Looking to Capture the Real-Time Opportunity in B2B Payments? You’re Not Alone

The thing about traditional B2B payment methods is that they tend to be rather … traditional.

That includes paper checks, which remain tied to 40% of commercial transactions, but also includes other B2B payment processes often characterized by delays and complexities, like wire transfers, ACH payments, trade credit and cash payments.

These legacy methods have been the backbone of B2B payments for years, but businesses are increasingly exploring modern alternatives that offer greater speed, security and efficiency in an evolving financial landscape — particularly real-time payment methods.

That’s because the benefits of instant and real-time payments, such as eliminating reconciliation issues and providing faster access to funds, make them an attractive option for businesses.

Unlike traditional payment methods that involve batch processing and settlement delays, real-time payments allow funds to be transferred instantly, 24/7, and help avoid common downstream pitfalls of other B2B payment methods like cash flow disruptions, missed vendor payments and more.

Looking ahead, there exists a significant opportunity for businesses of all shapes and sizes to capture when turning to real-time payments for B2B transactions, especially as the payment method continues to scale while providing a faster, more streamlined, and transparent payment ecosystem.

Read more: Buyer-Supplier Relationships Are Being Reshaped in a Crucible of Convenience 

Growing Demand for Efficiency and Speed

As previously reported, PYMNTS Intelligence has found that six in 10 firms use legacy methods to pay for commercial goods and services.

But compared to those legacy methods, real-time B2B payments offer many advantages, including enhanced speed and efficiency, reduced transaction costs, improved cash flow management, a minimized risk of fraud, enhanced transparency and potentially greater access to global markets.  

“The real-time payments opportunity is most prevalent in business and B2B transactions. If I get that money right away, I can start earning interest on it … immediacy has an impact for businesses and allows faster, even different, business models,” Shaunt Sarkissian, founder and CEO at AI-ID, told PYMNTS.

With instant access to funds, businesses can better manage their cash flow. This is particularly crucial for small- to medium-sized businesses (SMBs) that often face cash flow challenges.

“What we’re seeing … all over the world is that real-time cash and liquidity management are extremely important for businesses large and small,” Nilesh Dusane, global head of institutional payments at Amazon Web Services, told PYMNTS.

“Corporate Changes in Payment Practices: Manufacturing Companies Embrace Real-Time Payments,” a PYMNTS Intelligence and The Clearing House collaboration, found that 96% of manufacturers expect real-time payments to replace traditional checks when making payments, while 87% anticipate the same for receiving payments.

But that doesn’t meant that transitioning away from legacy and paper-based B2B payments will be as easy as flipping a switch. While the benefits of real-time payments for B2B transactions are clear, there are challenges and considerations that businesses need to address.

See also: What 17 Payments Experts Expect From Instant Payments in 2024 and Beyond 

Leaning Into the Real-Time Shift in B2B Payments

In order for real-time payments to scale across the B2B ecosystem, some hurdles must be addressed.  Existing payment systems must integrate the technology. Businesses must adhere to compliance regulations while being mindful of data security and privacy. There also needs to be industry-wide standards for real-time payments. 

Businesses also face another obstacle: the lower transaction limits inherent to the primary instant payment rails in the United States — the FedNow® Service managed by the Federal Reserve and the RTP® Network overseen by The Clearing House. These limits are a part of the reason large businesses have continued to rely on wire payments with higher limits rather than modernize their accounts payable (AP) and accounts receivable (AR) with instant options.

“I’m not disappointed by the rates of adoption, but I am disappointed by not seeing use cases developed by businesses and banks, and businesses built around banks to take advantage of these new capabilities,” Form3 CEO Dave Scola told PYMNTS.

However, real-time payments are still an emerging rail in the U.S., and it is likely that those limits will continue to increase. Already, the current transaction limits across both domestic rails have increased since their launch.

 “What’s often lost with instant payments — and this is where the education and awareness come in — is that there are key features that go well beyond the speed of the payment,” Irfan Ahmad, managing director and head of U.S. payments GTS at Bank of America, told PYMNTS, adding that those features allow businesses to differentiate themselves, with round-the-clock availability and transparency across a variety of use cases in industries ranging from trucking and hospitality to gaming and real estate.

However, the widespread adoption of real-time payments among businesses depends on their banks’ readiness to implement faster payment solutions.

“If banks have not implemented real-time payment systems, SMBs won’t be able to take advantage of the benefits,” a report from PYMNTS Intelligence noted.