B2B payments are cumbersome, time consuming and expensive. A transaction between supplier and a buyer involves procurement documentation, purchase orders, invoices and wait for 30 days or more, multiple financial institutions, and numerous follow ups. These pain points grow exponentially when these payments are cross-border.

Over the past couple of decades, a lot of innovation has happened in the B2C payments sector the B2B payments sector was lagging behind in terms of technology adoption. However, the past few years have seen good amount of investment in the B2B payment sector and as a result a lot of platforms have evolved to automate the B2B payments. The major pain points these platforms have addressed are: High transaction costs, Long payment cycles, Manual processes, Payment errors and delays, Fraud related issues, No or incomplete status updates, inconsistent payment methods, and payment reconciliations. The B2B payment platforms are also attempting to be a one-stop shop for all B2B payment methods.

Let’s take a look at the types of B2B payment methods and associated key features:

Wire Transfer:

• Electronic fund transfer from one account to another
• Low volume, time-sensitive and high monetary value
• Median cost = $20 – $50

ACH:

• Electronic Debit/ Credit transactions
• High volume
• Median cost = $0.2 – $0.4

Paper Check:

• Traditionally the preferred payment method in the US
• Funds are not available immediately
• Check Fraud accounts for close to $5 Billion annually
• Median cost = $1.6 – $3

Debit Card:

• Payments are immediately transferred from the account
• Primarily used by consumers
• External cost of Receiving debit transactions = $1.00 – $1.49

Corporate Credit Cards

• Enable payments through token
• Payee is able to accept and process the card
• Median cost = $1.5 to 1.9

Pre-paid Debit Cards

• Payor and Payee have relationship with Debit Card Vendor
• Payments are made by loading the pre-paid debit cards

Bitcoin

• P2P system enabling users to transact without an intermediary
• Transactions recorded in a public ledger called "block chain"

According to Precedence Research, the B2B Payments Transaction Market Size will be worth around $70 billion by 2030. With this significant untapped opportunity, many large financial institutions such as Visa, Mastercard and American Express have created B2B payments platforms to streamline and automate payments. At a high level, these platforms offer the following capabilities:

On-boarding/Registration Portal

• Either self-service or Customer Service Representative serviced portal where new businesses can sign up for the platform
• The business profile undergoes KYC, Risk/Fraud, AML checks to ensure that the business is in good standing

Payment Orchestration Engine

• Based on the business preference, various payment methods (ACH, Check, Credit card etc.) are used

Pricing and Configuration Engine

• Gives flexibility to charge different prices for different methods and different volumes

These basic or core capabilities are integrated into multiple internal system or records during the transaction lifecycle and are also exposed as APIs for internal or external consumption. Innovecture has helped clients define B2B technology, strategy, and architecture, as well as successfully building their B2B payment platforms.