Bank debit and checks remain two of the top methods companies use to send payments — but with check use rapidly declining, debit is poised to take a greater stake in the B2B payments world.
Debit-supported account-to-account (A2A) money transfers could help companies smooth out friction points in their B2B or B2C payment processes. This could not only offer firms a key competitive advantage as more businesses migrate their B2B payments online, but could also become the standard way to pay in the future.
In fact, digital B2B payments accounted for approximately one-quarter of total business payments value for the full year in 2020. At the same time, the share of instant payment use is expected to expand over the next two years, according to the September 2021 Next-Gen Debit Tracker, a collaboration between PYMNTS and PULSE, a Discover company, bringing the total global payment flows between businesses to more than $120 trillion each year, as PYMNTS reported.
See also: Easy Fix: Merchants That Accept P2P Payments Win New Business, Customer Loyalty
Next-Gen B2B Payments
Not surprisingly, B2B modernization is, more than ever, top of mind for chief financial officers (CFOs), Corcentric President and Chief Operating Officer Matt Clark told PYMNTS in a Sept. 24 interview.
For example, Clark said, the adoption of digital solutions by firms to improve their accounts receivable (AR) and accounts payable (AP) has been accelerating, taking a cue from the streamlined, intuitive interactions that are the hallmarks of B2C commerce. Clark added, “B2C always leads the way, because that’s where all the big investment dollars go — B2B often trails behind.”
For example, payment provider PayPal recently announced a partnership with financial services provider Fiserv to enable the direct deposit of gig workers’ paychecks into their PayPal or Venmo wallets. This will grant independent contractors easier access to funds, providing key benefits for workers who typically lack the regimented payroll cycles of full-time employment.
The tool could also support instant payments for other disbursements, including insurance claims or federal tax refunds, according to PayPal statements.
These debit-supported A2A (account-to-account) money transfers could enable speedier B2B payments, just as they do for gig entrepreneurs’ payments.
Factors Driving the Boom
B2B payments are following a trend already seen in consumer payments. A2A transfers are swiftly overtaking more traditional payment methods, such as cash or plastic cards, at the physical and digital point of sale (POS) globally.
The main factor driving the boom in A2A transfers is the growing popularity of contactless payment methods, including mobile apps that support instant payments. A2A money transfers soared when consumers were forced to migrate from physical to digital commerce in the first months of the pandemic. Consumers are unlikely to put aside their mobile payment apps now that many retailers are reopening their physical locations.
The barriers to supporting emerging payment methods have also become fewer over time, further saturating an already crowded field.
A More Diverse, Varied Payments Ecosystem
The pandemic appears to have accelerated the creation of a more diverse, varied payments ecosystem, where consumers and merchants have increased access to swifter, more convenient payment methods, regardless of channel.
As instant payments become the preferred way for individuals to send and receive money, demand for speedier payment methods is growing increasingly important on the B2B side, too, as tech enhancements and digital process adoptions look to capture the untapped 75% of business payments that are still being done the old-fashioned way.