A Global Approach To Local B2B Payments Digitization

Digitization of B2B payments is on the rise, but the trend is challenged by discrepancies across geographic markets, according to the latest World Payments Report by Capgemini and BNP Paribas.

The 2017 report, released Monday (Oct. 9), found non-cash transactions are growing at a healthy rate — with volumes increasing 11.2 percent between 2014 and 2014 representing the highest growth in a decade, researchers said. Developing markets are driving this growth, too.

But, despite the increased use of digital payments, cash remains king, especially for low-value transactions. Further, while consumer payments are quickly embracing digitization, corporate transactions’ uptick of electronic payments are much slower, and cash continues to hold its ground.

“Although the rate of adoption is good, corporates are not leveraging all the benefits of the digital transformation to provide new propositions to their clients, to help them move away from checks and increase overall efficiency in reconciliation and fraud,” the report concluded. Cash and checks remain common in B2B transactions, analysts said, with cash usage the highest in emerging markets including Asia Pacific and Latin America.

Where cash usage for B2B transactions remains low, as in North America, wire and credit transfers are most popular.

There are categories of B2B transactions in which digitization is taking a stronger hold, however. Cross-border remittances, supply chain finance, invoicing and trade finance experiencing higher usage of non-cash transactions, the report found, and analysts believe checks — which are particularly dominant in the areas of invoicing and wages — could “slowly fade out.”

Regional Trends

Worldwide, non-cash wholesale transactions initiated by corporates is expected to increase at a CAGR of 6.5 percent between 2015 and 2020 — significantly lower than the 11.2 percent CAGR of non-cash transactions overall.

But, it is difficult to assess overall trends in the digitization of B2B payments across the globe, however, because Capgemini and BNP Paribas found broad discrepancies across geographic markets.

For instance, in mature APAC markets, small- and medium-sized businesses (SMBs) are driving digitization of B2B payments through increased use of digital invoices, virtual cards and cloud-based financial management and accounting solutions. Emerging Asia is seeing ongoing traction for payment cards in the corporate sphere as companies turn to commercial cards for more secure supplier payments. Similarly, Asia and Latin America are set to see a 13.2 and 10.5 percent CAGR, respectively, thanks to increasing trade and supply chain finance activity, among other factors.

Across mature APAC, however, CAGR remains at 7.3 percent through 2020, led by growing global trade as B2B payment volumes in the region rise.

Across Central Europe, the Middle East and Africa (CEMEA), accounts payable (AP) automation is on the rise, which is also helping the uptick of digital B2B payment solutions. Electronic invoicing and the emergence of real-time payments across North America, meanwhile, remain top-of-mind for corporate treasurers.

According to Bruno Mellado, BNP Paribas global head of payments and receivables, there may be discrepancies across geographic regions, but global banks and multinational companies can bridge those differences to promote digitization of corporate transactions.

“Multinational banks and corporations seek better industrywide standardization and harmony among regulations,” he said in a statement. “As security issues are overcome, increased collaboration and partnership within the new payments ecosystem will create business value for corporates, banks and FinTechs. The new ecosystem may diminish most — but not all — challenges faced by banks and corporates. Industry participants can prepare for uncertainties as the payments ecosystem develops by working with banks and partners with the appropriate expertise.”

What’s Holding Them Back

While each region may have its own factors driving adoption of digital B2B payments, Capgemini and BNP Paribas did find commonalities in the factors preventing adoption.

A lack of payments messaging and data capture standardization, straight-through processing and seamless integration of digital B2B payment solutions into existing ERPs and other systems are key hurdles, the report said.

Analysts also identified siloes in the approach service providers take to address corporates’ needs. For example, not all solutions provide receivables and payables reconciliation in real time. Companies across the globe continue to rely on manual, paper-based processes and non-automated solutions, while service providers continue to lack transparency in pricing and transaction information — especially when it comes to cross-border and tax-related corporate payments.

According to Capgemini head of global banking and capital markets Anirban Bose, service providers have a role to play in promoting the adoption of electronic payments for B2B payments and beyond.

“Within this new and dynamic ecosystem, payments industry participants must strategically reassess their roles,” Bose said. “Banks must embrace this opportunity to enhance their offerings in collaboration with FinTechs and third-party developers. Breakthrough technologies and significant industry advances, such as Open APIs, instant payments, blockchain and regulatory standardization, will encourage collaboration.”