The definition of B2B payments that gets tossed around is: B2B payments is the transfer of value denominated in currency from buyer to supplier for goods or services.
But where it gets interesting is the amount often being transacted (generally the amount far exceeds purchases made by consumers) and the consistency of these payments. And as most businesses know, even though it’d be easier to have all of these payments done digitally, unfortunately, cheques remain the most common method of B2B payments.
Why does that matter?
- Businesses moving from cheque to electronic card acceptance save $24 for every $1,000 in sales. (Source: Visa Canada)
- 32% of small businesses experienced an increase in sales when they started to accept credit cards. (Source: Visa Canada)
- Worldwide B2B payments are expected to reach $218 trillion by 2022.
As we mentioned, B2B payments are traditionally much larger than B2C payments. And according to Business Insider Intelligence, the size of these payments will continue to increase over the next five years.
Benefits of Digital Payments for Businesses
Let’s quickly review the benefits of digital payments for your whole business ecosystem. Paying online can be convenient for customers, either from home or in the store, since contactless payments are on the rise. Therefore, investing in electronic payments is an excellent choice for businesses.
- Cost-effective. The handling costs for cash payments can be higher for businesses, making electronic payments a worthwhile choice in many cases.
- An opportunity to increase customers and sales. With digital shopping becoming the primary choice for customers, a business offering an online payment option is instantly in a competitive position to attract new customers and sell more.
- A great way to improve purchase efficiency. By providing electronic payment options in stores, the speed of payment handling can be faster; saving time for both businesses and customers.
- A safer transaction option. From manual errors around physical cheques to today’s security features, for example authentication or encryption, while not promising a 100% solution (none of the existing ones are failproof) electronic payments are still the safest option when it comes to data protection.
- A more sustainable solution. Compared to paper-based systems, electronic payments (although not necessarily carbon-neutral) does help save trees and reduce carbon dioxide emissions.
In fact, businesses that offer customers multiple ways to pay are able to increase their revenue by as much as 30%. Currently, only 16% of small businesses offer more than three payment options. So, this could be the opportunity to make your business stand out.
Embedded B2B Payments
You’ll hear this term more and more over the coming years. Embedded payments refer to payment processing functionality that is included within a software solution, such as business or loan management software, according to Global Payments Integrated. The functionality allows merchants to accept payments within their software, rather than having to use a separate software product.
Five Ways to Collect B2B Payments
There are a number of different methods for processing payments between two businesses. We’ll explore the top five most common B2B payment methods and how they impact your business.
Cheques: Checks are a traditional form of payment that is generally accepted on a large scale. Paying by cheques requires a manual process that is time-consuming, costly, and prone to human error. Furthermore, paper checks can be difficult to track, easy to misplace, and subject to high fraud risk. According to a report by PYMTS.com and MasterCard, 64 percent of B2B payments are still made with checks, so there is still an opportunity for businesses to transition to more efficient payment methods.
Electronic Bank Transfers (EFT Payments) : Electronic Funds Transfers offer a fast, reliable and cost-effective way to electronically credit or debit accounts at any Canadian financial institution in Canadian or U.S. dollars. Using an EFT Processing Solution through API integration or web portal, businesses can collect and disburse one-off or recurring bank account payments.
Wire Transfers: Wire transfers represent less than 1% of the total number of B2B payments, but make up 93% of the total amount because they are often high-value payment transactions, according to Glenbrook.
Credit Cards: Credit cards aren’t overly popular in the B2B payment world, since some vendors prefer to duck the 3 to 4 % processing fees that credit card companies often charge. That said, many businesses still make frequent use of plastic and are sometimes willing to accept payment by them. Payments Journal found that 93% of small businesses were accepting Visa as of 2019.
e-Transfer: Interac e-Transfer is a convenient way to send, receive and request money to and from anyone across Canada in a safe, secure and quick manner. An e-Transfer resembles an e-check in many respects. The money is not actually transferred by e-mail, only the instructions to retrieve the funds are. The funds are transferred from one account to another, in near real-time.
Who are the Best B2B payment providers in 2021?
Plooto is a payment management platform for small and medium-sized businesses that want to automate and streamline their payments. Plooto saves business hours of work by automating Accounts Payable (AP) and Accounts Receivable (AR) workflows. Trusted by thousands of accounting professionals, Plooto transforms AP and AR services, making them more efficient, streamlined and profitable.
Best for streamlining AP/AR processes.
Currencycloud, a global platform that enables banks and fintechs the capability to move money across borders, and transact globally in multiple currencies, fast. Since 2012, Currencycloud has processed more than $100bn to over 180 countries, working with banks, financial institutions and Fintechs around the world.
Best for cross-border payments.
Founded in 2005, Lightspeed is a point-of-sale and e-commerce software provider based in Montreal, Quebec, Canada. Lightspeed helps you run your business regardless of whether you have a store, restaurant or eCommerce business.
Best for Retail and Restaurant payments.
PayPal is an online payments company that allows people to send money to others. PayPal was one of the original web payments companies and was purchased by eBay in 2002. PayPal also charges a 1% fee if you want instant access to your money; a free bank transfer takes several days.
Best for eCommerce or online small businesses.
VoPay’s Payment-as-a-Platform solution is designed to facilitate B2B payment processing for software enterprises by utilizing local, regional and global payment options through a single open API. VoPay’s intuitive platform offers a variety of payment tools allowing businesses to send and receive digital payments without having to build their own infrastructure. Vopay’s payments network supports EFT, ACH, Interac e-Transfer for Business, Credit Cards and Visa Direct using Open banking payment technology.
Best for Enterprise and API payments.
Tips for Choosing B2B Payments for Business
Choosing the right B2B payment provider truly comes down to the needs of the business. Here are a few things to consider when looking for the best provider:
Set-up: It’s imperative that the payment process is simple on both sides of the equation. Today, most cloud-based options are intuitive and allow for ease of use. Look for a provider with up-to-date API integration technology
Security Features: Electronic payments are the safest option when it comes to data protection. Some things to watch for: data encryption and current security standards that coincide with your business and preferred payment method. Bonus points: Tokenization technology like VoPay uses, which adds another layer of security.
Business Needs: Ensure that the payment provider’s strengths meet your needs. For example, if you do more international business it’s important to find a provider that accepts various currencies. Or if you’re in a high stake industry where privacy is a concern then security is top of mind.
As B2B payments pick up steam—it’s essential to automate your B2B payment flows, including receivables, payables, collections and ideally, disbursement with a single API integration.
If you’re looking for a provider then look no further (if we meet your company’s needs of course). VoPay empowers businesses to maximize efficiency and reduce operational costs. Connect with a payments specialist today!