The Complete B2B Payment Processing Guide

Florence Carpenter

This year, the business-to-business (B2B) industry is expected to reach a revenue of more than $6.6 trillion. With the industry assumed to expand exponentially in the next few years, your B2B company must thrive in the ever-changing B2B landscape. One way to keep up is by using effective B2B payment processing methods.

As a business owner, you must ensure that your enterprise has a fast and reliable B2B payment process method. If you use an unreliable B2B payment scheme, you may deal with security issues and payment delays, among others. This can be detrimental to the health of your business.

Choosing the right payment gateway and processor can be challenging, especially given how there are hundreds of payment solution providers at present. 

Not to mention, you’ll want to know how you can avoid chargebacks and enhance the overall experience of your B2B clients. Aside from this, you’ll also want to get the best value for your investments, especially if you pay a hefty amount of fees in payment processing.

For this reason, you must understand the inner workings of B2B payment methods to know the ideal process to take. In this blog, we'll cast light on the B2B payment process so you can better navigate the payments evolution and keep more clients.

What are B2B payments?

B2B payments are business transactions made between two merchants for services and products. For instance, a real estate company may buy construction materials from a supplier. Essentially, when an enterprise invoices another business, a B2B payment scenario comes about.

In the past years, business-to-business payment methods have presented substantial opportunities. The global B2B payment market covered about $732.4 billion last 2019. It is reckoned to grow up to $1,900.6 billion in 2029 and is estimated to have a compound annual growth rate (CAGR) of more than 10%.

The Difference Between B2B and B2C Payments

Although relatively parallel with business-to-customer (B2C) payments, B2B payments require additional processes that make each transaction more sophisticated. When two businesses transact, more steps are involved to lessen possible issues that may arise due to the method, scale, and even contract of business-to-business payments.

Scale or Volume  

Generally, B2B payments are more significant in size than B2C payments. There is an expected increase in B2B payments in the next five years because of the continuous upsurge of Software As A Service (SaaS) business and the subscription economy.

Rules and Regulations 

Because B2B payments are much larger than B2C payments, they are under greater scrutiny than the latter. B2B payments require more regulations that dictate how payments are processed and what payment methods are utilized. 

Whether it is congressional oversight or contractual obligations, the regulations lead to more payment process standardization that’s not required in B2C.

Payment Methods 

Since B2B purchases are bigger than B2C purchases, instant or digital payments are not always feasible. Business-to-customer payments are more flexible than business-to-business payments, wherein contracts define what the payment method needs to be.

B2C transactions are usually processed using electronic methods, while B2B transactions often use bank transfers, paper checks, and direct debits. For this reason, delays may ensue that may result in compromised cash flow.

B2B Payment Lagging Behind B2C Payment

While the B2B payment market presents extensive growth in the future, there’s no doubt that business payment methods presently fall behind customer payments. Current B2B payments lack the same efficiency, flexibility, and security that most B2C payments have.

According to PayStream Advisors ePayments Report, about 46% of enterprises still depend on paper checks when doing business-to-business transactions in 2018. While printed checks are relatively easy to manage, they often result in the following negative attributes:

Hidden Fees and Costs

Paper checks often escalate transaction costs due to hidden fees and expenses. This may include the following:

Labor costs  

This may cover accounting and administration costs. Labor costs are considered the biggest expense that enterprises incur when processing B2B payments via checks. Every process, including the approval of checks and deposits, needs substantial time investment that requires fees.

Distribution fees  

Evidently, printed checks need to be circulated among sellers and suppliers. This means that businesses need to pay for transmitting supplies to get their payments through or vice versa.

Check fraud costs 

AFP Payments Fraud Survey claims that about 74% of respondents experienced check fraud. These check fraud costs can range from $4 to $20 per check.

Payment delays

While B2C payments can only take seconds or minutes, B2B payments can take up to 1-3 months. This may be because of the different payment terms between the two.

B2B payments usually have payment terms that can take up to 30 days. These terms are deep-rooted in the industry, and buyers don't make advanced payments for their orders.

It's not feasible to have a business-to-business e-Commerce company to base its revenue on advanced payments. Alternatively, B2C transactions are always made directly, with products and services received subsequently after payments.

The Rise of Electronic B2B Payment Processing

While electronic payment processing isn't streamlined flawlessly in the B2B industry, demand for innovation furthered newfangled business-to-business payment systems.

According to the National Automated Clearing House Association (NACHA) and the Credit Research Foundation, about 32% of B2B transactions are now carried out through Automated Clearing House (ACH) transfers. ACH is a computer-based funds-transfer system for processing payments. The same report claims that these ACH transfers will increase by up to 45% this year.

What's more, the study found that accounts receivable (AR) executives are expecting that usage of checks will drop to 34% by the decade's end. This is because more enterprises transfer to digital business-to-business payment methods like debit, wire, and credit.

As might be expected, prime movers like the US government help set a precedent for B2B electronic payment solutions. In fact, all invoices for business-to-government (B2G) payments will be acknowledged only in electronic payment forms.

Several property management companies now also use digitized B2B payment platforms to manage rent and homeowner's association (HOA) fees. Aside from touchless payment collection, these companies also use these electronic payment schemes to pay service providers that maintain their properties.

The lockdown that ensued due to the COVID-19 pandemic perhaps drove the increase in electronic B2B payment processing usage. As per the Centers for Disease Control and Prevention (CDC) recommendations, the zero-touch payment process makes it easier to promote social distancing.

Qualities of a Good B2B Payment Processing Provider

Excellent Security

Excellent security is essential in any business transaction, whether it concerns payment processing or not. Your B2B clients send valuable bank accounts and credit cards information online, so they must be protected at all costs.

To avoid security issues, you may want to find an online B2B payment processor that complies with the Payment Card Industry (PCI) standards. 

Also, make sure that you implement the best security measures on the payment pages of your website. By doing so, you will be able to address your business partners' concerns at the exact time they made transactions.

Ease of Use

Choose a payment processor that's easy to use. You may have old-fashioned B2B clients wary of making online payments, so making your online submission system easy to navigate can be of great help.

People should be able to log in and put their payment details without difficulty. Create an online submission system that accepts the types of payment that your clients most often use. This can include ACH payments and credit cards.

Convenient Integration With Business Software 

Whatever payment software you decide to use, always ensure that you can incorporate it with the current business software you have. Some B2B payment processors are well-matched with several business platforms or software, while some are somewhat circumscribed. 

If you choose a payment processor that can't integrate, you may need to fine-tune your software around it. This process can be extra complicated.

Great Service Provider and Buyer Protection

The payment processor you select must protect your business and your B2B customers from false charges and fraud. Credit cards are commonly used in payment processing because credit card companies offer high levels of protection.

24/7 Customer Support

Great B2B merchant services provide 24/7 customer support. You never know when you or your B2B clients need help regarding payments, so choose a payment processor that offers customer support around the clock.

Minimal Transaction fees

While transaction fees are inevitable, you can avoid getting bankrupt by choosing a payment processor with low transaction costs. Be that as it may, you also ought to be vigilant of some companies that claim to have very low fees. Some payment processors conceal huge transaction fees through inconspicuous “fine print” to be deceiving.

Tips for Finding The Best Payment Gateway for The B2B Payment Process

Finding the right payment gateway is vital for your business. To help you simplify this seemingly daunting task, take on these tips:

Go For Local Options

Most businesses go for local banks or payment service providers (PSPs) as partners because it is economical. Unlike with overseas acquiring banks, local banks levy minimal transaction fees. Choosing a local bank as a partner is even more beneficial if you plan on selling your B2B products or services within your home country. 

If you're planning to market your products or services globally, a bank with ties in a host of other countries is your best option. This will allow you to transact with clients in more countries. 

List Down Your Ideal Payment Schemes/Methods

A payment gateway that supports a wide range of payment processors is also preferable. You want a payment gateway that can accept any payment method that your client has. Choosing one that accepts a limited number of payment methods can cost you clients.

Your payment gateway should support almost all payment networks, electronic checks, and e-wire transfer. Choose a payment gateway that can support a host of credit card networks, especially if you plan on catering to global clients. 

For example, although Mastercard and Visa are the leading names in the credit card niche, Chinese clients prefer WeChat, and Latin-American clients prefer LatAm. 

Find Experts in Your Field

Some payment service providers specialize in a particular industry. Look for experts in your industry. They know their way around, and they are in the best position to protect your business from financial risks. A payment gateway whose expertise covers your business can help keep your business in great financial shape. 

Choose a 100% Secure B2B Merchant Services Provider

Protecting the card data of your clients is protecting your business. It builds trust between you and your clients, and also establishes your business' reputation as a reliable partner. That said, choose a PSP that holds a Payment Card Industry Data Security Standard (PCI DSS) certificate. 

A PCI certification means that your PSP implements the best-known practices in the industry, like installing firewalls that shield your client's card data from security breaches.They’ll use encryption software to hide data transmissions, and have anti-virus software to protect you and your clients from hackers. 

PCI-compliant security assures your clients that it is safe to conduct business with your company. It also shields your company from fines from government regulators. 

Your Options for Collecting B2B Payments

There are several various B2B payment processing methods. We'll discuss the topmost commonly used B2B payment schemes and how each can affect your enterprise.

Credit Cards

Although credit cards are reliable, they come with hefty contingency fees, especially for B2B companies that process a huge volume of payments.

MasterCard and Visa, among others, have tripled their swipe fees in 10 years. This can easily cut into the profitability of your business.

What's more, some credit card companies have a maximum limit in transactions. This can make it unthinkable to process extremely large payments. If you hit the limit, it may result in delinquent churn or clients' loss due to payment problems.

Bank and Wire transfers

Bank and wire transfers can be difficult to set up, but they are quite reliable and secure. Although they impose fees, there are no limits to the volume of transactions or payments that can be transferred from one bank to another. If you're looking for quick transfers, bank and wire payments can indeed provide the best timing and terms.

Printed Checks

Physical payments, such as printed checks, conjure up logistical issues. You may also encounter errors with handwritten checks because of bad handwriting. Since there are no electronic paper trails, dealing with these errors can be extra challenging.

The average cost of processing checks is around $5, according to The Accounts Payable Network. This then exposes the lie of how “inexpensive” printed checks are.

Cash Payments

Cash is the most unreliable type of method because it can be difficult to track. What's more, huge cash payments have significant regulations regarding their use, making it an ineffective way to make business-to-business payments.

Automated Clearing House (ACH)

ACH's main purpose is to process e-checks/electronic checks. In this method, the payments are pulled from the buyer's bank account and deposited into the seller's account. If you often do scheduled and/or recurring payments, this option can be ideal for your enterprise.

How Processing Card Can Help

If you’re in the business of high-volume transactions our experts at Processing Card can help you search for the best payment services for your needs. Why wait when you can accept payments today?

Get your high-risk merchant account up and running within 24 hours and contact Processing Card today!  

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