B2B payment processing

Let’s figure out what B2B payment processing is by dividing the term into two parts.

B2B, or business to business, is a type of company that provides services or goods to other companies. Respectively, when a company provides services to consumers, its business model is called B2C, or business to consumer.

Payment processing means a sequence of steps or processes required to finalise each online transaction, or a transaction made using payment methods other than cash or check. These steps depend on the method and transaction type but mainly involve data entrance, authentication, verification, and approval or decline.

This way, the term B2B payment processing refers to how a business that works with other businesses handles its transactions.

As we’ve just discovered, payment methods are the basis of processing. For businesses working with other businesses, the use of payment methods has its specifics compared to consumer-oriented business. Some options better serve the B2C model and are almost inapplicable to B2B, while others work better and are widely used to pay from company to company.

Let’s learn more about the best solutions for this segment.

Cash is the oldest method for payment acceptance. Although handling business payments in cash is very complex and inconvenient, good old paper money is still somehow in use, primarily among small businesses.

However, many businesses tend to decrease their use of cash already, and this trend is projected to persist.

Another traditional option, paper checks, is the most popular form of payment in B2B processing, although it’s far from being the best. The disadvantages business owners mention include high cost ($4 to $20 per check) and low speed. Besides, checks are error-prone and hard to keep track of.

All these drawbacks repel entrepreneurs and make them look for more efficient electronic alternatives.

ACH means Automated Clearing House, an electronic settlement system in the USA with debit and credit solutions.

Basically, the system allows making payments and payouts using electronic checks that can be settled digitally.

Many developed markets have similar systems, and such a form of payment is one of the most preferable by businesses due to low transaction cost, convenience, and high speed. According to a survey by Mastercard, entrepreneurs are most content with making recurring ACH payments.

Credit, debit, and prepaid cards issued through bank and payment institutions allow businesses to pay mostly for some inexpensive items, given the fact that large amounts may lead to greater bank or regulator scrutiny. Moreover, the business incurs fees close to 3% per credit card transaction.

Credit card B2B payments are on the rise these years thanks to fast processing and the simplicity and convenience of use.

Bank and wire transfers are complex to start with, so this form of money transfer is typically used by larger firms to send and receive international transactions. Transactions using wire transfer can be of any amount, so it’s a good way to send large payments between businesses.

Wire transfer via a banking network like SWIFT or SEPA is a type of electronic funds transfer, or EFT, meaning the digital money movement directly from one bank account to another. Historically, the trailblazer in the wire field is Western Union, but now wire transfers are widely used by many businesses worldwide.

Sending money via wire implies fees varying from $15 to $50 while receiving funds is usually free.

Cryptocurrencies are digital assets designed as a decentralised digital analogue for traditional money.

In the B2B field, the major benefit cryptocurrencies bring to businesses is the high speed and ease of international payments.

However, the price volatility of digital currencies, the need to exchange them, and regulators' concerns regarding them are major challenges.

Businesses also can send and receive money to and from each other using online payment methods. Some options are available after a fast registration process, like PayPal, while some require having an account at a provider.

Working with a payment platform not only gives access to a variety of online methods but also facilitates the payment process and allows to make a subscription, regular, recurring, and one-time transactions simply and efficiently.

Some platforms, including Corefy, offer additional features, like advanced invoice and fee management options, the opportunity to integrate multiple providers, processors and methods in a few clicks, collect analytics and have a single access point to all the data, route transactions, and much more.

There are a few trends that drive certain changes in the way B2B payments are made. Namely, a global upswing in card usage and real-time payments, growing investments in fintech, and open banking.

According to expert estimations , in 2020, more than 122 billion B2B transactions were made, with the market exceeding $100 trillion.

All these factors drive technology innovations and result in a growing variety of payment options for B2B. Some tendencies that we already witness are a decrease in cash and check usage in favour of virtual cards, electronic payables, and even cryptocurrencies.