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B2B payments

  • The State of B2B Payments

    Earlier this week, President Obama delivered his penultimate State of the Union address.  Whether you agree with his assessment of our country’s condition or the future he envisions for it, the practice of looking back and analyzing where we were, where we’ve come, and where we’re going is a productive exercise.  In this spirit, we thought it a good time to take a look at B2B payments, their past, present, and future.

    Historically, check payments own the B2B market.  In 2004, 81% of B2B payments were made by check.  Today that number is down to 50%, according to a survey by the Association for Financial Professionals.  But within this figure the survey notes there is a difference between large companies (those with revenues exceeding $1 billion) and smaller organizations.  Larger businesses process only 40% of their B2B payments by check, while these smaller companies pay 63% of their payments by check.  Larger organizations use wire transfers and ACH payments more than their smaller counterparts.  Wire transfers are often too expensive for small companies, as too are ACH payments.

    Both wire and ACH are also more difficult for small businesses to convince vendors and customers to use.  In fact, 82 percent of survey respondents indicated that they do not use electronic payment methods because they can’t get customers to pay that way.  74 percent said suppliers too won’t pay electronically.

    Here in lies the issue facing B2B payments.  While check payment loses its hold on the market, what is taking its place?  The answer is many things.  ACH payments, wire, credit card, debit card, and EFT payments all make up the other 50%.  This causes issue as all companies use different methods and thus require and request separate payment methods.  The payment field is becoming fractured.

    But there are benefits to electronic payments.  Cost savings, improved cash forecasting, and fraud control were all noted as benefits of electronic payments.  The question then is will one of the before mentioned methods rise above the rest to become a ubiquitous tool, providing not only the savings and security of electronic payments, but the ease of use and acceptance that checks have had for so many decades?

    We do not feign to know the answer to this question (we are not soothsayers after all), and since we don’t, we have worked to make it easier to use any of these methods.  PrintBoss enables you to create checks, ACH files, and even virtual credit card payments with a click of a button.  The key is flexibility and PrintBoss provides that.

    What will the B2B payments landscape look like in the future?  Chances are it will be even more focused on electronic payments, but which ones?  It’s hard to say, but what we can say is that PrintBoss makes your payments today easier and more secure.

  • How Checks Stay Relevant in an Electronic Age

    Many of us don’t even carry wallets anymore.  Things like Apple Pay, Google Wallet, Bitcoin, and a multitude of other electronic payment innovations are aimed at removing our wallets from our pockets and putting everything on our phones.  Even some states are moving toward electronic driver’s licenses.  Soon we’ll be able to buy pants with one packet in them for our phones only.

    Yet despite this market move toward electronic everything, checks remain the standard business-to-business payment method, accounting for over 55% of B2B transactions.  How is this possible?  We discussed this a few months ago, citing the distinction between B2C payments and B2B payments.  While virtual credit cards and e-wallets have made it easier for consumers to pay with credit cards stored on their phones, this same method does not work as well for businesses that, one, are not paying a payable befoSecurity key lock with businessmanre a POS machine, and two, are not willing to accept a 5% merchant credit card fee.  If someone owes me $10,000, I am not going to accept a payment method that charges me $500.

    But there is another big issue facing businesses that most business owners quote when asked why they don’t pay via new electronic methods: security.  Over the many generations that checks have been the keystone in B2B payments, security has become tighter and tighter.  Whether it is security in the check stock itself through chemical detection paper, micro-printing, fluorescent fibers, and toner grip paper to name a few, or check printing software enhancements like electronic signatures, encrypted bank information, or Positive Pay capabilities, check security has become a key differentiator of check payments.

    While these new B2C or even P2P payment methods provide the flexibility that consumers want, the security risks associated with larger B2B payments are still too great.  There is a reason that you can send $50 to a friend free of charge through Popmoney, but this same service won’t allow a business to send more than $5,000 a month.  It’s too risky for the banks to back those payments.  If you need to process that much in a month, which most small businesses do, then banks will say just send them a check.

    There’s a reason that checks have stayed relevant in this electronic age and it’s because they are reliable, secure, and trusted.

    Print your checks onto blank check stock with our PrintBoss 30 day free trial and save even more time and money while increasing your security.

  • Why Apple Pay and other B2C Innovations Don't Translate to B2B

    Innovation in the payments industry is constantly at the forefront of tech media coverage.  The recent announcement of the Apple Pay product has thrown the tech and payments world into another tizzy.  Articles across the internet have discussed its role as currency, as well as its impact on other like products such as PayPal.  But in the end, all the hubbub surrounding Apple Pay speaks to this era’s fascination with finding the next best way to pay.

    While innovation abounds in the B2C payment field, few of these innovations pertain to the B2B market.  While credit cards or Apple Pay (virtual credit cards) may be great for buying shoes at Nordstrom’s, a business vendor is not going to incur that same 5% merchant charge for a payment from a customer.  For this reason, credit card payments have not taken hold in B2B transactions.  Similarly, virtual wallets simply don’t translate to B2B needs.

    The real issue facing all of these new payment technologies getting into the B2B market is they can’t compete with the ease, speed, and cost of the incumbent: checks.  Checks are low cost to both the payee and payor and the check payment system operated by banks and the Fed is streamlined for business.  Things like remittance statements and check clearing notices help businesses track payments.  ACH is the main competitor to checks in B2B payables, though security risks, long clearing times, and the difficulty of signing on vendors has slowed its market share growth.

    Recent developments in remote deposit technology have made check clearing even faster.  With the advent of mobile and desktop deposits, both enabled by the Check 21 Act, businesses are spending less time processing receivables and are getting their money faster.  In fact, with remote scan deposits, businesses can receive their money within minutes of making a deposit, instead of the 5-7 day lag time of 10 years ago, or the 3-5 day lag time of ACH payments.

    So what does this all mean for B2B payables?  It means that while payment innovation in the B2C market centers on credit cards and POS QR codes or apps, B2B payments are different.  B2B transactions require accurate and accessible remittance information and quick clearing for improved cash flow.  For this reason, it is the innovation in the check payments industry that has provided the greatest benefits to businesses.  By relying on the consistent and proven check banking infrastructure, increased efficiencies like remote deposit and digital clearing have improved payable processes and exchanged money faster.  Couple this innovation with the high level security measures currently surrounding check payments (i.e. signature requirements, Positive Pay, check stock chemical detection, etc.) and you can see why check payments are the most efficient B2B payment processing available.

    Experience all of these check benefits free for 30 days with the PrintBoss free trial and save time and money by printing onto blank check stock.  Learn more about PrintBoss here!

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