B2B payments have been a long-term laggard compared to their consumer counterparts, as many old-school paper checks and disconnected legacy software systems contribute to payment delays that can take weeks.
But that reality is actually changing, as Thomas Priore, executive chairman and CEO of Priority Technology Holdings, told PYMNTS — and it’s changing faster than most people realize.
“Statistically, we’ve seen 100% year-over-year growth in the adoption of card-based payments on our platform,” Priore told PYMNTS in an interview. “There’s a comfort level that consumers have always had with their card, and that’s being translated into their business lives. That was not the case pre-COVID, so there’s been an acceleration that the pandemic has afforded this segment.”
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Old Holdouts Take a Fresh Look
One-hundred percent growth sounds impressive, but Priore admitted that the company was starting from a very low base. Even now, he said, more than 50% of B2B payments are still resolved with checks.
That said, there has been an undeniable acceleration in areas such as healthcare and construction, two industries that have traditionally been resistant to change. “Now we’re seeing that many of those organizations that had built software for automated payables are starting to adopt digital strategies, whether it’s card, dynamic discounting or ACH with terms,” Priore explained.
Just as important, he said, are any efforts that can reduce friction with suppliers, a process that requires a great deal of time spent educating suppliers about the fact that it costs far less to accept digital payments than they might realize. Card networks such as Mastercard, Visa and Discovery have also played a part in the increased business uptake by lowering their rates to reduce the costs of interchange, Priore said.
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“It’s a combination of those factors all working in harmony, coupled with the level of comfort individuals have in operating this way in their business lives, the same as they have operated in their consumer experience,” Priore said. “We’ve got a nice trend developing.”
The Trend Is Your Friend
Another factor is the coronavirus pandemic, which Priore said rendered many older business practices impractical, and made digital payments a necessity rather than a luxury.
“It’s a means of working more efficiently, given that people aren’t in the office now,” he said. “So they’ve adopted strategies that are required to keep business flowing.”
Looking ahead, Priore said his company has big plans to further evolve the world of business payments. He sees a big opportunity in what he termed the “convergence of payments and banking.”
“So imagine that in the B2B space, where there’s no longer a need to drive adoption of a supplier on a card, I can give them a virtual wallet to accept payment and I can permission them immediately,” he explained. “That’s where we’re headed. So you have a buyer, and then – bang! – I’m going to automatically permission all of their suppliers to receive funds digitally in a virtual wallet.”
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Priore reckons that such a digital wallet would be advantageous for buyers and suppliers alike. For example, suppliers will be able to access their money as fast as they want, though the buyers could still dictate terms associated with that access. It will also simplify international transactions for both parties, he said, because all transactions will take place in that closed-loop wallet framework.
For all of his enthusiasm around digital wallets, Priore was less fervent over the prospect of cryptocurrencies being used in such a framework.
“To me, crypto is just another tender type. We’ve tried to build an agnostic network to move value from A to B,” he said. “We’re kind of indifferent as to whether or not we’re picking up crypto and delivering it, or settling it in dollars or euros.”
Of far greater interest to Priore is the additional value virtual wallets will be able to provide to his customers.
“As we get more and more good data around those networks, things like predictive analytics and AI will come into play,” he said. “So we’ll be able to predict how likely a supplier is to accept, what the costs will be, and then optimize these things using AI and other analytics. It sets everything up for a really exciting time in this market.”