A Bird’s-Eye View of the B2B Payments Landscape

Mar 3, 2022 by Brandon Jones

The B2B payments landscape is jumbled with options, and it can be hard to sort through everything when trying to understand what is going on. That’s why we’re helping you take a step back and giving you a bird’s eye view of the different B2B payment methods, their strengths and weaknesses, and what is lurking on the horizon.

Paper Checks

While the B2B landscape is continually evolving and progressing toward the digital revolution, many companies still use paper checks. In most cases, paper checks are only used because they are familiar and the accounting department in an older company has become accustomed to dealing with them.

The only slight benefit of paper checks is that they do not incur overt processing fees or charges. Upon analysis, this benefit is too small compared to the high error risk, the cost of labor that it takes to process and maintain a department that uses paper checks, and the serious delays that are far too common.

Paper checks are still an accepted form of payment, but with the international move to digital solutions, they are not the fastest or most cost-efficient payment option.

ACH Payments

ACH payment solutions were one of the first digital payment solutions. They transfer cash between businesses using the Automated Clearing House Network. This brought a major change to payment processing because it streamlines operations, providing both speed and efficiency. Compared to paper checks, ACH payments significantly reduce overhead costs because there is less need for manual processing, and they also carry reduced charges or fees.

The biggest limitation to ACH payments is the inability to process single small transactions easily. If a company deals with larger transactions set up on a recurring, long-term schedule, ACH payments are the best solution. However, it isn’t feasible for one-off or smaller transactions.

ACH payments have a minimal processing time compared to paper checks, but they are not instantaneous. Funds have to be verified by a banking institution before they are approved and released, which means ACH payments can take one or two business days to complete.

EFT Payments

Electronic funds transfers (EFT) are similar to ACH payments and transfer money directly from one banking account to another. While EFTs use a similar electronic process as ACH payments, transfer fees and charges are noticeably lower while transferring at a faster rate, with most payments being processed the day that they were posted. However, occasionally delays may hinder EFT payments, with them sometimes taking as long as three business days to process.

Credit Cards

Credit and debit card payments are another option in the B2B payment landscape. This option grew in popularity because it eliminated the hard costs of paper checks and was able to better improve short-term cash flow compared to ACH and EFT payments.

B2B credit card payments mainly extend working capital benefits while still keeping vendor payments on time. By using a credit card, you create a virtual “loan” that enables you to optimize your working capital as much as possible and still make payments on time.

While this potential can optimize your cash growth and use, it comes at a cost. Credit card processing fees, especially with frequent and high-volume transactions, carry a processing cost for each transaction. While these transaction fees aren’t unreasonably high, for a company that is dealing with many payments, they can quickly add up and cut into your revenue.

The biggest downside of using credit cards is debt. Using a credit card for fast and approved payments can help optimize payment processing in the B2B landscape, but if you do not have the capital to pay off those debts quickly, your company could be faced with high-interest rates.

Because of the potential risk of gaining unwanted debt, most companies choose to avoid paying with a credit card, even though they can provide faster processing times with less manual input and oversight.

Automatic Digital Payments

Real-time or automatic digital payments remove any processing time and eliminate high transaction fees.

If you’ve dealt with paper checks for years, this might sound too good to be true, but it’s real, and it’s spreading like wildfire in the B2B landscape. While it is a newer payment solution, these benefits aren’t going unnoticed, and it’s estimated that by 2025 up to half of B2B payments will be automatic digital payments.

Automatic payments help improve cash flow by completely removing slow pending transaction times. They also require less manual input and management because the entire process has been simplified for businesses to make quick, secure payments without worrying about all the technical details.

Learn More About the B2B Landscape

B2B payment processing is rapidly evolving, and we’re looking everywhere for better solutions than what we currently have. Find out how B2C payment trends may influence the B2B payments landscape and what that means for your business.