A Review of B2B Payments in 2021

Dec 14, 2021 by Kelsey Banerjee

The pandemic and related lockdowns accelerated digital payments adoption in 2020, but as economies began to reopen in 2021, new challenges to business operations and payments emerged. Supply chain disruptions and reopenings prompted businesses to reevaluate their workflows once again.

However, businesses weren't the only ones making sweeping changes and auditing their B2B payment workflows. Government tax reporting agencies have begun implementing e-invoicing mandates and updating their global payment policies.

B2B companies with international suppliers or customers are feeling the heat to shift away from paper checks to electronic payments.

We've collected essential data and trends on the shifting landscape of B2B payments in 2021.

How B2B Payments Changed in 2021

In 2021, the conversation is less about "why digital payments" but instead about "how can we make digital payments even better?" AR and AP automation for invoice processing, enhanced analytics, and more secure electronic payment integrations are at the forefront. Furthermore, experiences that please customers and suppliers while ensuring global compliance are in high demand.

Digital payments technology continue to evolve

Most businesses have accepted, to some degree, that digital B2B transactions are the future. But accounting departments are looking for more than "any" digital B2B payment solution. Usability for both the accounting team and the end-user increasingly becomes a key differentiator among the best-in-class B2b payments space.

One of the major shifts in the industry is the preference for integrations or a single payment solution. Before the proliferation of APIs and ERP integrations, most companies were forced to purchase multiple software that often didn't fit together. However, this multi-solution setup often made workflows complex and sluggish for both accounting teams and their suppliers.

After the adoption of APIs, it was easier than ever to streamline payment processing. With new programs plugging into an ERP system the accounting department is familiar with, there was no need for an extensive workflow.

As cross-border B2B payments become more complex, the ability to plug-in integrations, especially for capturing data and automating the B2B payment system will be critical for reducing cash flow bottlenecks.

Global compliance pushes forward e-invoicing

Many countries are introducing e-Invoice mandates to reduce tax gaps and fraud. While such regulations are refined in Latin America and Scandinavia, we are likely to see sweeping changes in the next decade. Already, countries like India and Portugal have introduced proactive measures that make e-Invoicing obligatory for SMEs.

With the introduction of e-Invoice mandates, it's clear that the flip side is to do away with cash and institute electronic B2B payments. Invoicing matching with paper-checks is time-consuming and efficient, especially in countries where a business is required to submit the invoice to the government for clearance.

Instead, electronic B2B payments can be automated and recorded for both a proactive cross-border payment strategy and an audit trail. In other words, companies can use this B2B payment method to cover their bases, whether they are making an international payment or a domestic one.

The State of B2B Payments in 2021

B2B payment trends

  • Excluding cross-border transactions, the B2B domestic payments market grew to be worth $49 billion in 2021. (Statistica, 2021)
  • The B2B payments transaction market is expected to grow to $70 billion by 2030, with a CAGR of 10.7% from 2021 to 2030. (Precedence Research, 2021)
  • Businesses are aiming to support growth in payments from ACH (61%), virtual cards (28%), and real-time payments (27%). (Bottomline, 2021)
  • 65% of businesses report preferred a single or integrated payments solution as opposed to juggling multiple independent solutions. (Bottomline, 2021)
  • In 2021, 88% of businesses believe that API technologies will affect payments the most over the next couple of years. (Bottomline, 2021)
  • 15% of B2B receivables are overdue. (PYMNTS, 2021)
  • 34% of companies are open to turning to fintech organizations for B2B payment solutions. (iBanFirst, 2021)
  • US organizations wait 33 days on average to receive cross-border B2B payments. (PYMNTS, 2021)

Digital payments

  • By 2023, some studies project that mobile contactless payments will reach a total transaction volume of 49 billion. (Juniper, 2021)
  • The US alone is forecasted to see a 300% growth in digital payments over the next five years. (Juniper, 2021)
  • B2B eCommerce sales are likely to reach $3.6 trillion by 2024. (PYMNTS, Global B2B Payments Playbook, 2021)
  • 75% of buyers and sellers want to make purchases online. (PYMNTS, Global B2B Payments Playbook, 2021)
  • 63% of consumers would switch to another business that offered contactless payment options. (Visa, 2021)
  • 33% of businesses stopped accepting cash, or accepted fewer cash payments, due to COVID-19. (Visa, 2021)
  • ACH payment continues to be a popular choice as a B2B payment method, as it grew 10.7% YoY in 2021 (Nacha, 2021).

Electronic invoicing

  • 64% of all businesses are making more than half of their payments electronically. (Bottomline, 2021)
  • Several countries are likely to roll out mandatory e-Invoicing mandates over the next several years, including Italy, Australia, China, India, and Japan. (Billentis, 2021)
  • Current leaders in the e-invoicing market are Latin America and Scandinavia. (Billentis, 2021)
  • Only 47% of AP teams used e-Invoicing in 2020. (Ardent's State of ePayables, 2020)

Virtual card

  • Virtual cards continue to provide a higher level of security than traditional payment options, as only 3% of virtual cards made up targeted payment fraud as opposed to 74% of checks (AFP Payments Fraud and Control Study, 2020)
  • By 2026, the virtual card transaction value is projected to hit $6.8 trillion. (Juniper, 2021)
  • Over the next 5 years, B2B payments are set to drive the growth of virtual card spending by 363%. (Juniper, 2021)
  • Only 4% of healthcare companies use virtual cards, but they are the highest spends, with $277 billion in transactions.(PYMNTS, 2019)
  • Virtual cards will generate more than $14 billion in revenue for card providers in 2022. (PYMNTS, 2021)

Manual processes

  • It takes organizations 67% longer to finalize overdue payments when using manual processes compared to automated solutions. (PYMNTS Global B2B Payments Playbook, 2021)
  • In 2020, 49% of AP teams received invoices in a manual format. (Ardent's State of ePayables, 2020)
  • The cost of processing a single invoice is between $12 to $30 with manual processing. (Planergy, 2020)
  • It takes 15 days on average to process an invoice manually. (EY, 2020)
  • Manual international payments cost between $50 to $60 to process. (PYMNTS, 2021)

AR/AP Automation

  • 48% of firms consider AR processing speeds a top concern. (PYMNTS Global B2B Payments Playbook, 2021)
  • In the coming two years, 25% of businesses are planning to focus on automating AP, and 18% plan to focus on AR automation. (Bottomline, 2021)
  • Best-in-class B2B automation solutions have a straight-through rate of 67.2% (Ardent's State of ePayables, 2020)
  • An automated B2B payment solution can decrease invoicing processing costs by 80%. (Ardent's State of ePayables, 2020)
  • An automated B2B payment solution can also reduce the invoice processing time by 74%. (Ardent's State of ePayables, 2020)

Moving forward in 2022

From the data, it's clear that accounting departments can save time and resources to allocate to higher-level tasks through:

  • Reducing manual processing
  • Automating their AR and AP departments
  • Migrate to a complete e-Invoicing platform
  • Leverage virtual cards
  • Provide easy-to-use digital payments systems

Financial professionals should not be focusing on data entry in 2022. After the pandemic, it was clear to many companies that their AR systems had to evolve to thrive in a fully remote environment. After two years of asynchronous lockdowns and labor shortages, the demand for faster payments and streamlined operations is here to stay.

At Paystand, we strive to help businesses process payments faster by automating an organization's entire cash cycle. Built with blockchain and cloud technology, our platform integrates with all major accounting ERPs. The best part? We have a track record of cutting DSO by 60% and the cost of receivables by 50%.