Five Factors Affecting B2B Payments

B2B payments can be made with checks, wire transfers, credit cards, automated clearing house transfers, and many other methods. Checks are still the most common way for businesses to pay each other. These types of transactions can involve more than one intermediary which can slow down processing times and possibly be subject to fraud. B2B cryptocurrency payments, on the other hand, make it faster to send and receive payments. Ultimately improving a business’s cash position.

In the cryptocurrency space, payments are completed much differently as they occur without banks or intermediaries. They simply and immediately occur on the blockchain. The blockchain technology is distributed across servers around the world, where cryptocurrency transactions occur directly among users or businesses. Transactions occur much faster than checks, wire transfers, or ACH and are highly secure. Each transaction is verified on the blockchain network where it’s impossible to introduce false information.

Factors affecting B2B payments

B2B payments have significantly lagged behind consumer payments over the past decade. Many factors create a “payments friction” that affect the current state of B2B payments. This friction slows down and creates inefficiencies in the transaction process for the businesses involved.

High processing costs

A significant pain point for many businesses is the high cost of transactions involved in the traditional payments process. The cost is amplified by the sheer amount of transactions that may need to take place to maintain business operations.

Manual processing

With multiple people being involved in each transaction, B2B payments can become very labour intensive. As the volume of transactions increases, the people involved in the accounts payable or receivable processes may sadly make mistakes.

Decreased payments visibility

Managing too many payment methods or payment platforms can often result in decreased transaction visibility. Businesses require clear methods for tracking and recording transactions.

Payment frequency and payment delays

Manufacturers, suppliers, retailers, and many other types of businesses will often have contracts with recurring payments. Processing times are an important metric for these types of B2B transactions. Any delay in payment, whether it be recurring or otherwise, can have a significant impact on cash flow and client/vendor relationships. 

High-risk industries

Many B2B companies deal in high-risk industries where accounts may go unpaid. These B2B companies are often speculating on which payments will be paid and when. Even though the costs of doing business are factored into the books, for many businesses it can leave them in a precarious position with dwindling cash flow.

Common methods for sending and receiving B2B payments

There are multiple traditional ways to make payments, but each method comes with its own pain points which we’ll outline below.

Checks

In the world of B2B payments, checks are still one of the most used payment products among small and medium businesses. It’s an extremely inefficient payment method that can be rife with fraud and painfully slow processing times.

Credit cards

Credit cards are a fast but expressive payment method. The average credit card processing fee can range from 3% – 5%. For B2B payments, the transaction size and fees can quickly amount to a sizable amount of lost revenue.

Wire transfers

Wire transfers are used much less frequently than checks, but they are often used for high-value payment transactions. However, wire transfers are expensive, especially for international wires. It’s also a manual process that needs to be done through the bank. 

ACH payments

Automated clearing house (ACH) payments are electronic payments that have become commonplace in recent years. ACH is limited by its international reach and manual bank process. This results in slower transfer times compared to even wire transfers.

Payment friction

Payment friction can be detrimental to a business as it affects cash flow. With many payment methods, visibility for what’s paid and unpaid is obscured from the accounting process. This payment friction increases the time between payments, and can lead to a delay in making or receiving a payment.

On an international scale the cost of payment friction is vast as it needlessly locks up business liquidity. Liquidity that can potentially be used for investments in products or services and overall company growth.

How Crypto disrupts the typical payments space

With complete transaction tracking and visibility, cryptocurrency is ideal for B2B businesses who are in need of a highly secure and fast payments technology. By not being controlled by any central authority, crypto’s decentralized nature immediately distinguishes itself from traditional payment methods. Indeed, one of the central tenets of the blockchain technology is autonomy. Cryptocurrencies allow B2B companies to have more autonomy over their transactions than other payment methods. B2B companies are able to control how they make transactions without intermediaries such as banks or third party companies involved in the process. 

Cross-border payments

Cryptocurrency allows the cross-border payments experience to be no different than from a local one. B2B supply chains are inherently globalized with suppliers, vendors, & retailers spread all across the planet. The days of B2B transactions tied to a single geographical location are long gone. 

Traditional payment methods have often struggled with cross-border payments. The challenges faced by international B2B companies are often related to transaction speed, currency liquidity, visibility, and cost. Cryptocurrency alleviates these challenges offering a system that runs peer-to-peer 24/7 across the globe. Its digital and direct nature means it’s a highly liquid system that continuously pushes for efficiency.


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