The diversity of B2B ePayments: There’s more than one way to pay

There are times throughout history when a single issue can create major changes. When it comes to business-to-business payments, the advent of COVID was one of those times. As disruption virtually exploded, staff began to work remotely, supply chains shut down, and gaining control over cash flow and working capital became vital to the growth (and in some cases, the very existence) of an organization. Even as the pandemic has faded, it’s impact is long term, and when you add in inflation and global uncertainty, optimizing cash management has become a major goal for businesses globally.

Ardent Partners’ new report, sponsored by Corcentric, Pulse on B2B Payments in 2023, tracks how businesses are responding to the many disruptions they face, how pressure has been building on accounts payable (AP) to optimize the method and manner in which they pay suppliers, and how the B2B payments landscape has changed. According to the report, “Ardent’s research found that due to the uncertain and difficult times, a majority(53%) of businesses altered how and when suppliers were paid…For AP teams, this meant that more CFOs, treasurers, and other finance leaders were placing their B2B payment processes and systems under a microscope, examining the best way to maintain internal liquidity and/or support their suppliers’ financial well-being.”

The history of transaction currency

Throughout recorded history…and further back than that, transactions have been a part of life. Someone wants to purchase something from someone who wants to sell that same thing. What’s changed over the millennia is the type and manner of currency used in the transaction.

Bartering was the original manner of currency, a direct trade of goods and services. Some goods have more value than others. Salt was highly valued for its preservative value; weapons for their protective and aggressive value; precious metals and jewels had their own obvious value for making jewelry and decorative.

There are still places in the world where barter takes place; however, according to a NOVA documentary, modern coinage as a currency started around 500 B.C. in what is now a part of Turkey and migrated from there around the Persian Greek and Roman empires. And so, it remained for thousands of years, whether the buyers were businesses or individual consumers. Paper checks originated around the 1700’s and Western Union began electronic fund transfer (EFT) in the 1870’s. That’s right, the first electronic payments were made more than 150 years ago. Credit cards followed in the 1950’s and that rounded out the methods of B2B payments for quite some time.

But as B2B transactions became more complex, and with advances in technology (like digitization and automation) AP teams and finance managers recognized that legacy manual and paper invoice processing and payments are fraught with the potential for human error and fraud, not to mention the lack of visibility into invoice status and speed of payment delivery. This has resulted in an expanded landscape for payments, filled with many payment options and payment platforms that streamline business payment workflows, with an increasing emphasis on electronic payments (also referred to as digital payments).

Most companies appreciate the speed, efficiency, and accuracy of electronic payments and the additional benefits realized. In fact, even though a third of all respondents are still using paper checks to pay suppliers, according to the report, “electronic payments comprise 62% of all payments.” And the Pulse on B2B Payments in 2023 report details the options AP has for ePayments.

The ePayments technology landscape

ACH – ACH or Automated Clearing House payments first began operating in the 1970’s and are the largest form of electronic payments. This digitally based payment clearing house, established by the Federal Reserve and the banking industry, ACH was viewed as a more efficient payment method than paper checks. ACH payments are also more secure than wire transfers and card payments. One disadvantage for global businesses that utilize cross-border payments, ACH payments can only be made between U.S. accounts. There is an ACH International that is similar to the U.S. version; unfortunately, there’s no single universal ACH system to send and receive funds across borders. In fact, there are more than 100 unique systems like this representing distinct regions.

Wire transfer – Many of us may have used wire transfers at one time or another for personal reasons. For businesses, wire transfer runs second only to ACH as the largest type of electronic funds transfer globally. Normally used for high-value transactions, wire transfers can take place across international borders. Although fast and secure, they can also be more expensive to set up. One other caveat, you need to ensure the provider you use is reputable to avoid the risk of fraud.

Commercial cards – Since most of us likely have multiple credit cards in our wallet, we understand how they work. But businesses have a variety of cards to choose from:

• Purchasing cards (P-card) – These are physical plastic cards (like regular credit cards) that the purchaser must present when making a purchase. Companies can restrict the cards to specific dollar amounts and restrict the use to specific suppliers.
• Virtual cards (V-card)– These are extremely secure entities that have a credit card number that is specific to a single transaction and for a predetermined amount.
• Corporate cards – Most companies give these to employees to use for travel and entertainment expenses so they don’t have to use their own personal credit cards.
• Fleet cards – Pretty easy to understand. The purpose of these is to enable designated employees to purchase fuel and repairs at authorized gas stations.
• Ghost cards – Like virtual cards, these are not physical cards. The main difference is that although V-cards can only be used for a single transaction, ghost cards can be used over and over again.

Business networks – According to Ardent Partners, “a business network (including supplier, B2B, eInvoicing, and/or payment network) as a web-based platform that enables interconnected buyers and sellers to transact, communicate, and/or collaborate with each other.” This enables companies to electronically connect their supply chains.

Digital wallets and payment applications – Consider these similar to debit cards, where a payment service allows an individual or business to make an electronic payment. Originally used more so by consumers, businesses now view these a way to pay vendors.

Cryptocurrencies – There are few payment or currency types more controversial than crypto. Fortunes have risen and fallen depending on how individuals and businesses have invested in this digital currency. It’s essentially the Wild West of currency right now and, although not recommended by Ardent Partners as a B2B payment method, this mode of currency is one to keep an eye on for the future.

As noted at the beginning of this article, CFOs and finance leaders are looking AP for ways to ensure liquidity while also maintaining healthy and profitable relationships with suppliers. They all understand that relying on legacy manual processes that are paper and manual dependent is an outdated concept. As the report notes, “Out of almost 200 AP, P2P, finance, and treasury leaders surveyed in 2023, the top benefits, noted by more than half, are time (56%) and cost (51% savings.”

Download the full report to see how expanding the use of ePayments in 2023 and 2024 will provide significant benefits for the AP team and the organization overall.