3 Myths About B2B Payments Adoption
The payments industry has been talking about the digitization of B2B transactions for years but has been slow to embrace the benefits of the digital payments world. There is reluctance among businesses to let go of manual processes in accounts payable and accounts receivable departments that continues to hold the industry back. But it doesn’t provide the whole story of why electronic B2B payments adoption still struggles to take flight.
In some ways, the lack of digitization is the result of the financial services industry operating on misconceptions about the best ways to ensure that electronic B2B payments gain traction. According to PYMNTS, some of the industry’s missteps can be traced back to the beginning of the digital B2B push.
Myth #1: Buyers Always Decide
From the very start, solution providers were too confident that buyers could lead the digitization process which failed to ignore the suppliers’ needs in the equation. The initial B2B digital payments push was from a buyer’s point of view.
Industry stakeholders likely overestimated how much leverage corporate buyers really had over their suppliers, who pushed back against using card rails for high-dollar transactions. That is particularly true for corporations with thousands of vendors, each with their own differing needs for the accounts receivable and order-to-pay process.
“If you look at one company’s supply chain, often their supply base is made up of a diverse group of companies that span all different sizes, all different levels of maturity, all different verticals,” says Cocentric President and COO, Matt Clark. “That in and of itself creates a real challenge – not just from a payments perspective, but from an invoicing and order acceptance perspective.”
Myth #2: Corporates Are Stuck in Their Ways
This hurdle introduced another misconception about the B2B payments sphere. The assumption is that suppliers, especially smaller ones, may lack the resources necessary to adopt electronic payment solutions or are simply too stuck in their old ways to make a change. That may be the case for some but having paper checks as the primary means of B2B payments kept many suppliers using this tried and true method.
The stickiness of the paper check isn’t so much about the love of a paper-based payments method, but more about its universal use and the fact that everyone knows how to cut and deposit a check.
And while B2B payments innovation has produced a range of viable payment alternatives, there isn’t necessarily an alternative that has proliferated as easily as the check.
As financial services companies scramble to push one payment alternative over the others in pursuit of B2B ePayments, a better strategy would be to introduce flexibility into the transaction process to address the range of needs and challenges for suppliers and buyers alike. This means FinServ players and corporate buyers must make it as easy as possible for vendors to accept an electronic payment and create added incentives for suppliers to make that change.
Myth #3: Suppliers Shun Cards Because of Interchange Fees
The commercial card space is an area with significant opportunity to introduce this kind of flexibility. It’s an industry that has evolved on yet another misconception, that suppliers refuse to accept cards because of the added cost of interchange fees.
Remittance data – or lack of – can be just as big of a factor in suppliers’ decisions not to accept cards. Virtual card information is often sent via email, forcing vendors to manually enter card data into their systems without automated access to the key transaction information they need for reporting and reconciliation.
Enhancing virtual card services by streamlining the supplier onboarding process, addressing friction with purchase orders or invoices, or adding transaction data that can be easily integrated into suppliers’ own back-end systems can enable businesses to use their payment rail of choice without ignoring vendors’ needs. Plus, virtual card technology is flexible enough to address that wide array of needs across the supplier community. One of the simplest ways to introduce flexibility into the B2B payment process is to offer choice, said Clark.
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