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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.

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