Emerging payment networks and models are rewriting the rules of commercial transactions. And it’s time for chief financial officers and treasurers to cash in.
Whether it’s through an in-store experience, eCommerce or virtual invoice billing, the payment stage is critical to business operations.
Dean M. Leavitt, founder and CEO at Boost Payment Solutions, told PYMNTS’ Karen Webster that new intermediaries, such as FinTechs and accounts payable (AP) and accounts receivable (AR) platforms, are reshaping competition and creating new opportunities for innovation and efficiency in commercial payments.
“Across all different payment types, the rails have largely remained the same,” Leavitt said. “What has changed dramatically is the work being done around those rails.”
Since at least 2009, a “new world order” of FinTechs and process-driven companies have smoothed out a lot of the friction associated with payments, he said.
This influx of FinTechs and new technologies has created a competitive environment in B2B payments, with a burgeoning ecosystem of networks vying to become the preferred intermediary in B2B transactions.
“Competition drives innovation, and innovation creates expanded opportunities,” Leavitt said, adding that every business now wants to be part of the “last mile” in a commercial transaction — the moment the payment is made.
One of the key advantages of modern payment solutions is their flexibility. Unlike the rigid payment structures of the past, today’s payment platforms offer a range of options for buyers and suppliers. This flexibility allows businesses to tailor their payment processes to meet their specific needs, whether they’re dealing with small, recurring payments or large, one-time transactions.
Against this backdrop, the use of cards in B2B payments is surging.
“In 2009, the concept of a business using a card product to make an AP-driven or invoice-driven payment was, to many, nonsensical,” Leavitt said. “Cards were used for travel and entertainment, or for an in-store experience. But what is driving the utilization of cards now is primarily working capital management.”
Cards can serve as a less expensive alternative to traditional credit sources, offering advantages in terms of debt management and cash flow flexibility, he said.
Still, while there are often additional financial incentives for businesses to use cards in their transactions, such as rebates, one of the biggest hurdles remains supplier acceptance. Many suppliers still view card acceptance with skepticism, largely due to misperceptions about cost and complexity.
“Once you sit down with a supplier and explain the true costs and benefits of card acceptance, they’re much more likely to consider it,” said Leavitt, noting that historically, there has been “a little bit of an allergic reaction to cards.”
Suppliers often find that card payments can reduce friction in their AR processes and provide more reliable cash flow than traditional payment methods like checks or wire transfers. FinTechs play a role in this process by offering solutions that automate payment and reconciliation procedures, making card payments easier for suppliers to manage.
This helps to “grease the wheels” of B2B payments and facilitate broader adoption of card-based payment systems, Leavitt said.
One of the most significant challenges in business payments is uncertainty, he said. Companies often face delays in receiving payments, which can impact their ability to make strategic decisions about expansion or investments. The digitization of payments, particularly using cards, can help reduce this uncertainty by providing greater clarity around payment timing and costs.
“Technology has shifted leverage from buyers to suppliers, allowing suppliers to get paid sooner and more reliably,” he said.
Digitized payments also provide buyers and suppliers with more transparency about the costs associated with each transaction, enabling them to make more informed financial decisions.
The broader economic environment, including interest rates, also influences B2B payments.
As interest rates begin to fall again, Leavitt predicted that card transactions will regain prominence as financial institutions seek to generate more interchange revenue. This could lead to a renewed push for businesses to adopt card-based payments, further fueling the ongoing transformation of B2B payments.
For CFOs and treasurers, the key to success will be staying informed about emerging B2B payments platforms and understanding how to use them effectively. By embracing digitization and new payment models, businesses can reduce friction in their payment processes, improve cash flow visibility and ultimately enhance their financial performance.
“It’s not a one-size-fits-all approach,” Leavitt said. “The companies that succeed will be the ones that recognize the diverse needs of their buyers and suppliers and adapt their payment strategies accordingly.”
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