B2B is “business-to-business” and refers to businesses designed to create products and services for other businesses. More and more software products have been developed for businesses and fall under the B2B category. Examples include HR and accounting software, CRM, email marketing software, and other software designed to enhance business operations.
B2B payments, more specifically, refer to the exchange of money for goods and services between two businesses. Therefore, a B2B payment would be made from one business to another in exchange for a product or service that particular business is providing.
Today, unlike C2C payments and C2B payments, many B2B payments are still tied to paper-based processes that are highly work-intensive. That’s because B2B payments are much more complicated than consumer payments and involve much higher transaction volume.
As a result, B2B payments are stuck in the dark ages, with over 40% of them being processed via paper check – a form of payment that falls victim to fraud 74% of the time. On top of that, paper checks greatly extend DSO time due to mail float – the time it takes for a check to travel through the postal system from the payer to the payee. While other options are available, such as wire transfers and credit card payments, they also have their drawbacks.
Wire transfers can be costly – they usually cost between $25 and $50 per transfer, depending on whether or not the payment is being made domestically or internationally. They also run on infrastructure built long before the internet was commercialized. Credit card transactions often come with exorbitant fees (usually 3.5% of every transaction) determined by credit card companies and inevitably punish merchants for accepting payments from their customers.
As a result, B2B payments are extremely costly and time-consuming for AR departments. They have a long way to go compared to how seamlessly and inexpensively C2B and C2C payments operate today.
While it still holds that many B2B payment options are entirely outdated, innovations designed to help AR teams step into the future are being created every day. These new B2B payment solutions are designed to make payments cashless, feeless, intuitive, and free finance organizations from the rote tasks that drain time and energy. Here are a few examples of next-gen B2B payment innovations:
Paystand built Smart Lockbox as a digital-first alternative to traditional lockbox services. Now, businesses have the keys to unlock a fully paperless cash cycle from payer to merchant – one that incentivizes customers to move to a digitized payment model that eliminates manual tasks and lowers operational costs for finance teams everywhere.
The Paystand Bank Network is a zero-fee, digital payment rail that gives businesses access to real-time fund transfers and automated payment settlement. Due to its digital format, this payment rail allows for easier, faster, and more secure transactions than legacy options like debit or credit cards, which helps businesses get paid more quickly and efficiently. On top of that, it makes it possible for businesses to stop accepting credit card payments for good – and avoid the punitive transaction fees associated with them.
Here are some of the benefits that come from using our zero-fee direct-bank network as part of the collections process:
Additionally, Paystand has created payer incentives that businesses can use to encourage customers to move away from credit card payments altogether – something that can help businesses save 67% on credit card fees on average.
At the end of the day, B2B payment solutions should help turn the cash cycle into a revenue-generating machine – not contribute to draining a business’s bottom line.
When it comes to choosing the B2B payment solution that’s right for your company, there are a number of factors to consider: