What is B2B payment processing?
Over the past few years, the payments industry has developed so rapidly that it has simply moved to a whole new, more efficient level. If previously a payment required a lot of complicated actions to make a payment, now everything is solved with the touch of a finger.
B2C payments became even more popular in 2020, and there’s no doubt that trend will continue in 2021. But what about business-to-business payments? Are they still at the same level as before?
Certainly the B2B payments industry is growing just as fast. Experts predict that in 2026 the volume of transactions between companies will exceed $63 billion.
This tendency is very encouraging, because the more quickly B2B payments develop, the more useful and profitable it will be for everybody, in particular, it will be reflected in time savings when processing payments. Fast payments are beneficial to everyone without exception.
Right now we’re going to take a look at what does B2B mean and whether it’s possible B2B payment processing free.
What do B2B payments mean?
In order to distinguish a payment that is made by one company to another company from any payment that is made by a consumer who is an individual, the term B2B was introduced.
There is not a single company in the world that has not made at least one payment to another company throughout its history. Such payments are made every month, and your company probably makes them as well, for example, paying for server rent, paying utility bills, and so on.
Some interesting features of B2B development
Right now we offer you a look at some interesting features of B2B payments development, as well as the most popular trends:
- Checks are the preferred form of payment for many businesses. In order to send a payment to another firm, 34% of companies, according to information from Mastercard, use checks specifically
- Credit cards, regular payments by ACN and online bank transfers were the more popular payment methods between companies during the last year
- 18,2% of companies prefer to make payments via CLAs
- 9.1% of companies use credit cards to send payments
- Cryptocurrencies, despite their popularity, are very rarely used in B2B payments. The main reasons for this are the very unclear rules governing the use of cryptocurrency around the world, as well as the risks associated with the high volatility of cryptocurrencies.
It is worth saying that despite the fact that credit cards are not the most popular way to make B2B payments, their popularity is growing every year. Just like individuals making purchases from companies, businesses themselves appreciate their ease of use and incredible simplicity.
Opportunities and hidden risks of some B2B payment methods
Above, you and I reviewed some facts about B2B payments. Imagine a situation where your vendor can only accept payments in one of the following ways. In this case, you should keep in mind some important nuances.
Cash
It would seem that cash is accepted by all companies in the world and should be the most popular B2B payment method. However, in reality this is not the case, because sending money through the postal service is extremely risky. In addition, while paying with cash in the U.S. is not difficult, because all companies accept cash, paying with cash in other parts of the world may cause difficulties, because your provider will not be local.
That’s why cash can rightfully be called a B2B payment method that is becoming less popular every year.
Checks
On the one hand, there is nothing easier than writing a check on a plain sheet of paper and mailing it in. In practice, this is not the case, and it will take a lot of time for the company to get to its destination. This gives the payer some time to deposit the funds needed for payment into their account. The problem with checks is that no one can know for sure when they will be cashed, making it very difficult to predict one’s finances.
And yet, despite the decline in the popularity of checks as a B2B payment method, they are still the most popular.
Wire transfers
Wire transfers are probably one of the fastest ways to send money to another company, but the company will have to pay up to $40 per transaction, which is not cheap. If a firm sends an international payment, it will have to pay an even higher fee.
Credit Cards
The widespread use of credit cards when sending B2B payments is due to the various rewards schemes, fringe benefits, cashback, and favorable interest rates that some companies offer. But in reality, some companies charge their customers very high fees, making some businesses reluctant to deal with credit cards.
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