Why B2B is the next trillion-dollar payments opportunity

Sept. 29, 2017

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By Andy Barker, head of global payments, Magento

Consumer-facing industries like fashion and electronics have long led the payments innovation game. Large investments in technology and talent over the past decade have brought about mobile wallets, "invisible” payments, one-click checkout, and other advancements that make the consumer buying experience truly frictionless. 

Meanwhile, business-to-business merchants lag behind, still trapped beneath outdated systems, analog processes and an “if it isn’t broken, don’t fix it” attitude that has prevented major technological transformation.

B2B businesses are typically older, running on what they know and what’s come before them. As a result, the $6.7 trillion B2B e-commerce opportunity remains largely untapped – and payments represent an important part of that untouched territory. As the final step in every purchase, the payment experience is a crucial component of the customer experience and, by extension, digital commerce’s multi-trillion-dollar potential. B2B payments is the next innovation frontier, and now is the time for technology providers and merchants alike to seize the opportunity. 

Tackle the B2B payments beast

Why has it taken B2B payments so long to adapt to the digital age? The B2B money transfer market is tough to crack. Technology providers need proven regulatory records, sound security practices and strong balance sheets in order to win over B2B merchants – a group that, generally speaking, is already resistant to technological change. 

Many B2B businesses still rely on their sales representatives to negotiate complex quotes, manage customer-specific pricing and cultivate ongoing relationships. While companies may be afraid of damaging relationships with long-time customers and trusted channel partners, the old-school account representative model drags out the purchase process and doesn’t suit the habits of the modern customer. This is particularly true for merchants who sell in bulk, offer thousands of SKUs or distribute across multiple country borders. 

As with any industry, customers want convenience, accuracy and speed. This means a streamlined checkout process that doesn’t require dialing a phone number to check the status of an order or to purchase.

In addition to enabling experiences that imitate the convenience and speed of the B2C world, the most revolutionary B2B payment breakthroughs will be the ones that effectively manage debt. The high-volume nature of B2B commerce demands flexible payment terms, including the ability to pay later. While small firms are increasingly using business credit cards, larger enterprises still use checks and typically require suppliers to issue a purchase order, which involves a series of approvals and other steps to complete the transaction. 

The process of extending lines of credit or offering purchase orders is excruciatingly manual – not to mention resource-intensive for the merchant, from continually tracking credit standing to identifying and preventing transactions when purchase order limits have been exceeded. The next wave of payment providers will automate these B2B-specific buying processes to save companies money, time and resources and even out cash flow. It’s no easy task, but it’s a change that the market desperately needs. 

Seize the opportunity

B2B customers are consumers, too. In today’s B2B crowded marketplace, buyers demand a simple, intuitive online experience that mirrors the interactions they have with their favorite B2C brands. Merchants who cannot meet today’s fast-paced digital demands will quickly lose out to competitors. 

That’s why the B2B transformation needs to happen now – and the good news is it’s already beginning.

According to Forrester, 70 percent of e-commerce professionals plan to increase their technology budgets in the coming years, a strong recognition of the power of digital and delivering experiences that customers want. Investors are similarly waking up to the opportunity, evidenced by recent venture funding for B2B-focused startups like credit platform Apruve, payment cycle management Billtrust and cross-border provider Payoneer. In fact, four of the top 10 fintech investment deals in Q2 of this year landed in the B2B market.

B2B merchants must think of digital commerce as not only an opportunity, but a strategic imperative to ensure survival. It will be up to payments providers, technology vendors and banks to commit the same energy they have long devoted to B2C and inspire merchants to get on board. The payments revolution is well underway, and it’s time for B2B to join the movement.


Topics: Transaction Processing, Trends / Statistics


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