B2B payments are in the midst of a dramatic shift — and while the outcomes are yielding greater efficiency, security and productivity, the process of change can be a painful one.
The good news is that more organizations are acknowledging the value in enduring short-term friction for long-term benefits as they seek to modernize and optimize their back-office operations. There are plenty of opportunities to drive progress, too, as PYMNTS’ latest Global B2B Payments Playbook, a collaboration with Worldpay B2B Payments, reveals.
See also: Global B2B Payments Playbook
Rising commercial card adoption, a growing focus on overcoming cross-border payments friction and an expanding opportunity to adopt unfamiliar technologies are reshaping the B2B payments ecosystem, says Andrew Wind, director of product management at Worldpay from FIS. Speaking with PYMNTS, Wind discussed some of these trends and explored how they’re driving a deeper relationship between corporate and payment service providers.
At the heart of many firms’ modernization efforts is a focus on efficiency and productivity, with data a key element of success. When it comes to B2B payments innovation, businesses are embracing solutions that can enhance their data strategy — whether it’s an older tool with recent upgrades or a novel technology still emerging onto the scene.
Stemming from the former camp is the commercial card, a payment tool that has been around for decades but is only just now seeing significant traction in accounts payable. There are a few factors behind that shift, but growth in solutions designed to lower interchange fees is among the most prominent.
As Wind explained, payment service providers’ ability to support so-called Level II and Level III data when processing a commercial card payment helps to lower interchange fees, which have historically been among the biggest barriers to supplier card acceptance. What’s important to note about Level II and Level III data processing, he said, is not only that cost-savings opportunity, but also the value that more robust data brings to both buyers and suppliers.
In the latter camp of more novel technologies is blockchain, which Wind highlighted as particularly promising for cross-border B2B payments — an especially challenging area of commerce. “It is kind of a labyrinth of challenges to navigate,” he said of the cross-border commercial payments ecosystem.
Innovations around digital currency, combined with efforts to modernize global payment infrastructure through the emergence of new payment schemes, are making headway. Among the more recent initiatives in this wheelhouse is the partnership between DBS, J.P. Morgan and Temasek, an effort that intends to develop a blockchain platform to facilitate interbank payments across borders.
As the Global B2B Payments Playbook highlights, “the deal comes at a particularly opportune time,” considering that the value of cross-border transactions hit $130 trillion in 2019, with B2B payments leading the way.
According to Wind, this innovation is not only exciting for the possibilities of the blockchain platform, but also for how it could spur further innovation from others.
“I would expect to see similar iterations pop up,” he said, noting that this can occur across both the private and public sectors. “Essentially with this solution, it’s the issuance of a digital token in one currency, and then transferring that to another digital currency with an equal value called wholesale digital cash. Banks are exchanging this wholesale digital cash, and the transaction can be completed almost instantaneously.”
Evolving Business Expectations
Overcoming some of the largest points of friction in B2B payments is an effort that requires multiple strategies and industry collaboration. As new solutions surface, the B2B arena is quickly discovering that some tools are able to multitask, addressing a variety of challenges at once. For instance, the speed at which transactions are facilitated via blockchain and other novel innovations can be of paramount importance.
“A primary driver for our business customers is: How can we do things faster?” said Wind. “How can we get more toward real-time? Because that’s really how business operates, and the expectation of payment has the same light.”
Blockchain solutions and other tools can also mitigate transaction risk by ensuring that all stakeholders in a B2B transaction adhere to agreed-upon conditions and requirements, he added, while they’re also able to address the need for more robust transaction data. This opens up the opportunity for greater workflow efficiencies and — as long as the data can be efficiently captured and integrated into general ledgers, ERPs and CRM systems — a better user experience.
That experience is increasingly moving to the top of corporates’ checklists when adopting new B2B payment solutions. According to Wind, a better user experience is beginning to surpass cost savings when it comes to payments technology investments, as more organizations recognize the efficiency gains that drive revenue increases for customers.
Whether it’s a check, card payment, digital currency or otherwise, the payment technologies that corporates adopt have some heavy lifting to do. As progress is made, it’s vital for organizations to think ahead and to embrace strategic partners.
“What we’ve seen from some of our stronger players in this space is an upfront investment, and critical thinking about their payment strategy and how it is a revenue driver for their business,” said Wind. “It’s important to have a strong relationship with your acquirer or payments provider, and to have these discussions about what’s important for their business.”