Within B2B payments – marked by paper checks, PDF invoices and an ongoing scourge of late payments – there’s no lack of imagination in mulling what commercial transactions could be.
They could be more efficient – and more transparent and faster, too. Direct links between the two sides of the cash-flow equation – the accounts payable (AP) and the accounts receivable (AR) departments – could ensure that suppliers get paid the way they want to get paid, on time or even early.
But execution is everything, of course – and thus far, execution is lacking.
Ben Ellis, global head of strategy at Visa Business Solutions, told Karen Webster as part of this month’s series on the transformation of B2B that companies occupying various places in the financial services ecosystem focus on their areas of expertise. But it takes a joint effort, and a collective effort across the industry, to truly reimagine business payments.
The reimagining starts within the firms themselves. Not all that long ago, transforming payments processes would have been the province of finance teams as they examined working capital and late payments.
But now the questions are broader. A range of professionals within the organization – from the C-Suite to the sales team – are mulling ways to improve payments execution so that it becomes a strategic differentiator, able to keep relationships between buyers and suppliers sticky, to everyone’s benefit. That means data can be embedded within payments in ways that will make workflows more efficient across payables and receivables departments, he said, and payments can be used as a strategic differentiator.
“When you’re looking at technology in terms of data, information, connectivity and mobility, there are wildly different capabilities and ways of doing payments than would have been possible five or 10 years ago,” Ellis said.
Those who would reimagine B2B payments have been taking lessons from consumer marketplaces and applying them to payment-enabled B2B marketplaces. Ellis noted that joint research between Visa and PYMNTS found that 60% of businesses not selling through online marketplaces would like to do so, and 78% of sellers said they used marketplaces to reach more customers.
Of course, being on the marketplaces drives businesses to examine how, and how quickly, they are getting paid – not just by end users, but by their own customers. B2B marketplaces, or consumer marketplaces that have a B2B component, can help alleviate pressures on working capital. PYMNTS’ own research has found that on any given day, more than $3.1 trillion in outstanding receivables is owed to suppliers.
The problem is especially acute for the smaller firms, with $1.2 trillion in outstanding ad-hoc payments owed to SMBs with less than $5 million in annual sales – which accounts for more than a third of their top line. Of that amount, more than 30% is paid late, and half of that tally is paid more than a month late.
Linking buyers and suppliers through digital channels, said Ellis, lets suppliers set their own terms, and fosters what might be termed “collaborative commerce.” Late payments exist not just as a working capital problem, but also as an operating expense problem.
“If you’re not working together with your suppliers and you get paid, and you’re not sure what the payment is for, if it’s not for the right amount, or if there’s a question on the invoice, it just takes time” to get everything squared away, Ellis explained. The pandemic, and the ensuing stress on supply chains, has underscored the urgency of bringing buyers and suppliers together to share more in a bid to improve cash flow. Marketplaces can help here, he maintained, as discounting programs can make sure suppliers get paid in a timely fashion.
By way of contrast, these same firms can take a 4.8% discount to get paid earlier.
It Takes Time
Of course, such evolutions and transformations take time. As Ellis noted, only a bit tongue in cheek, it takes more time to write a short letter than it does to craft a longer missive. “And it takes more time and thought to design a streamlined and frictionless interface than it takes to do a complex or clunky one,” he told Webster.
The interfaces that drive consumer-facing commerce have made the leap toward such frictionless interactions, in part because the consumers have demanded it. The back-end overhauls and infrastructure upgrades that have been a part of B2C commerce are now evident within B2B ecosystems, said Ellis. Recent and continuing B2B innovations have included provisioning digital credentials into mobile wallets.
“We’re now starting to see a lot more direct push to card or push to account, streamlined into the digital experience in ways that let businesses engage with their customers much more directly than they could before,” Ellis said. The intention to work more efficiently together may have been in place, but now the tech tools to foster collaborative commerce are available and accessible.
In a nod to just how advanced (and digital) the technical tools have become, crypto has a place in B2B payments, said Ellis. CEO Al Kelly said during commentary on the latest earning call that crypto can be a “significant driver of growth.” And as Ellis told Webster, the digital offerings can be part of Visa’s network strategy to bring payments more fully into the digital age.
Ellis was quick to point out that there is a number of ways to look at digital coins, digital currencies and cryptos in general. Bitcoin may be thought of as digital gold, but it’s not being used at a significant scale for payments. Central bank digital currencies (CBDCs) and stablecoins might be more easily folded into use cases within B2B, backed by assets and gaining ground in cross-border payments. As has been reported, the company said that spending on crypto-linked cards topped $1 billion in the first half of 2021.
Read also: Visa’s Crypto-Backed Cards Count $1 Billion in Spending
“It’s an opportunity for us to give consumers an easy way to access the stored funds in their crypto accounts,” said Ellis. “But we’re seeing a lot of companies and partners coming to us, looking to partner.”
The payments network is currently partnering with 50 of the leading crypto platforms on card programs that make it easy to convert and spend digital currency at 70 million merchants worldwide. And of the companies in North America within Visa’s FinTech Fast Track program, more than a quarter are working on issuing crypto-linked B2B cards. There remain significant opportunities to improve cross-border interactions between firms, which spurred Visa to launch B2B Connect two years ago, linking bank-to-bank payments across existing infrastructures in a standardized fashion.
Partners such as Visa, with emerging and evolving B2B platforms, have visibility into companies making and receiving payments – and the frictions that need the most urgent attention, through collaborative efforts.
“From that network vantage point, in order for [innovation] to work, it’s got to work for everyone,” noted Ellis – and the short-term pain of moving B2B payments more firmly into the digital realm will translate into long-term gains. “All of us working together can make a better payments experience for businesses than any one of us working by ourselves could do,” he told Webster.