The lockdown that ensued due to the COVID-19 pandemic exposed how labor-intensive current business payment processes are and how much companies rely on manual work.
According to a report by the Association for Financial Professionals, 42% of B2B payments are still made by paper checks in the United States. It’s rare to find an organization that has digitized completely, as 97% still pay at least some of their major business suppliers by check. This stems from CFOs and CEOs wanting to physically sign off on paper checks, despite the fact that it’s costly, time-consuming, and has a high risk of fraud.
Business suppliers who wanted to survive had to quickly rise to the occasion and meet the demands of buyers who were no longer willing to settle for less when making purchases digitally. This meant businesses had to cut ties with outdated payment methods in favor of more reliable and secure electronic payments such as ACH, virtual cards, wire transfers, and real-time payments.
Virtual cards, in particular, have started to gain traction in the B2B payment world. These are single-use “cards” with randomly generated credit card numbers sent by AP departments to their suppliers. Once an invoice is approved for payment, the buyer’s virtual card platform automatically sends the single-use card number to the supplier for the exact amount on the invoice.
Virtual cards allow the buyer to maintain control, convenience, and security when making transactions. They are less susceptible to fraud and data breaches as would be the case with traditional credit cards due to their one-time use and strict allowances. These cards also allow for suppliers to be paid at a faster rate.
Besides updating their payment methods, suppliers had to update the entire digital experience they were giving to their buyers. Anything less than outstanding was not going to cut it.
In a recent McKinsey survey of B2B decision-makers across 11 countries in seven sectors and across 14 categories of spend, 36 percent of their sample cited the length of the ordering process as one of the top-three most frustrating issues with suppliers’ websites; 34 percent cited difficultly finding products, and 33 percent cited technical glitches with ordering. Another common concern among the group was difficulty setting up payments.
To address these pain points, business suppliers amped up their websites and digital features in order to enable effective digital interactions by implementing live chat features and ordering through mobile apps. These features help make the process from ordering to payment seamless. Although the innovations taking place in the B2B payment space are happening rapidly, there is still a long way to go in order to come close to the innovations in the B2C space.