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: (Pl create a table to represent below Payment methods & 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
Median cost – $0.2 – $0.4
Paper Checks
Funds are not available immediately
Median cost – $1.6 – $ 3 Check Fraud accounts for close to $5 Billion
Preferred way of making payments in US Domestic
Debit Cards
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 between Buyers and suppliers through token.
Payee/ Supplier is able to accept and process the card.
Median cost for this method – $1.5 to 1.9
Pre-paid debit cards
Payer and Payee have relationships with Debit card vendors.
Payments are made is executed by loading the pre-paid debit cards.
Bitcoin
P2P system enabling users to transact without an intermediary
Bitcoin transactions recorded in a public ledger called block chain.
By 2020 the total B2B payment market in US alone is expected to cross $20 Trillion mark. With this significant untapped opportunity, a lot of large financial institutions such as Visa, MC and Amex have created B2B payments platforms to streamline and automate the payments. At a high level these platforms offer the following capabilities:
