B2B Payments Trends
In the past few years, companies like Square and PayPal have proven adept at using our increased connectivity to revolutionize the B2C eCommerce payments industry. In contrast, innovation in online B2B eCommerce payments has remained relatively stagnant despite the industry’s growth — Forrester Research is predicting that the numbers for (non-EDI) B2B eCommerce will top $780 billion this year, more than twice what online retail sales were for 2014. Due in large part to this staggering potential, it should come as no surprise that B2B payments trends are poised for substantial change.
As we have previously documented, B2B organizations have sought to emulate many of the successful trends that have emerged out of B2C eCommerce. This is no less true for electronic payments. There have been dozens of promising B2B payment tools that have made it to the market but have nevertheless failed to gain traction. While many reasons can be found for this, most of them boil down to an incomplete understanding of how different transactions are between businesses than they are between businesses and consumers.
In B2C, the payment process is straightforward. Customers simply select which items they wish to buy, then they pay in full for those items (using either a credit card or another form of electronic payment) before they are shipped. Prices are identical for each customer and, when the purchase is complete, a receipt (usually electronic) is the only expected form of documentation that is sent. Additionally, because the payment volumes are so low, the business bears the cost of any card processing fees.
The payment process between businesses is much more complex. First, prices will vary depending on a number of factors, such as whether the buyer is placing a large order, regularly places repeat orders, or has previously negotiated special terms with the supplier. Payments are also not made at the time of purchase. Instead, weeks, even months, later, the supplier will send the buyer an invoice for the amount they owe. Often, it will take the buyer additional weeks to review the invoice and send payment, a process that might involve many different people. Meanwhile, the supplier must apply the appropriate discounts and provide credit until the payment is received.
To complicate matters further, buyers will often wait to pay multiple invoices at once and, depending on factors such as whether goods were damaged during shipment or whether they have a dispute with the price, they may not pay the full amount. When they do pay, the buyer is responsible for sending a detailed explanation so that the supplier can match the cash received with the goods sent. This process can be tedious and is one of the reasons why checks have remained the dominant form of payment in B2B — down the line, it can be difficult to match electronic payments with unpaid invoices.
The world of B2B e-commerce payment methods is vast; we have only just scratched the surface. Despite its complexity, however, new and innovative solutions are currently being developed and deployed that are making it easier, faster, and cheaper for both buyers and suppliers to exchange goods. In the coming weeks, we will detail some of these advances, as well as the ins and outs of B2B e-commerce payment methods, in order to help your business build its store.
Stay tuned. When it comes to B2B payments trends, there is much to discuss.