When it comes to business-to-business (B2B) payments, it’s easy to get blindsided by the staggering $100 trillion-plus annual transaction volume and miss the real action.
It’s not about the money moving around; it’s about the current friction associated with workflows and data handling that set the stage for these payments. That’s where the magic — and the innovation — needs to happen.
The real game-changer isn’t just another payment method; it’s about creating tailor-made solutions that address the challenges businesses face on both sides of the transaction. Gone are the days of one-size-fits-all.
“Not every buyer is going to pay all of their suppliers the same way … unlike traditional consumer payments, where there’s a standardized way in which consumers pay and merchants get paid — within the B2B arena, no two buyer-supplier profiles are the same,” Dean M. Leavitt, founder and CEO at Boost Payment Solutions, told PYMNTS CEO Karen Webster.
“It is important to focus on what’s important to buyers, because that dictates their dealings with their supplier base … and buyers want flexibility with respect to their payment options,” he added.
Given the contemporary backdrop, where credit is tight and cash flow matters more than ever, optimizing the ways in which buyers are able to pay is becoming more important.
Solve for that, and the lion’s share of transaction volume will follow.
In the B2B sphere, adapting payment workflows to suit both buyers and suppliers is key to fostering a mutually beneficial environment. Digital solutions and tools like virtual cards are at the forefront of this shift, offering a fresh perspective on buyer-supplier dynamics.
“Traditionally, it’s been a supplier’s obligation to pay for the cost of the card transaction, but you’re seeing more and more technologies create a lot more flexibility to the point where it might be a buyer-paid model, it might be a supplier-paid model, and it might be a shared model,” explained Leavitt, noting that the construction industry, for example, is moving to a shared model around B2B commercial card usage.
“Technologies historically have not allowed for a shared environment. It was either only buyer-paid or only supplier-paid,” he added.
But as shared payment models evolve, and the costs and benefits are distributed among stakeholders, a new future is becoming possible within B2B payments, allowing for greater flexibility and collaboration between buyers and suppliers.
The concept of “acceptance on your terms” has emerged as a guiding principle for Leavitt’s company, Boost Payment Solutions, empowering suppliers to be active and empowered participants in the payment process.
“If I’m a supplier and I’m receiving large payments from my customers, hundreds, even thousands, of invoices, being able to receive that data in a format that I can ingest right into my accounting system is super important … to the extent I can automate that process, I may then not have several people doing that reconciliation process over a multiweek period,” Leavitt said. “As a business, I might be willing to pay for that.”
Empowering suppliers to accept payments on their terms is not just about convenience; it’s about integrating transaction data seamlessly into their systems, streamlining processes and potentially saving big on operational costs.
“Data is absolutely paramount as it relates to B2B transactions,” Leavitt added. “Both the transactional data and the data around what is my cost of making a payment, what’s my cost of receiving a payment.”
By leveraging commercial card solutions strategically, businesses can extend their days payable outstanding (DPO) while simultaneously reducing suppliers’ days sales outstanding (DSO), creating a symbiotic relationship that enhances liquidity and efficiency.
That’s because, as Leavitt said, B2B payments extend beyond mere transactions — they are integral to optimizing working capital.
“When other types of credit instruments have tightened up dramatically, a lot of mid-size to large-size corporates have expanded how they use their commercial card product across their accounts payable file,” he said.
“By utilizing a card as a buyer to pay your supplier, where very often the supplier will pay at least a portion, if not the entire amount, of that cost, you are essentially getting free credit. … So, it’s a very unique model,” Leavitt explained. “Obviously, it’s a payment vehicle. But it’s also a very strategic payment vehicle.”
And while paying a supplier on time is one of the most effective ways to shoot up to the top of their preferred buyer list, creating a mutually beneficial B2B transaction landscape also helps to create a better acceptance environment for innovative solutions and value propositions.
“It’s trying to create a win-win scenario, where the buyer benefits from shifting over to one payment modality like a commercial card, while at the same time getting enormous benefits for the supplier,” Leavitt said. “It needs to reflect the sophisticated balance of the existing commercial relationship between the buyer and supplier.”
He highlighted the emergence of new paradigms already being built atop new B2B rails, such as early payment discount arbitrage, which leverages commercial card solutions to optimize working capital and foster collaborative commerce.
This strategic approach exemplifies the symbiotic relationship between buyers and suppliers, where both parties derive tangible benefits. By embracing innovative payment solutions and fostering collaborative relationships, businesses can unlock new possibilities.
“The total addressable market in B2B payments is huge, $120 trillion, most of which has not been optimized or digitized,” Leavitt said.
That’s why focusing on workflows and data, rather than just the transaction itself, is the key to unlocking value. As businesses embrace new payment solutions and collaborative models, they’re not just changing how they transact; they’re reshaping the entire landscape of B2B commerce.
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