The wide expansion of global trades and increased import and export of goods and services has resulted in a surge in the volume of B2B payments worldwide. Though bank cheques and wire payments have been the most popular mode of transactions between merchants, digital innovations have paved the way for faster, reliable, and accessible payment methods. Here is our guide that covers everything about B2B transactions, payments, and solutions to help you scale through the B2B payment landscape.
What are B2B Payments?
A B2B payment is an inter-commerce transaction between two businesses that includes retailers, corporations, wholesalers, or start-ups but does not involve a consumer. In simple terms, whenever two businesses interact for goods and services, a B2B payment scenario is generated.
The quantum of B2B payments is much larger than B2C payments. It is evident from the fact that the B2B payments industry stands at $18.5 trillion, against the $709 billion B2C or P2P payments. Digitalization of payment services has accelerated payment processing and helped improve business cash flow considerably.
Types of B2B Payments
Disruptive payment technology has made it easier for people to connect worldwide and make payments. As a result, the market is flooded with options.
B2B Payment Methods
- Cards – Merchants can use debit or credit cards to facilitate in-merchant transactions. Credit cards give businesses access to excess cash. However, they charge high APRs that increase the costs of transactions.
- ACH – Automated Clearing House payments use merchant‘s bank accounts and routing numbers to move funds electronically. They work best for recurring B2B payments or for settling accounts.
- Paper Checks – Merchants will use checks if B2B transactions require more data exchange and security than normal B2C payments. They make it easy to track cash flow and inventory as they have an audit trail.
- Cash – The most popular and easiest payment method between two parties is cash as it is instant and there are no fees or interest charged. However, cash can be lost, forfeited, and lead to a negative cash flow balance.
- Wire Transfers – Companies often use wire transfers for real-time transactions or international payments. They have a faster turnaround time and are available for immediate access.
- Digital Payment Platforms – Payment gateways are online payment platforms that allow the buyer to pay online for goods or services during the checkout process. They are widely popular digital B2B payment solutions. Among the best payment gateway for India, Zaakpay offers lightning-fast payments with its payment gateway.
Challenges of B2B Payments
- Too many options for payment mediums
- B2B payment fraud exists
- Difficulty in tracking payment when different businesses use different payment methods
- Long processing time for non-digital payment methods
- Additional fee costs
Most of the B2B payment methods incur additional charges or fees. For instance, wire transfer involves costs in both sending and receiving money. More and more B2B businesses are looking for convenient and risk-free ways of making payments. This has given rise to diverse new B2B payment solutions on the market by fintech firms, banks, or industry specialists.
Rise of Digital B2B Payment Solutions
Businesses adopt payment solutions as per the needs of each company. While B2C businesses prefer electronic processing, most businesses today still rely on checks and ACH transfers. However, rising demand and accessibility of innovative payment means, merchants are encouraged to shift to digital business payment systems. 42% of SMBs in 2020 saw an increase in online B2B transactions in Q2 – Q3 of 2020. Similarly, 58% of organizations were likely to convert their B2B payments to electronic payments from checks.
Benefits of Digital B2B Payments and Solutions
- Quick and Reliable – Digital transactions are quick and effective and save time writing out or reconciling cheques.
- Convenient and Accessible – Digital payments allow merchants to self-serve. They can also pay directly with a 1-click “Pay Now” button from the emails and invoices received.
- Secure – Digital B2B transactions are more secure than traditional ones with PCI-DSS compliance. They are processed by secure gateways and use strict encryption protocols to keep your money safe.
- Easily traceable – Merchants can easily access details of Digital B2B payments as they are stored in a merchant-specific database. This makes tracking payments transparent and visible.
- Improved Cash Flow – Cash flow issues can prove detrimental to your business health. By automating B2B payments, you can easily manage your incoming and outgoing cash flow. Payment software provides detailed analytics about your payment status, AR (accounts receivable) and AP (accounts payable), late payments.
- Simplified book-keeping and taxes – B2B payment solutions simplify your AR and AP accounting as payments are automatically recorded and stored by the software tool. They can directly integrate with your accounting software, making it easier to keep records.
What to look for in the right B2B Payment Provider?
You need to consider some essential points before choosing the right B2B payment provider.
- Utility – This depends on whether you do domestic, local, or international business. International businesses need to use a platform capable of cross-border payments and supports multiple currencies.
- Mobile Payment Support – It should provide mobile payments as well as most of the merchants use mobile phones and tablets for transactions.
- Limits – Most payment gateways limit the maximum amount of a transaction that you can process per month. You need to be aware of that, as although the limit may not influence small businesses, it can take a toll on large business volumes.
- Easy Integration – An efficient payment gateway should easily connect with your accounting or invoicing software so that when an online transaction takes place, it will update the corresponding invoice automatically.
- Payment Gateway Charges – Various payment gateway fees get charged for facilitating online payment processing. These include gateway setup and integration charges, annual maintenance charges, and MDRs. They depend on market type, transaction type, frequency, and overall business revenue generated.
You need to find the right B2B payment gateway that levies less payment gateway charges as compared to the services offered. For example, Zaakpay does not charge any setup or maintenance fees for its merchants.
Conclusion
While some companies choose to keep traditional payments, payment preferences shift toward digital transactions to make operations faster, remote, efficient, and secure. Choosing the best payment gateway for India should not be challenging if you know all the options thoroughly and then make a decision.
