What are B2B payments?

A comprehensive guide to understanding business-to-business (B2B) payments.

Every business needs to buy goods and services from other businesses. With the globalisation of labour and supply chains and digitisation of commerce, increasingly such payments are happening across national borders. This makes having an efficient and effective international B2B payment solution more important than ever.

In this article, we cover:

What is a B2B payment?

What is a B2B payment system?

What are some examples of B2B payment methods?

What are the pros and cons of B2B payment methods?

What’s changing in the cross-border B2B payments landscape?

What are the problems with cross-border B2B payments?

What are the implications of broken B2B payments?

What’s the solution for cross-border B2B payments?

1. What is a B2B payment?

Every business needs to make and receive payments. When they transact with other businesses, that’s a business-to-business (B2B) payment.

B2B is a healthy and growing market. The value of B2B payments will grow 40% by 2028 to reach $124 trillion globally, Juniper Research says.

There’s also an increasingly cross-border dimension to today’s B2B payments. Those trading via e-commerce shops, iGaming or investment platforms need to make and accept international payments quickly and easily.

Likewise, those wanting to pay suppliers in other countries or make intra-company payments to overseas subsidiaries need a cross-border B2B payment solution.

Whether it’s a one-off or recurring payment, full or instalment payment, transacting with other businesses around the world is a near-universal requirement these days.

2. What is a B2B payment system?

Unlike consumer purchases, B2B transactions tend to involve more internal departments and signoffs. Average transaction values are typically higher and may involve recurring payments to regular suppliers. More data tends to travel with the payment, for example tax info, purchase order or invoice numbers. A B2B payment system must take these needs into account.

Usually, a B2B payment system will automate the steps from raising invoices to processing payments and managing reconciliation.

3. What are some examples of B2B payment methods?

There’s no single, universal way to pay or be paid. So, every business must devise their own optimal payment mix.

Factors influencing this choice include the countries where the business and its customers are based. But also, the channels through which it trades, its industry, payment terms, pricing model and internal processes, particularly around finance and accounting.

Some examples of B2B payment methods include:

• Payment cards – widely issued and accepted for payment across a wide range of business sectors, countries and currencies.
• Bank transfers – sometimes also known as account-to-account (A2A), bank account payments or pay by bank, the main types include: direct credits, direct debits and real-time credits.
• Cheques – paper cheques have been around for centuries, so individuals and larger companies are familiar and comfortable with using them. Digital cheque imaging is also speeding up cheque processing.
• Cash – probably the oldest and most familiar way to pay and be paid. It’s unlikely to disappear entirely, merely decline in usage, which represents costs to businesses that still accept it.
• PayPal and other digital payment platforms – PayPal and domestic schemes like iDEAL (Netherlands), Swish (Sweden) have built slick, mobile- or web-based customer front ends. Yet are dependent on traditional card and/or bank rails for funds movement behind the scenes.

4. What are the pros and cons of B2B payment methods?

 Each payment method has its pros and cons.

 Payment cards

Pros

• Speed – settlement ranges instant to 5 days
• Convenience – especially with payment links or embedded options with reminders to pay
• Coverage – global acceptance has been developed by international card schemes (e.g. Visa and Mastercard) over decades

Cons

• Expensive – due to scheme/provider fees
• Approvals – may be needed internally to use cards
• Inconvenience – administering expired, lost, stolen or updated card details make recurring payments on cards less attractive

Bank payments

Pros

• Convenience – set and forget payment for either one-off or batch transactions available
• Cost-effective – account-to-account payments strip out middlemen and cost
• Familiar – among payers and payees alike

Cons

• Financial inclusion – users must have a bank account to make or receive payments
• Expensive – particularly for cross-border payments
• Speed – international bank transfers can be slow, taking up to five days
• Lack of transparency – tracking payment status or tracing missing payments can be challenging, especially for cross-border payments

Cheques

Pros

• Familiar – among payers and payees alike
• Convenience – even if payers do not know the bank details of the payee

Cons

• Slow – settlement can take days
• Expensive – most banks charge businesses for writing and paying in cheques
• Risky – cheques can be easily counterfeited

Cash

Pros

• Familiar – trusted by payers and payees alike
• Convenient – even if payers do not know the bank details of the payee
• Speed – settles almost instantly

Cons

• Expensive – costs money to store, transport, insure and bank
• Acceptance – impractical for e-commerce, digital and cross-border transactions
• Traceability – is difficult to track
• Regulatory requirements – cash limits may be in place for some transactions, industries and countries

PayPal and other digital payment platforms

Pros

• Familiar – particularly among consumers for P2P and C2B payments
• Acceptance – widely accepted, at least locally

Cons

• Functionality – B2B features can be limited
• Traceability – manual work may be required to reconcile payments
• Cost – digital payment platforms can be expensive, particularly in the case of PayPal

5. What’s changing in the cross-border B2B payments landscape?

B2B payments lag behind B2C, particularly when it comes to innovation. In-store contactless payment via card or mobile phone have become increasingly commonplace. As have all types of mobile banking, payment and money management apps. Yet B2B payments are still cumbersome, manual and often paper based.

Businesspeople are consumers, too. In fact, small and mediums enterprises (SMEs) probably have more in common with consumers than large corporates. As a result, customer expectations are changing particularly around speed, convenience, value and choice. When e-mails can be sent across the globe almost immediately, businesses wonder why sending money the same distance still takes 3-5 days. 

6. What are the problems with cross-border B2B payments?

Cross-border B2B payments are often complex, time-consuming, manual and expensive. There’s also a general lack of transparency around pricing, timing and tracking.

Much of the payment process seems to be a ‘black box’, with so many factors either hidden or out of the sender’s or receiver’s control. For example, which banks are involved, which systems they use, and whether transfers cross a business day, weekend or time zone. That’s quite apart from any language or currencies differences.

No wonder that daily cut-off times, unexpected delays, nasty fee surprises, failed payments, wasted time sorting out admin and exceptions are commonplace.

B2B payments are generally more complex than payments between people (P2P) or between businesses and consumers (B2C). This is partly due to the extra internal signoffs required and extra data that travels with the payment, such as tax info, purchase order or invoice numbers. And partly due to the multi-party nature of correspondent banking. 

7. What are the implications of broken B2B payments?

Being able to facilitate cross-border payments as quickly, easily and cost-effectively as domestic bank transfers brings a whole host of benefits.

Businesses can manage their cashflow better. But also plan by managing stock optimally, never missing a sale, trade or wager, forecasting better to anticipate potential problems, growing customers and revenues and so on.

Financial institutions and payment service providers (PSPs) can compete strongly against their peers and tech-savvy new entrants by offering a superior customer experience. Plus improve payment efficiency for themselves and their business customers.

8. What’s the solution for cross-border B2B payments?

Cross-border B2B payments must be as fast, simple and efficient as local bank transfers. They must be flexible, allowing single or recurring payments, plus a choice of connection methods: API, SWIFT, File Upload or customized by API.

Any B2B solution must also be cost-efficient, with no international SWIFT wire fees, so payment arrives in full without deductions. And finally, transfers must be safe, with advanced screening, real-time monitoring and online payment tracking. 

Inpay is in the business of making cross-border payments flow. Our network covers 100+ countries and gives access to the 36 SEPA countries with our instant SEPA solution, as well as the UK with GBP and other local payment offerings.