In virtually every sector, the relentless march of automation and “smart” technology is reshaping the business landscape. From revolutionizing consumer shopping experiences to transforming manufacturing processes, these innovations are disrupting traditional norms. However, one domain that has been relatively slow to embrace these advancements is the realm of business-to-business (B2B) payment methods. While consumer-to-business (C2B) payment solutions swiftly adapted to technological changes, B2B transactions are now catching up, undergoing a profound modernization facilitated by disruptive payment technologies.
To comprehend the significance of this shift, it’s essential to grasp the nature of B2B payments. In essence, B2B payments involve the exchange of currency for goods or services between two business entities. These transactions may be periodic or one-time, contingent on the terms agreed upon by the buyer and seller. The entities engaged in B2B transactions encompass manufacturers, distributors, corporations, wholesalers, and retailers.
Unlike consumer transactions, B2B purchases are characterized by their scale and often involve substantial quantities of goods. The decision-making process for such transactions is intricate, and the overall procedure tends to be more time-consuming. Various factors, including purchase volume, payment histories, and the relationship between buyer and seller, contribute to the complexity and duration of B2B transactions.
Historically, the B2B payment network has been reliant on manual and paper-based processes due to these complexities. However, a paradigm shift is underway, marked by the increasing adoption of cloud-based, automated payment systems. Businesses engaged in B2B transactions are turning to digitization as it streamlines the buying and selling process, enabling faster and more efficient business payments.
The catalyst for this digital transformation was not solely technological; the global pandemic played a pivotal role in expediting these changes. Small businesses, seeking more efficient alternatives, reported reducing their reliance on cash and paper checks during the pandemic.
The allure of digital and smart disbursement methods extends beyond efficiency; it’s also a cost-effective solution. Electronic invoice payment processes cost less on average than their paper-based counterparts. High processing costs, identified as a significant challenge for businesses, underscore the financial benefits of embracing digital payment solutions. Notably, emerging technologies like blockchain are making inroads into B2B payments.
Despite checks and cash currently maintaining a stronghold as the preferred option for B2B payments, the trajectory clearly favors smart and electronic disbursements as the inevitable future. For an in-depth exploration of B2B payment methods and emerging trends, refer to the accompanying resource.
Infographic created by CardConnect, an ISO credit card processing company