B2B payments and the untapped potential for the B2B ecommerce industry
The purchase journey for the consumer has been largely obsessed over by tech. The B2C checkout has been glamorized by seamless fraud screening tools, BNPL solutions, e-wallets, and just about anything else merchants need to enable a convenient purchase.
On the business side, companies are at different stages of maturity when it comes to developing and investing in the path to purchase.
B2B payments are the perfect example. And what exactly that term means varies from company to company. But once you understand the different use cases and applications, the opportunities that B2B payments present can’t be unseen.
What are B2B payments?
B2B payments are a broad term referring to the process, method, and action involved in a business transaction. Merchants depend on B2B payments to receive funds, facilitate transactions, accept payment, and ultimately manage flow of cash.
But there is quite a level of complexity involved in each one of these steps.
Each purchase typically goes through a rigorous buying decision cycle with multiple stakeholders involved. By the time the buyer is ready to purchase, there is often some negotiation or opacity in pricing. Then when it finally comes to the payment, there are no standard methods in B2B. What suppliers accept vs how buyers want to pay, can vary significantly.
The offline and paper-driven processes traditional to business payments only complicate matters. And most of all, they are simply no longer fit for the new wave of digital adoption in B2B. Businesses have tackled this reality in a number of different ways.
How do B2B payments work?
Some merchants have started offering online payment options, like via credit card or PayPal. Others rely on their ecommerce channels solely for receiving quote requests, while payments are handled via offline trade credit lines or net terms.
Both of these present a challenge for merchants. While credit card payments or PayPal may allow merchants to receive online orders, businesses need more flexibility than what these payment methods can offer. And leveraging ecommerce without accepting any form of online payments, limits the impact and scale of a true digital channel.
Buyers have their business payment preferences and want to keep the way they’ve been transacting, simply the expectation is now to translate that into a digital format. That's what B2B payment solutions are all about—bringing B2B payment functionality online, with all of the benefits that come with digitizing invoicing, automating reconciliation, and integrating more value into the checkout.
So the B2B payments that can help businesses optimize and grow as they move online, are not the clunky, offline ones.
According to Paul do Forno, Managing Director of Commerce Practice at Deloitte Digital, “there is a segment of the market that doesn't ask about payments simply because they don't even know what that can mean for their business.”
Paul has analyzed the ecommerce evolution over the last 20 years and has been on the partner advisory board of all the major enterprise commerce platforms. He has also led some of the largest B2B Commerce transformations during that period.
And he believes that it’s just a matter of time before B2B payments are prioritized. Not only as a way to reduce friction at checkout but to collect money faster and reduce financing costs, all of which can result in significant savings.
How to do B2B payments
Some people think B2B payments simply mean ecommerce credit card payments. It’s for this reason that if a business is currently offering payment terms and seeing success there, then the need for B2B payments can be overlooked. The how and what of B2B payments also really depends on the business size, ecommerce maturity, market, and business type.
For example, Paul explains that for smaller companies, the payment priorities are more similar to the B2C world–with an emphasis on the digital experience. Whereas “when we're working with big chemical and oil companies, DSO collection and working capital are a major topic.”
He adds that some of the clients that come to Deloitte Digital have used the same payments infrastructure that they put up 15 years ago and have never updated since.
As a result, something as simple as reducing invoicing from 90 days to 60 days through automation has saved them hundreds of millions of dollars. “We’ve seen that be the case for one of the largest oil companies in the world,” Paul says.
Marketplaces as a use case
Marketplaces, on the other hand, are an example where B2B payments are almost immediately understood as an advantage. Paul believes that it’s no longer a question if there will be B2B marketplace adoption, but rather a matter of who will win.
A lot of the marketplace success is due to the fact that even though there are certain supply restrictions, legal, and compliance regulations—marketplaces have figured out innovation quirks and solutions to make the buying and selling process easy. Among those solutions are payments. According to Paul, “payments are a no-brainer for marketplaces.”
From the B2B marketplaces that we work with, we’ve seen payments not only scale the volume of transactions that can go through their platform but result in monetization and retention.
The move to omnichannel B2B sales
As ecommerce continues to grow, the payment conversation will continue as well. A lot of B2B ecommerce tech and solutions are still seen as nice-to-haves. But as ecommerce becomes more about the end-to-end experience, payments will become key to enabling that.
Paul explains that as with B2C ecommerce, B2B will also evolve to be more about omnichannel, and increasing optionality and choice for customers.
“When I started talking about ecommerce back in 2003 or 2004, retailers would treat ecommerce like a different segment. And then as it started to grow in prominence, we were introduced to the idea of omnichannel.”
B2B ecommerce merchants have the advantage that they can learn from the trends of B2C and start already planning for when customers ask for more than just a direct website. “Commerce can also be mobile. It can be a marketplace. It could be sales-assisted. It could be a punch out to procurement,” Paul points out.
That’s why he champions the term omnichannel when discussing B2B ecommerce, because it’s about “all things digital selling, end-to-end.”
Paul started using this terminology after seeing industrial companies resist ecommerce. “There is this belief that some companies have said that their buyers won’t be able to order online without the help of a sales agent,” Paul says.
So he started to explain to merchants that what you're doing with ecommerce is making sales interactions easier. When all of the information is reflected on the website, sales can just focus on building deeper customer relationships, rather than order taking.
Expectations are on the rise
Payments are at a similar point where merchants can argue that one payment method is enough or that buyers won’t want to pay any other way than with what they're used to. But what if they could pay online with B2B payment methods like check or ACH?
What if they could pay with net terms digitally and seamlessly? And what about buyer expectations 5, 10 years down the line? Businesses that are already starting to address legacy payment infrastructure and costly A/R management today, are well positioned to take full advantage of the ecommerce opportunity.
Prep for the future of B2B payments
As ecommerce takes on a bigger focus in B2B, the payment needs and expectations are changing. The future will belong to those that are willing to lean into that. Because increased buyer demands are here to stay.
And as Paul points out, “it’s not about deploying a quick-fix solution,” but rather it’s about finding a partner that’s committed to one thing: helping merchants grow.