Why Accounts Receivable Is Warming Up To Digital Currency

Any business that trades internationally or manages a global workforce will be familiar with the pain points of traditional cross-border wires and bank transfers.

With barriers to globalization lowering, more companies are exposed to the challenges of a lack of visibility, lengthy processes and high fees with unfavorable exchange rates.

In many ways, the rise of crypto and digital currencies like Bitcoin aims to address some of these issues, empowering payers and payees with a way of bypassing the “middleman” of the inter-banking system for faster transaction speeds.

Yet in B2B payments, with transaction values often in the thousands or tens of thousands of dollars, the current landscape for global cryptocurrency payment services isn’t always an affordable alternative, according to Gilded Chief Operating Officer Neal Roche.

“These providers have become like a credit card transaction,” Roche told PYMNTS in a recent interview. “They accept cryptocurrency, facilitate the exchange, charge a processing fee then transfer funds into a bank account in one or two days. That’s OK for accepting small funds for consumer products, but those payment processors are not ideal for larger B2B transactions with credit card-like processing fees.”

This is the challenge that Gilded aims to address with its services that enable corporates to issue invoices and accept crypto and digital currencies on those bills. Accounts receivable (AR) departments are gradually opening up to digital currency acceptance, but as Roche emphasized, it’s not a transition that will happen all at once. Choice, he said, is key to guiding corporates toward a digital currency ecosystem.

The Benefits To AR

Cryptocurrency transactions can offer a host of benefits for B2B payment scenarios, with AR teams able to secure greater visibility and predictability into incoming payments while obtaining a secure record of the transaction.

Yet few AR teams are eager to embrace crypto. Existing digital currency offerings require many manual steps to manage crypto wallets and exchange accounts, enter long identification numbers and manually manage transaction data via spreadsheets.

“It’s not business-friendly,” Roche said, adding that this led to the creation of Gilded to not only enable cryptocurrency B2B transactions, but support automation in the acceptance and reconciliation of those payments, while connecting with back-office systems in the AR department and lowering transaction fees for high-value payments.

Initially, some early adopters of the solution have been certified professional accountants (CPAs) and accounting firms that are servicing business clients in the crypto industry. The ability to accept cryptocurrency can be instrumental in driving customer satisfaction, particularly for crypto businesses that understand the digital currency arena well.

But increasingly, Roche said more non-crypto businesses are expressing interest in paying via digital currency, adding new pressure on AR departments to explore how they can support their customer need and obtain the benefits of transparent and accelerated payments without the drawbacks.

Embracing Choice

For many traditional firms, cryptocurrencies remain off-limits thanks to the market’s perception of risky volatility. That doesn’t mean digital currencies aren’t in the cards, however.

“Many traditional businesses that are not related to the crypto industry don’t even like crypto because of the volatility,” noted Roche. “Those businesses will look to digital currencies.”

In this regard, stablecoins have been particularly disruptive at enabling corporates to embrace the benefits of cross-border digital currency payments.

“Stablecoins have seen a huge influx in the last few months,” he added. “This is lowering the barrier for traditional businesses to take advantage of digital currency, versus the wild west of cryptocurrency that companies don’t want to touch.”

As organizations dip their toes into digital currency, it’s also important to recognize that, despite its potential value to B2B payment workflows, digital currencies still have a long way to go before they are commonplace. As a result, Roche said it’s important to not only offer businesses and their customers a choice to receive and send cryptocurrency, stablecoins, and other digital currency, but to also integrate support for traditional payment methods.

“We realized early on that no one is going to force an upgrade of their current payment channels just to replace them with digital currency,” he said. “Companies need to offer their clients choice.”

Supporting digital currency alongside traditional methods like credit cards and bank transfers means organizations can adopt cryptocurrency or stablecoins on their own terms. It may also make it easier for AR teams to more clearly recognize the potential benefits of digital currencies compared to other payment methods they accept.

Gilded aims to expand its product offering by augmenting support for corporates to initiate B2B payment via digital currency in addition to its AR offerings, and to embrace bank connectivity capabilities to enable crypto wallet connectivity, custodial options and exchange capabilities. With more non-crypto businesses exploring the potential of digital currency in B2B transactions — and with more organizations elevating scrutiny over high cross-border transaction fees amid the coronavirus pandemic — Roche said digital currency is headed toward a more prominent role in the B2B payments ecosystem.