Since the emergence of COVID-19, the payments industry has experienced rapid digital transformation. Bank customers who once stood in line at branches now deposit checks via a mobile app. Shoppers who flocked to malls for holiday shopping now opt to buy online. Consumers who once ate in restaurants are now well-versed in curbside and contactless pickup options.
Business to business (B2B) payments are no exception to this trend. While some organizations still rely on paper invoices and checks, there is an increasing demand for digital-first B2B experiences.
In an interview with PaymentsJournal at the 2021 Money20/20 event, Brandon Spear, CEO of TreviPay, spoke about the need for companies to embrace a digital-first payment strategy and how B2B companies can approach modernization.
The pandemic-driven shift to digital processes
The past 18 months have brought remarkable digital transformation. Much of this transformation was driven by sheer necessity—digitizing processes meant people did not have to be in a physical location amid health and safety concerns and widespread social distancing mandates.
“What we have seen in the last 18 months would probably have taken four or five years to accomplish, but because of the urgency of everything else that was going on, it was all compressed,” said Spear.
While manual processes made sense when they were first implemented, that is no longer true. “In the past, if your entire interaction model was face-to-face, then it might not seem strange to have paper invoices and paper checks. But if your interaction model is digital, it can suddenly feel [outdated] if you have paper invoices and paper checks that are following everything around,” he added.
Other factors contributing to digitization
COVID-19 is not the only driving factor behind digitization. “What’s also happening is a generational shift of who is buying. As buyers become younger and younger, we are talking about a generation that has only known digital-first,” explained Spear. This will only become truer over time as Gen Z, born beginning in 1997, make up a greater portion of the workforce.
These younger generations are less likely to be loyal to a specific brand than generations past. Rather, they prioritize the customer experience. “We often describe this as a shift away from brand loyalty to experience loyalty. More and more often, you are picking who you are going to work with and who your suppliers are going to be based on the quality of the experience you have with them, rather than the brand per se,” said Spear.
Offering a digital-first experience is no longer optional
To ensure that customer experience keeps customers coming back, businesses need to provide an all-encompassing digital-first experience. That includes everything from how they onboard new customers to how they provide customers with credit lines, how they prepare and present invoices, and how their transactions flow.
For example, digitizing the invoice payment process can reduce the days sales outstanding (DSO), or the number of days it takes a company to collect a payment on a sale. Having these funds sooner can free up credit lines and improve cash flow, allowing companies to focus on their core business.
“I think the combination of working capital and the digital-first experience is providing sellers with more cash flow to grow their businesses, which is really the theme that we drive home,” said Spear.
The importance of meeting buyers where they are at
According to Spear, B2B businesses need to meet their buyers where they are. “If you can meet your buyer where and how they want to interact with you, then that buyer is likely to spend more with you and you’re likely to increase your share of wallet,” explained Spear.
Achieving this can be difficult in a B2B context. Unlike business to consumer (B2C) payments, B2B payments typically involve multiple stakeholders in every purchasing decision, adding complexity to digitization. A B2B commerce partner can help companies conquer this challenge.
“If you can simplify that, if you can make it easier for your customer to buy from you and match up with their procurement processes and the processes that are important to them… If you are able to fulfill those requirements from those customers, then our experience is they will spend more,” said Spear.
This could be as simple as providing buyers with a purchasing order for every invoice so their accounts payable team can respond accordingly. “At the end of the day, in all our business lives and our consumer lives, we want the experience to be slick. We want it to be simple. We want it to be easy. It’s more difficult to do in B2B, but it’s not impossible,” he added.
Slow and steady wins the race
Digitization may seem like a daunting process, but it doesn’t have to be. Instead of overhauling an entire legacy system at once, companies can take a slow and steady approach to integrating modern tools into existing systems.
“There are definitely techniques you can use [where] you do not have to rip out all of your back-office environments in wholesale fashion. Integration is a key technique that we see being used very often,” said Spear.
In fact, many legacy systems were built on sound processes. But even though there is nothing fundamentally wrong with these processes, they were not designed to work well in an integrated world. A lack of APIs, interfaces, and other modern front-end tools can result in valuable data being locked away in inaccessible legacy systems.
“If you can find ways to expose the data through integrations, through APIs, through portals, you can actually accomplish a lot of what you’re trying to transform, which is information sharing,” Spear concluded.