the general range of 40-45%). The piece then goes on to discuss certain use case categories and instruments where fintechs have continued to grow capabilities, some directed towards corporate adoption and many in concert with banks seeking faster to market solutions for key constituencies. As we have pointed out many times, the early days of fintech were more or less dedicated to consumer propositions since the path to revenue was quicker, but as more and more entrepreneurs became familiar with corporate uses, that effort has widely grown into B2B solutions.
‘Fintechs have understood the pain points of SMEs and corporates and how they can provide specific solutions to address particular needs. This will be further amplified by the development of open banking provided by fintechs such as Bottomline, Trustlayer, Volt, and Yappily to facilitate cash management and initiation of payments…
By simplifying and digitalising B2B processes and payments, EDC expects fintechs to continue developing relevant value propositions and addressing the very needs of both SMEs and corporates. Fintechs have contributed – and will continue to contribute – to the growth of B2B payments.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group