As consumers, we tend to view making payments as a highly automated process, whether paying for something using our debit/credit cards, or paying our household bills online through our bank’s website. In the B2B world, however, many of the payments that businesses make to other business are still done manually. Why? It’s all about relationships. In a retail sale, the buyer and seller don’t necessarily know each other, so payment is expected before goods are delivered. In contrast, businesses depend on their suppliers, and suppliers depend on the repeat purchases by their business customers. The recurring nature of B2B sales is designed to keep the supply chain moving, with payments occurring as a byproduct of that.
Automating B2B payments continues to be the target of many fintech companies, with most focusing on either on payables automation or receivables automation.
“There are two sides to every payment—creation and receipt” says Derek Halpern, Senior Vice President of Sales for Nvoicepay. “When it comes to consumer payments, both sides are straightforward, especially with today’s technology. But in the world of business payments, process complexity adds friction between them. Accounts payable’s goal is to manage cash flow by hanging on to money as long as possible. That puts them at odds with accounts receivable, who wants to get paid as quickly as possible.”
Companies providing B2B payment automation solutions have focused on either the receivables side or the payables side, but no one provider has reached the significant critical mass needed to form a universal business payments network. Fundamentally, though, the technology is not the limiting factor in the slow pace of B2B payments automation. “Digitizing transactions doesn’t efficiently address the complexity or friction between the sender’s and receiver’s processes,” says Halpern, “And the lack of consideration can worsen the issue.”
Overview provided by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group