Why is the progression of electronic B2B payments so slow?

It is important that B2B businesses switch to electronic payments to keep up with the fast pace of today’s demands, as cheques will soon become irrelevant and too slow for expanding businesses however, the electronification of business-to-business (B2B) supplier payments has been progressing at a much slower, albeit steady, pace compared to business-to-consumer (B2C) payments. There has been a lot of speculation as to why B2B payment conversion is so slow.

There are a few problems that have cropped up regarding B2B electronic payment conversion, which is causing the process to be so slow. All parties involved in making payments want to be able to control every aspect of their payment. Payers want to control the timing of disbursements; suppliers want to accelerate collection of payments and this process is something that is not so easy to control with automatic electronic payments when you have data to consider at each step of the supply chain.

Firstly, most businesses have many customers and suppliers. It is not unusual, for example, for a large B2B company to have hundreds of thousands of suppliers in their vendor database. Electronic payments become too time-consuming when you have to go to each individual company, find out their account details, in order to send them a payment, and then store and update these details when necessary. On the other hand, when making cheque payments, all you need to know is your supplier’s address – and that should already be in your database.

There are also regulatory issues: Different governments have different rules and ways in which they view the flow of a payment, and companies need to deal with that in order to comply with separate laws. This also takes time and effort to implement when dealing with electronic payments.

The third issue is the business model in B2B payments. Business models in B2C are really simple and understood by the consumer, but in B2B, different supply chains have different rules, different interactions within the business and with other companies and even different B2B companies have different business models. A more flexible approach to these different interactions and the ability to deliver payments that work around different business models needs to be introduced to speed up the uptake of electronic payments.

Technology changes also need to be addressed. In the B2B space, data matters. Data lives in back office information systems – in ERP, purchase-to-pay systems, order-to-cash systems, electronic invoicing systems, and more. The data received at certain points in the supply chain can determine or change the destination, amount, speed or volume of a certain payment. Cheques can be cancelled at any time, whereas when electronic payments are sent they are automatic and instant. What is needed is the ability to change the payment once it has been sent electronically.

North Payments offers fast application to combat these issues, along with competitive rates. North Payments offers scalable and flexible solutions to adapt to any business model. We are able to change payment modules at the press of a button, leaving a business to quickly change payment data according to business models or data received at different intervals in the supply chain.

North Payments can help take B2B companies into the digital age, paving the way for more similar companies to do the same.