How Venmo and PayPal have changed B2B payments

Oct 7, 2021 by Kelsey Banerjee

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

And, that same psychology that led to the development of B2C payments rapidly spread into business transactions as organizations realized that electronic payments provided an opportunity for simplified and streamlined transactions. Let’s take a look at how PayPal and Venmo have changed B2B payments for the better – and what we can do to make them better still.

The first step towards real-time payments

The history of PayPal starts back in late 1998 with Peter Thiel and Max Levchin, who both realized that digital payments were the future. At this time, even goods bought online were paid via checks and money orders, resulting in delayed shipments and fraud risks. The complexity of this outdated payment infrastructure was not only risky and inconvenient but there was also a complete lack of visibility.

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

So when PayPal launched in December of 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

By the time Iqram Magdon-Ismail and Andrew Kortina first created Venmo, PayPal was already considered 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 message, but it quickly transitioned to a mobile app. Similar to 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 for the same reason they were so popular in the B2C space. 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, thus improving cash flow. Bank accounts or credit can be validated in real-time, which reduces risk. And the icing on the cake? These digital wallets can be integrated into most accounting software or ERPs.

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

But while digital B2B payment solutions have disrupted the industry, they aren’t perfect for AR or AP processes by themselves.

For example, credit card processing fees can add up quickly 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.

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

The Venmo of B2B?

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

Electronic invoices just aren’t enough, 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? It’s almost impossible to optimize and strategize accurately without clear data on your B2B payment processing methods.

In fact, according to a Deloitte study, accounting teams handling B2B payments have a number of 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 probably 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.
  • The ability to save on credit card swipes by asking payers to shoulder the processing fee? Done.

At Paystand, we believe that 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

One of the most important aspects of choosing a digital payments platform is compliance and security. And traditional online portals are not immune. PayPal has faced security breaches and vulnerabilities, one of the most recent ones being in 2020. Not to mention the infamous [Venmo trace]('s Security Flaw%3A Hacker Reveals,significant feature in the app.) 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

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. 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. 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 just as flexible and easy.

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