B2B payments innovations driven by digitization, customization and control
Payments innovations that scale broadly in the B2C space aren’t always as widely adopted in the B2B space due to limited applicability. The principles of consumer payment innovations can offer insights around streamlined user experiences and enhanced convenience, but the B2B space presents its own unique set of payments needs and considerations.
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“While we certainly take cues from consumer payments, B2B innovations have to be anchored in the needs of the client,” says Kimberly Henning, senior vice president of product management, Merchant Services, at Bank of America.
The reason is that B2B payments require a greater level of sophistication, as B2B transactions are typically larger and more complex than B2C transactions.
Additionally, businesses have existing systems, and the expectation is that any new technologies will be able to integrate with those existing systems so businesses can leverage their past investments.
However, B2B and B2C payments do share a common theme: What the customer wants, the customer gets. Frequently, those wants are met by innovations.
“B2B payments are not one-size-fits-all; there is not one answer for every organization,” says Henning. “Needs must be evaluated against individual business goals.”
Just as consumer-facing innovations have streamlined user experiences and enhanced convenience, businesses are also seeking similar advancements as digitally native decision makers increasingly take the helm across businesses.
“The whole concept of digitization and the benefits that come along with that are not only going to improve productivity, but also enable organizations to better manage cash flow and have a better handle on their working capital,” says Henning. “That’s the holy grail.”
Digital transformation as a driver of expectations around B2B payments
For organizations considering modernization initiatives, it’s essential to recognize the unique complexities of B2B transactions.
Firms need to take a clear-eyed look at their goals and operating environment, as well as assess the spectrum of payments technology they currently have deployed to assist B2B workflows.
Whatever approach firms may take — whether it is a big overhaul or an intentional, step-by-step upgrade — the result should lead to B2B payments with increased flexibility and more digitization.
“Digitization and automation are going to be paramount to keep up, not least for businesses wanting to attract younger talent,” Henning says.
After all, there remains a startling amount of paper still being pushed around across the B2B payments space — and that’s not something that digitally native talent cohorts want to spend their time on.
While any B2B payment modernization initiatives should ultimately lead to improved efficiency, reduced costs and increased transparency, there are four key benchmarks for measuring return on investment that firms need to keep track of.
Any B2B payments initiative should be measured against how it delivers across providing cost reduction, increasing fraud prevention, optimizing working capital management, and enabling greater transparency and control over payment workflows.
Payment acceptance costs are a fundamentally significant line item on any P&L, and B2B modernization should reduce that. Firms are also expecting to see a reduction in fraud and improvements across working capital.
“What is also really important is the control that the organization has,” Henning says. “Do they have enhanced real-time transparency into their payments ecosystem, into their books, their cash flow?”
Unlike consumer transactions, B2B payments necessitate extensive reporting capabilities and role-based entitlements, reflecting their intricate workflows and data-centric nature.
High tech B2B payments still require a human touch
While technology plays a role in modernizing B2B payments, the human element remains essential, particularly in complex scenarios and high-value transactions.
Henning emphasized the importance of “high tech, high touch,” where advanced digital solutions are complemented by personalized support and expertise, providing clients with confidence and reassurance.
“The human touch is still incredibly relevant, especially in the B2B space.”
The trend of increased sophistication in B2B payments is driven by evolving buyer-supplier dynamics and changing expectations.
Organizations should anticipate shifts in payment preferences and behaviors, such as incentivizing early payments or embracing new payment modalities. Additionally, staying attuned to developing technologies like AI will be crucial in navigating future disruptions and opportunities in the B2B payments ecosystem.
Kimberly Henning | Senior Vice President of Product Management, Merchant Services, Bank of America
