Lately, it seems each new day brings another advancement in the payments world.
And increasingly, those exciting advances and innovations are impacting the world of business-to-business (B2B) payments.
“There’s been an amazing acceleration of across all business processes,” Joe Pergola, CFO at Connatix, told PYMNTS.
He explained that innovation in the world of B2B payments is progressing at an unprecedented pace, driven by advancements in technologies like artificial intelligence (AI), machine learning (ML), and real-time payments.
“For us, it is how do we move from SDKs (software development kits) and APIs (application programming interface) to true automation and integration with all our processes,” Pergola said.
The ability to harness the power of these technologies can transform the way businesses handle financial transactions and improve decision-making.
“How do we empower the board and leadership to understand where the business is going, understanding those key aspects, and having those KPI (key performance indicator) dashboards to really drive us,” he said.
Read more: Trust Matters in B2B: How Commercial Relationships Impact Payments Innovation
One of the key trends in B2B payments is the shift from traditional methods like physical checks to real-time payments.
Real-time payments provide instant access to financial information, enabling businesses to track their financial positions more accurately. This shift can be both beneficial and challenging, as businesses need to adapt to this new dynamic.
Real-time payments can help optimize cash flow and investments, but they also require efficient data management and continuous vigilance, Pergola explained.
“There’s a lot of innovation, but I think the entire ecosystem needs a lot of investment to speed things up,” he said.
The emergence of B2B innovations like real-time payments also places pressure on traditional banking institutions to upgrade their technology, Pergola noted, in order to meet the demands of businesses moving towards real-time payments.
Within the commercial landscape, it’s becoming increasingly clear that real-time payments can significantly affect the dynamics between businesses and their suppliers or customers.
With the ability to pay in advance, businesses can offer their partners greater financial flexibility. However, as Pergola noted, this newfound flexibility also requires a high level of trust, security and transparent reconciliation processes to ensure that both parties benefit from this approach.
“We’re a technology company, so most of our investment is in product and technology on behalf of our customers,” explained Pergola.
Innovations in B2B payments have led to increased collaboration among internal stakeholders within companies. The CFO, in particular, collaborates closely with product teams to understand the investments made in technology and their expected returns, Pergola said. This collaboration ensures that capital allocation aligns with the company’s growth objectives.
In the B2B payments landscape, understanding customers is crucial.
Pergola emphasized the importance of “know your customer” (KYC) evaluations, particularly in the mid-market and small business segments. Speed and trust are paramount when dealing with smaller businesses, and AI and ML technologies can play a pivotal role in streamlining this process. They help businesses assess the history and reliability of customer accounts, reducing the risk of payment defaults.
Additionally, AI and ML have the potential to provide insights that aid decision-making. These technologies can assist businesses in identifying payment trends, anomalies and potential issues, allowing for proactive measures to be taken, Pergola added.
And understanding your customers better not only reduces fraud, but also makes businesses more likely to be flexible in offering extended payment terms to their partners, especially when they have a long-term strategic relationship.
This flexibility can help businesses nurture trust and establish a foundation for long-term collaboration, particularly as businesses must increasingly assess their financial health and ensure that they are on a sustainable growth path.
Decisions regarding the deployment of working capital are crucial in the current economic environment, where the cost of capital has risen, explained Pergola.
“A number one priority is making sure that the company is healthy, is viable and is going to continue to focus on growth,” he said.
See also: Unlocking Growth by Modernizing B2B Payments
As we move forward, the future of B2B payments promises further innovations. Real-time payments are likely to become even more common, with a focus on trust and security.
Businesses are already leveraging AI and ML technologies to enhance their payment processes and customer relationships and will continue to do so.
So what does the Connatix CFO see the future holding?
“Having great technology takes time. Unless all parties get involved, adoption will take some time — but it is about partnership and trust with your [B2B] customers. Once that is in place, then the whole business model gets to move forward. And that’s what’s important for me, is being able to predict recurring revenue by forging multi-year agreements with my partners who I’m now planning together with,” Pergola said.
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