Where Electronic Payments Fall Short In B2B Commerce

Adoption of electronic procurement, online B2B commerce and digital invoices are all on the rise, yet just because a company uses an online platform to sell or procure goods does not mean the actual payment for those goods will be digital, too.

Indeed, an eProcurement system will often still require that companies complete the transaction outside of that platform. A digital invoice may be sent via email, but the recipient will still have to rely on analog, manual processes to pay it. Overall, the efficiencies gained via digital B2B buying don’t always extend to B2B payments – and that can be a major problem for buyers and suppliers alike.

Yet even when companies have access to electronic B2B payment solutions, their payment processes can fall far short of what they need. As organizations continue to face pressure to turn away from paper checks, their options are limited when online procurement platforms fail to guide them to the appropriate ePayment solution.

Take the commercial credit card, for instance. Even if an invoice is sent electronically, a buyer often still has to call their supplier and relay card information over the phone to pay electronically. This process may promote adoption of cards in B2B payments, but still leaves major gaps in security and user efficiencies on both sides of the transaction.

Payment software company VelocIT Business Solutions recently joined the list of companies that take a page out of the B2C eCommerce book, launching a Click2Pay “Pay Now” button on invoices exchanged via VelocIT’s Acumatica enterprise resource planning platform.

The feature has some obvious benefits for corporate buyers, according to Jeremy Burt, founder and principal of business development at VelocIT. Of course, there is the convenience factor of being able to pay a bill from directly within the invoice itself.

But there are less obvious reasons why such a feature is beneficial to the B2B commerce space, and as Burt told PYMNTS in a recent interview, they can be seen on both the accounts payable and accounts receivable sides.

Security Risks, Inconveniences

B2B payments are notoriously manual, even as payments technology continues to evolve, and as procurement and B2B commerce technologies grow more sophisticated. This fact can often be traced back to the unique challenges of the B2B payments space: For digital payments to address corporates’ needs, they must integrate into back-office systems for streamlined reconciliation, provide data for spend analytics, be affordable and be easy.

Perhaps most challengingly, the transaction must address the needs of both buyer and supplier, which often contradict each other.

Take commercial cards, for example. While corporate buyers like the familiarity and digitization of paying invoices via card, suppliers often shun the friction of implementing infrastructure for card acceptance, and particularly its cost. Further, corporate buyers forced to relay card information over the phone to pay an invoice will certainly dislike the hassle and lack of security that process creates.

Vendors face similar issues with security and compliance in this strategy as well, Burt said.

“The problem for businesses who receive customer credit card info by email or phone calls is two-part,” he explained. “First is trying to stay compliant while keeping the customer data safe in the process of writing card numbers down and passing them into your system or on to AR or AP departments.”

There is also the expense of manual processes as professionals spend valuable time writing and re-keying card numbers into their systems, added Burt.

Customer Control

Challenges like manual keying of commercial card numbers reflect the broader issue of electronic B2B payments. A company mailing out checks to vendors won’t switch to card payments if it adds to the manual workload.

Service providers have to address those issues when rolling out new tools in their broader effort to promote B2B payments digitization. For corporate buyers, Burt said, offering a portal linked to an invoice where they can submit their card details electronically not only adds to the convenience of accounts payable, but shifts the process to a “customer-controlled experience and customer-initiated payment process.”

On the accounts receivable side, service providers need to tackle some of the biggest hurdles to card adoption, including data integration and cost. Integrating into ERP systems is an important part of this, while Burt also emphasized the value in Level 2 & 3 data processing that not only increases the amount of valuable data a company can access on a particular transaction, but also significantly lowers interchange costs so vendors can more affordably accept cards.

“It depends on how many purchases and corporate cards are received by the business, but the savings can be significant,” he said.

As electronic procurement, B2B eCommerce and eInvoicing continue to evolve, the demand for not only electronic, but secure and efficient B2B payments will increase. Burt noted the space is changing rapidly, so payment technologies and service providers will have to catch up.

“I would suspect we will see deeper automation in the ERP space driven by the shift to an omnichannel experience,” he said. “Many businesses are working harder to meet their customers wherever they are. That means we need to provide a simple path to accept payments from social media, web, ERP eInvoices, retail and mobile – all within a single platform.”