How Venmo and PayPal Changed B2B Payments

May 11, 2023 by Kelsey Banerjee

The way money changes hands has transformed in the last two decades. Digital transactions are the norm. This shift came to the payments industry through point-of-sale technology, which made B2C transactions more convenient.

Over the past two decades, we've seen a revolution in how money changes hands as transactions become digital. This transformation came for the payments industry, first through point-of-sale (POS) technology for convenient B2C transactions.

The same drive that led to the development of B2C payments spread into business transactions. Organizations realized that electronic payments provided an opportunity for simplified and streamlined transactions. Let's look at how PayPal and Venmo have changed B2B payments for the better – and what we can do to improve them.


The first step towards real-time payments

PayPal was started in late 1998 by Peter Thiel and Max Levchin, who realized digital payments were the future. At this time, even online-bought goods were paid via checks and money orders, resulting in delayed shipments and fraud risks. The complexity of this payment infrastructure was risky and inconvenient, and there needed to be more visibility.

In other words, the state of payments in the 1990s was a mess.

So when PayPal launched in December 1998, consumers and merchants flocked to this low-cost and fast payment method. Within two years, the company crossed the 1 million users mark.

As it grew, PayPal was able to offer services for B2B transactions and cross-border payments. But it didn't stop there. In 2013, the company acquired Venmo.


Targeting inefficiencies in payments

When Iqram Magdon-Ismail and Andrew Kortina first created Venmo, PayPal was already a digital payments giant. But millennials needed something more than email invoices and credit card payments. They wanted quick and easy mobile payments.

Originally, Venmo was designed to conduct payments through text messages, but it quickly transitioned to a mobile app. Like PayPal, Venmo began as a peer-to-peer platform. But after its immense popularity, business owners began accepting Venmo payments.


B2C psychology for B2B payments

Digital payments for B2B businesses were initially appealing from their B2C-space popularity. Even if the seller has to give up 2.5% or 3% of the profit as part of the platform's payment terms, they can get paid almost immediately, improving cash flow. Bank accounts or credit are validated in real-time, reducing risks. And the icing on the cake? These digital wallets can integrate into most accounting software or ERPs.

No more payment delays, reduced risk of fraud, and higher visibility – what's not to love?

But while digital B2B payment solutions have disrupted the industry, they could be better for AR or AP processes.

For example, credit card processing fees can add up and drain revenue that could be used for other resources. And, while Venmo has moved consumers away from electronic checks and credit card payments towards ACH transfers, many businesses are still hardwired to use a company card.

B2B payment platforms need more than manual invoicing and billing options to take advantage of the full potential of next-gen payments. AR departments need access to automation and opportunities to reduce their transaction fees.


The Venmo of B2B?

With over $3 trillion in outstanding invoices, manual B2B payment systems, payment processing delays, and increasing regulations, finance professionals are looking for the Venmo of B2B.

Optimizing and strategizing accurately is almost impossible without precise data on B2B payment processing methods. More than electronic invoices is needed, especially if they aren't automated. And what use is digital billing if you can't track who is opening your invoices and average pay periods?

In fact, according to a Deloitte study, accounting teams handling B2B payments have several challenges, including:

  • High processing costs
  • Fraud risks
  • Incorrect data for invoice reconciliation
  • Lack of diversity in supplier payment methods
  • Manual processing
  • Payment delays

Paystand is often called the Venmo of B2B payments and for a good reason. Consider all the features you'd want from your ideal payments tool, and we have them:

  • Fast, easy, and secure payments? Check.
  • ERP integration options with platforms like NetSuite and Sage Intacct? You got it.
  • Extensive data and tracking capabilities? Of course.
  • Multiple payment methods, including ACH payments, credit cards, and eChecks? Definitely.
  • Automated and compliant? Yes, we are.
  • Can you save on credit card swipes by asking payers to shoulder the processing fee? Done.

At Paystand, payments should be as convenient as consumer payment options for AR and AP departments. Our user-friendly, customizable invoices allow you to request payments via email. Your customer can choose their preferred payment method from our payment portal, save their information for future payments, and move on with their day.

No more waiting on checks, manually matching invoices, or verifying bank accounts – it's time for a better way to process B2B payments.


Security matters

Compliance and security are critical to choosing a digital payment platform. And traditional online portals are not immune. PayPal has faced security breaches and vulnerabilities, one of the most recent in 2020, not to mention the infamous Venmo trace of President Joe Biden, which highlighted the app's security flaw.

At Paystand, we use tokenization to replace sensitive user information with meaningless and random strings of letters and numbers. This process protects customer information from both malicious hackers and human error. Even if a user decides to save their payment information, it is encrypted and replaced with a token, keeping it secure.


Transform your B2B payments

For accounting teams aiming to improve their cash flow, save time for high-level tasks, and reduce costs, providing a digital B2B payment method is more than essential. Automation and easy-to-use B2B payment methods have allowed our clients to see 60% drops in DSO while saving up to 50% on the cost of receivables. Soon, it will be expected.

The fact is, we're used to convenient and fast payments as consumers. So, your vendors and customers will expect their payment options to be as flexible and accessible.

Book a demo with one of our payment experts today to see if we're a good fit for your business.