The ultimate guide to B2B payments: what they are, types and current situation

B2B payments are transactions between companies for purchasing goods and services. We tell you all about B2B payments and how to get the most out of your transactions with suppliers.

Current status of B2B payments

The covid-19 pandemic has revolutionized the current state of B2B payments worldwide. The ever increasing demand for online products, accelerated by mobility restrictions enforced by governments around the world has led to an unprecedented increase in imports worldwide.

B2B payments were already a reality before 2020 but dramatic growth is expected through 2028. According to a study by Allied Market Research, the global B2B payments market had a total volume of $870.42 billion in 2020, and it is estimated that, by 2018, it may reach $1.91 trillion, with an annual growth of 10.6%.

At the moment, most of the volume of these payments is focused on the domestic market, i.e. payments within the domestic market. However, although cross-border payments are still residual, especially compared to domestic payments, they are expected to increase between now and 2028, especially for large companies.

Bank cards

Bank cards are very popular for B2C payments but not so much for B2B payments. Despite their convenience, there are several obstacles to implementing them in companies:

High fees: Traditionally, bank cards have been associated with a fee for each transaction which reduces their attractiveness. In fact, according to a ValuePenguin study, these fees cost suppliers an average of 1.81% per transaction.
Need for manual intervention: Nowadays, it is difficult to automate payment by bank cards in companies. In these cases, the supplier must retrieve the card number, process the payment through a payment terminal and integrate its payment information into its ERP system.
Security breaches: Bank card information is extremely sensitive. The more cards the business accepts, the greater the risk of this data being exposed.

However, bank cards are one of the fastest B2B payment methods available, as payment is instantaneous and funds are available in the recipient's bank account in real-time.

Bank transfers

Wire transfers (also known as Wire Transfers) are payment methods in which funds are transferred from one bank account to another. It is one of the fastest methods available, as the funds are usually available in the beneficiary's account in less than 24 hours in the case of local transfers.

They are also used for international or cross-border payments, where the sender and receiver are located in different countries. There are two types of depending on the countries and the currency in which the transfer is made:

SEPA transfers are those made within the Single Euro Payments Area, which includes 36 countries in total: the 27 member states of the European Union, plus Andorra, Iceland, Liechtenstein, Monaco, Norway, San Marino, United Kingdom, Switzerland and Vatican City.
SWIFT international transfers, an acronym for 'Society for Worldwide Interbank Financial Telecommunication, are international transfers executed outside the scope of SEPA. Usually, international transfers through the SWIFT system involve a currency exchange, which usually has an impact on the costs associated with these transactions.

What are the main challenges of B2B payments?

Despite their potential, B2B payments face several challenges. Some of these are:

Since B2B payments typically involve high-volume transactions, security breaches are a risk to be taken into account. In this regard, it is critical to ensure that no confidential third-party information is compromised.
Modern business applications and systems make it possible to automate certain treasury-related processes. But there are some issues, especially if they are not sufficiently tested. This can lead to incidents that end up incurring more costs and resources than when done manually.
To date, payments are still not settled in real-time. Despite efforts to implement instant transfers, there are still transactions that take 2 to 5 days to process, especially in the case of international transfers, which makes it difficult to report corporate cash flow data.
There is a huge asymmetry between businesses when it comes to B2B payments. Even if a company is sufficiently digitized and its processes are ready to process B2B payments digitally, its customers or suppliers may not be. This means that not all operations can be automated, at least not in the way that many companies would like.

As you can see, the challenges of B2B payments are greater than the usual payments between a merchant and a consumer, as other factors and variables come into play that make their needs different.