Why B2B is Losing the ePayments Race

by Dashia Starr 0

automation

Here’s the deal: Printed checks and cash are things of the past. Today, businesses and customers run to hacks to save time and money. As technology evolves, consumers are quick to simplify the purchasing process with the click of a button. But businesses are reluctant to use ePayments for goods and services. Why? 

Getting on the Fast Track for ePayments

We know that outdated, paper-based accounts payable processes have a terrible reputation in the FinTech industry. Paper poses a significant problem when it comes to security, data integrity, and accurate year-end closings. With manual payment processes, businesses lack the visibility and control to efficiently manage spend or keep vendors updated on their expected paid date.

In the past, businesses relied on a few manually-intense payment methods to pay vendors. In time, wire transfers and commercial cards grew in popularity, but printed checks still reigned. These paper-based payment methods, however, have been proven to lead to high costs and low efficiency. Finally, companies are ready to explore other options for paying vendors, and what are they’re discovering? Electronic payments.

Ingo Money CEO Drew Edwards shared the evolution of B2B payment processing in a recent article. Ever since banks and financial institutions have earned trust in the B2C space, they’re trying their luck with businesses.

“Originally, faster payment systems were primarily focused on the retail market [person-to-person (P2P) and person-to-business (P2B)], but increasingly business payments [business-to-person (B2P) and business-to-business (B2B)] are taking advantage of the benefits that faster payments offer.”

Since the dawn of the Digital World, the focus of processes has been ease and efficiency. But users appreciate speed and security. Markets are beginning to understand that businesses and consumers quickly grow impatient and prefer real-time results. Keeping that in mind, financial institutions and government agencies are now offering real-time ePayment options. Real-time ePayments give buyers and suppliers their payments immediately, without worrying or waiting days for electronic payments to process. 

The Big Difference Between Real-Time and Instant ePayments

Consumers’ demands and desires drive the need to be fast. Industries are using different payment terms to define speedy ePayments. They’re using phrases like “instant payments,” “push payments,” and “real-time payments” to name faster electronic payment options. It’s critical to understand the difference between the terms, and how that impacts payment delivery.

Edwards defined instant payments in a recent article and podcast for businesses. Instant payments must be on-demand, final (no reverse payment options), and the opportunity to make a payment 24/7, 365.

On the other hand, real-time payments are immediate payments. The payment only takes a matter of seconds—instead of days—to process. Deloitte’s study points out that real-time payments are instant, authorized ePayments to verified bank accounts. After the payment is processed, a notification of verification is sent between the sender and receiver, improving ease and visibility in the payment space.

The big difference between these two ePayment methods is that instant payments can eat up a lot of B2B payment processing time—a few business days or hours. Real-time payments are available immediately without any wait time. 

Who Takes First Place in the Payment Race?

It’s no secret the B2B market is years behind B2C desires and demands. While consumers are trusting technology to manage their money, businesses are still counting on checks and manual processes to pay for products and services. In fact, the recent 2017 PayStream Advisors ePayments Report shared that 46% of businesses still rely on printed checks to pay suppliers. Even though checks seem cost-effective and easy to manage, they often drive up costs, fraud risks, late payments, and hours spent manually managing repetitive payment processes.

Consumers pay for purchases with mobile devices in seconds and keep a digital record of all transactions. They’re counting on financial institution fraud prevention measures to alert them of suspicious payments. Conversely, businesses still rely on locked file cabinets to protect printed pages of proprietary information, all the while realizing that efficiency and security are top priorities when managing hundreds of B2B payments and sensitive documents. Slow, manual processes just won’t cut it in the digital space.

What does this mean for B2B payment processing? They’re falling behind in the race for accounts payable efficiency, security, and flexibility. Consumers are paying in seconds, while the average invoice processing time is still 12 days, not counting time for approvals or payment. 

Businesses are Coming in Last Place in the Race

Myths and misconceptions make it difficult for businesses to trust electronic payment systems to manage ePayments, including the following fallacies:

  • There is a lack of visibility and control over B2B payments and payment statuses.
  • Payment automation solutions will hurt the happy, healthy supplier-buyer relationship.
  • Suppliers prefer to be paid by check and aren’t open to change.
  • Implementing new payment solutions takes time, and current processes are working fine.

The Paystream Advisors report pinpointed the number one reason why businesses don’t welcome fast ePayment methods: The belief that their current payment methods are working just fine. But what’s working well now may cost a company a fortune in the future.

Businesses that choose to operate in the Stone Age with paper-based B2B payments face bigger risks than rewards. Recent AFP payment and fraud findings show that three-fourths of companies that fell victim to fraud were relying on paper checks.

Nevertheless, high-performing businesses are now considering ePayments for faster B2B payment processing. B2B electronic payment systems have evolved to focus more on getting ePayments to suppliers and vendors in real-time. With real-time B2B payments, businesses can pay vendors instantly, keeping their ledgers and reporting updated.

How Do Real-Time ePayments Work Best?

For businesses, electronic payment systems work best with accounts payable automation solutions. AP automation streamlines the payment process from invoice to final payment without piles of paper. With accounts payable automation, electronic invoices (e-invoices) are received using invoice management software. After invoices have been approved electronically, they’re automatically routed to payment processing between the AP solution and accounting or ERP system.

Payment solutions electronically handle the rest. Once you select the electronic invoices you want to pay, ePayments are withdrawn from the business’ bank account to your vendor’s trusted bank account. If your vendor prefers another business payment method, the AP support team will handle it. For example, the AvidXchange ePayment Network contacts your suppliers for payment information and accepted payment methods. Regardless of their preferred method, all your payment data stays in one hub. AP automation and electronic payment solutions also offer fraud prevention methods such as Positive Pay, which automatically checks every payment and invoice for suspicious details or red flags.

For business, ePayments are the most widely accepted accounts payable tools. There’s less worry about manually managing paper-based payment processes and printed checks. As a result, the finance department has more control and visibility of spend from start to finish.

The number one reason why businesses are adopting faster ePayment methods is the increased convenience for employees. The AP staff has more visibility into spend and budget without waiting for checks to clear. Pairing electronic payment systems with accounts payable automation streamlines the payment process from beginning to end while providing complete control and visibility into budget and spend. Streamlining this process saves time, so employees can focus on improving strategies and analyzing financial data.

The Importance of Keeping the Supplier Happy

Many businesses may be surprised to learn most suppliers are ready to welcome the accounts payable digital disruption. A recent webinar shared survey results from suppliers asked about ePayments: 82% of suppliers said they are “likely or are very likely to accept” a new method of payment from buyers; 72% of respondents said they would actually prefer being paid electronically (via ACH or VCC). And no surprise, a little over 25% preferred paper check as the primary payment method.

Electronic payment systems also give suppliers the control and visibility they deserve in the payment process. When buyers use electronic payment systems, suppliers can easily check the status of payments without constantly calling buyers for updates. Suppliers can simply log in to their ePayment portal to retrieve remittance data for each payment, including date history, amount, and individual invoice information. Other ePayment supplier benefits include faster B2B payments with improved cash flow and security. There’s also the elimination of time and money spent processing paper-based checks.

The Next Big Thing for ePayments

Consumers are already taking advantage of the next big thing for ePayments. They aren’t carrying cash or sticking to traditional ePayments anymore. They’re relying on NLP (Natural Language Processing) to make purchases and payments. According to a recent Mastercard study, 20% of survey respondents indicated they use NLP through voice and text, otherwise known as “conversational commerce.”

“Sixteen-percent use voice or text agents to initiate payments for goods and services today.”

According to the study, over half of these respondents use NLP for payment purposes at least once a week via smartphones. In the B2C world, consumers are trusting technology to keep a “card on file” when shopping online. In fact, 37% prefer this method to make rebuying a quick and straightforward ePayment process.

Even though the B2B market isn’t using digital wallets as an ePayment method, it has opportunities for speedy and secure payments with a big update from ACH.

ACH reigns as the most efficient method for businesses and consumers. ACH allows companies and consumers to easily transfer money directly to verified bank accounts without fluctuation of B2B payment processing and transfer fees. Suppliers pay as little as a penny per ACH transaction instead of the 2% of the payment and processing fee for each transaction. An example that businesses are taking advantage of is Same Day ACH. This new process allows ACH debits and credits to be processed and available within one business day. In March 2018, the NACHA announced the final update to Same Day ACH which leads to even faster ePayments for ACH users.

“Under this latest phase, banks and credit unions that receive Same Day ACH credit payments make funds available to their depositors by 5 p.m. (in their local time).”

But that’s not enough for businesses. They’re looking for innovative features that speed up time-consuming payment processes, including remittance information, fast settlement, and the capability to handle both batch and individual payments electronically.

As both financial institutions and businesses determine a strategy for real-time payments, there are critical features needed for success. It’s all about providing high customer value in the process. The latest FIS Flavors of Fast report shows that businesses and consumers are interested in ePayment methods that are innovative and secure. Even though real-time payment options are available worldwide, most do not have the B2B payment processing features that are forward-thinking and provide customer value. Most real-time business payment methods include the required features. They’re irrevocable with less than one minute end-to-end and account-to-account processing. 

Making the Case for Better B2B ePayment Processing

Changing day-to-day processes can be daunting. There’s the natural fear of changing proven processes and losing control. Companies often hear FinTech trends thrown around, making it difficult to determine which ones are necessary or simply “nice to have.” As businesses begin to scale for growth and eliminate paper, automated processes will become essential to working smarter, not harder, for a simple and secure payment pipeline.

Businesses interested in implementing electronic payment systems should consider the following:

  • How many monthly B2B payments does your business handle?
  • What are the hurdles and headaches that slow down the payment process?
  • How many payments are made by check versus electronically?
  • How much control and visibility are available based on current payment processes?