How Long do B2B Payments Take (and How to Speed Them Up)
As markets and players' consumption patterns evolve, processes sometimes follow at different speeds. Payment solutions are one of them. Speed is a key component in the evolution of B2B payments.
Currently, B2B payments can take between three to five days. This depends on the intermediary's agility and how fast it carries out verification processes. But, very soon, payment technologies will guarantee real-time transactions.
B2B Payments Overview
B2B payments are transactions that occur between companies for the purchase of goods and services. They involve a series of processes related to its treasury, such as cash flow management, accounting, or tax payments. Understandably, they are more complex than B2C payments or payments between individuals.
According to a study by Allied Market Research, the global B2B payments market had a total volume of $125432 billion in 2021. It is estimated that, by 2031, it may reach $313947.8 billion, with an estimated annualized growth of 9.9%.
Although some parts of the B2B process are digital, significant gaps remain. Nearly 30% of all payments are made through bank transfers, and almost half of all global business transactions are still paper-based.
Regarding innovation, B2B payments need to catch up to consumer payments. This is because a variety of factors affect them, such as:
- Volume: merchant-to-merchant payments tend to be higher than consumer-to-consumer payments.
- Frequency: Merchants often have contracts that allow for regular, recurring transactions. For example, a retailer may receive a monthly recurring shipment from its supplier.
- Industry: Certain industries have specific payment needs. For example, healthcare providers often use customized B2B payments due to privacy regulations.
- People involved: Every B2B transaction involves many people, including AR, AP, billing, and procurement teams.
- Delayed payment: Direct payments are often right on the spot or a few hours after the event. In contrast, B2B payment cycles last 30 to 90 days.
In light of the complexity of B2B payments, more and more companies are opting for digital and trackable payment options.
B2B Payments Methods and Transfer Times
There are different B2B payment methods, although not all providers accept them simultaneously. These are the most common:
Today, checks continue to be an indispensable instrument in B2B payments. A bank account holder gives the order to pay a certain amount to a beneficiary. Its main advantage is that it is free of charge.
It offers excellent security, as it is rigorous of the transaction rules of drafting and settlement. But this security makes payments slow and inflexible.
Cash remains the payment method of choice for paying for goods and services. Its most significant advantage is the absence of costs and the ease of use and handling. Sometimes it facilitates B2B payment transactions much better than other payment methods.
In some cases, suppliers only accept cash as a payment method. But this alternative is only possible for payments where the two parties have a direct physical relationship. This is the case for cross-border or domestic payments with a distance between the two parties.
Credit cards are prevalent for B2B payments but not so much for B2B. Despite their convenience, high fees, cumbersome processing, and security breaches make them challenging to implement in companies.
It's one of the fastest payment methods. Cards are processed almost immediately as funds are available in the receptors' account in real-time.
Wire transfers are payment methods in which one bank transfers funds to another. The funds are usually available in the beneficiary's account within 24 hours. It is one of the fastest methods available.
Digital Payment Platforms
Digital payment platforms allow electronic transfers from one account to another. Many of these applications enable direct integration with the companies' ERP. Invoices can be posted and reconciled almost in real-time with the help of an API. The major drawback of this possibility is the fees required for each transaction.
Speed Up Your Payments with Paystand
For some B2B companies, completing payment can take 45-90 business days. Merchants then must wait from 2-14 business days beyond that to access their funds. They must also pay transaction fees of 3% or more, depending on their customers' payment methods.
In response, Paystand offers an option for businesses to access revenue the next day with zero fees. This is achieved through its unique, DeFi-enabled B2B payment network.
This functionality works through the merchant's DeFi Corporate Card Account. The Card enables customers to receive and manage their cash without friction and use it for payments. Here is how it works:
- A merchant receives a payment via the Paystand Bank Network.
- The payment becomes available for use in one banking day.
- Merchants can instantly transfer available network funds to their Paystand DeFi Card Account.
- Merchants can use those funds to create prepaid virtual and physical cards to pay their vendors or cover their employees' expenses.
With Paystand's Next Day Fund Availability feature, merchants can access their cash faster, encourage better spending behavior among their teams, and streamline their online vendor payments.
Don’t wait another day to access your funds and contact one of our experts today to book a demo and take your payment process to the next level with Paystand.