The complexity and scale of B2B payments is a world apart from B2C. The stakes are high: get it right and you can cement important business relationships, securing preferred partner status; get it wrong and you risk your cashflow and your reputation. Pat Bermingham, CEO of Adflex, explains how B2C and B2B payment technologies differ and addresses whether they meet the needs of businesses today.

As a consumer, buying products or services is familiar and simple. We choose what we want to buy, go to the checkout, pay the merchant and leave with our goods (or they are sent for delivery). In a matter of clicks, the purchase flow is complete, with very little friction.

But in business payments, smooth user experiences are still often secondary to lengthy, complex processes.

Clunky, outdated invoicing means that buyers must allocate extra resource to Accounts Payable (AP) just to make a purchase, and those receiving payments (Accounts Receivable) are often made to wait during lengthy invoice periods of thirty, sixty or even ninety days. In short, businesses are waiting too long for their money.

The scale and volume of B2B payments is also much larger than B2C, so the risks associated with checkout abandonment and poor cashflow are intensified. The stakes are higher but the opportunity is also greater; the B2B payments market is set to reach $2,515bn by 2030 – and fit-for-purpose B2B solutions are currently shaking up the market.

What makes B2B different?

Standard terms of payment in B2B vary from one industry to the next. Instead of addressing these complexities through innovative new services, however, many companies have defaulted to legacy invoicing, typically because they fear the unknown; in other words, digital practices.

This leads to complex AP processes for buyers. It means lengthy payment timelines for suppliers. The result is a system that is hugely detrimental to the vital cashflow that keeps businesses functioning. This is particularly concerning in the current economic climate.

B2B is also financed differently. For small consumer purchases, linked to a personal credit card, finance can be quite easy to access. For businesses, supply chain finance is often more complex, mainly due to the larger sums involved, which carry more risk. Banks need to assess the risks associated with enabling large commercial card purchases, while helping businesses make large investments that facilitate growth and regeneration.

Even newer consumer technologies pose challenges when applied to B2B purchases. A consumer with a card and no history of poor credit can go online and make a purchase using a card stored on a mobile wallet such as Click to Pay, or using a checkout service like PayPal or Apple Pay. But in larger businesses, access to certain company accounts may be limited or locked. It’s not as simple as using your phone to click through and buy an item; larger purchases often need to be signed off by AP teams, adding steps to the process.

The consumerisation of B2B

B2C payments may be the golden child of the financial sector, with neo-banks and start-ups offering Buy Now, Pay Later (BNPL) models and eye-catching apps, but B2B has its own weaponry in the race for payments nirvana.

In industries such as corporate travel, mobile wallets are becoming increasingly popular as more payment options become available. One example of this in action is the growing use of virtual cards. These cards can be created quickly, with set controls like spend limits, timeframes and who can use the card. This has clear benefits in industries such as corporate travel, where tracking of spend and expenses is vital.

Another consumer solution used in B2B is payment links, whereby a URL is shared with the buyer via email or SMS, linking to a hosted payment page. This means the buyer can complete checkout in a matter of clicks, quickly and conveniently. However, there are cases where complex payment flows and ecommerce options mean services like payment links simply won’t work, such as with large ticket items.

Furthermore, if the URL is sent to someone at the buying company who does not have access to the company commercial card on their mobile wallet, or if increased finance needs to be brokered with the banking partner, then following a link and checking out suddenly becomes far from simple. In these cases, taking innovation from the consumer world simply doesn’t meet the requirements of the business world.

Simplifying the complexity of B2B

The good news is that more nuanced services are emerging, designed to deliver simple checkout experiences that drastically improve B2B payment processes: Variable Recurring Payments (VRPs), and Straight-Through Processing (STP) are two high-profile examples.

Both STP and VRPs offer transparency and security. VRPs and STP are digital platforms that empower both parties to see payments in real-time, and even schedule payments, enabling better financial forecasting. The buyer’s bank and card details are only handled by the processor, reducing PCI DSS scope for the supplier. Better visibility of incoming/outgoing payments also allows businesses to reinvest with confidence and grow their operations.

VRPs use open banking to increase buyer control over payments. They are designed as a set of payment instructions, enabling a buyer to set up several payments in one go. Unlike direct debits, to which VRPs are often compared, VRP payments can be modified, so long as they are within the initial terms. This gives the buyer more control, able to amend the timing and amount of a recurring payment based on the level of service delivered.

Many businesses may prefer to avoid VRP, direct debit or even account to account (A2A) payments, however, in favour of commercial cards, where they can access an up-front line of credit. This enables buyers to pay suppliers quickly, while improving their own working capital. After all, if the biggest source of friction is who gets paid and when, the ideal solution is one where both parties can access finance at all times.

For those using commercial cards, STP is the enabler of new levels of automation. Like VRPs, STP allows a buyer to maintain full control over the payment and is capable of real-time settlement. It does this by flipping the standard purchasing process on its head, so that the buyer initiates payment and starts automatically ‘pushing’ payments to suppliers. This can significantly improve prompt payment practices.

Now you know the power of B2B payment innovation

While simple consumer solutions may seem attractive to the business world, often they are just that: simple. Navigating the complex world of B2B payments successfully and efficiently requires extensive knowledge of the intricate nuances of business payment processes, financing options and control.

It’s equally important that businesses understand their own needs, and that of their suppliers, to ensure they can select the most suitable methods of payment to work with. Consumers expect multiple options at the checkout and will select the one that causes the least friction – the same is true for B2B.

Once a business understands its needs, the technology can start to do the work. As more companies move toward fit-for-purpose B2B solutions, the speed of doing business will only accelerate, and the value of B2B payments can finally be unlocked.