Update: Business-To-Business Payment Technology

Richard Chatterton

Liquidity is one of the key ratios and financial indicators for any business: It’s the ability to settle liabilities as they come due with the current assets available – fundamentally, money due from customers to pay suppliers. Cash-flow optimization is extremely important, especially in a challenging economy and competitive industry. Business-to-business (B2B) payments represent a vast majority of commercial expenditures; when technological advancements offer the ability to make these processes more efficient and provide enhanced data and controls, businesses take notice.

For financial institutions, investing in payment technology and having a point of differentiation that can help their customers operate more effectively and prosper can help them maintain their own market share and remain competitive. Ultimately, it can benefit them in the longer term.

B2B payments that are shifting to electronic payment mechanisms are typically considered better, faster, and less expensive than existing processes.

What are the recent developments?

B2B payment solutions are evolving rapidly, as technology and security offer the foundation to deliver fast, efficient, and effective payment methods – which are in high demand by businesses globally. Key trends of B2B payments include:

  • Development of data-rich and integrated card-based payment platforms that offer additional insights and integration with finance systems
  • Increasing availability and adoption of virtual payment solutions over physical card offerings, optimizing working capital and providing more options for addressing high-volume, low-value spend
  • Digital solutions offered by businesses and service providers that combine enhanced reporting, reconciliation, and automation tools to create efficiencies in procure-to-pay processes

Digital solutions that focus on utilizing working capital benefits, such as single-use accounts, virtual accounts, and payment platforms, are displacing petty cash, check, and electronic funds transfer (EFT) payments. These bridge the gap between physical purchasing cards and trade finance products.

For increased security, businesses can now request “one-time-use” virtual card numbers (also known as a “controlled payment number”). These are linked to your credit card facility and can be used to settle single or centrally billed invoices or statement balances for significant monetary amounts. At the same time, they make it more difficult for online vendors or criminals to commit fraud as they could with a normal credit card number.

Purchasing cards (P-cards) can essentially replace the traditional purchase order process, making it easier for authorized employees to buy approved goods or services for their business. P-cards offer businesses additional levels of control such as capping spending or restricting purchases to suppliers using a particular merchant category code (MCC).

Enhanced card data is determined by the amount of transaction data provided with each transaction. It is classified into three levels, with level one the lowest transactional data provided and level three the highest. For context, Visa’s level-three card data includes 10 fields as a minimum and an additional four optional data fields.

What is the future direction?

B2B payment technology will continue to evolve as adoption increases, leading to an increased volume of digital and virtual transactions. And with economies of scale, we can expect to see decreased costs to process a transaction this way.

Expect to see more data captured and transferred with a transaction. We are already seeing electronic receipts being sent directly to an expense management or finance processing system as soon as a transaction is completed, resulting in increased efficiency and a better end-user experience. This year, Australia and New Zealand announced a transition to PEPPOL for e-invoicing in an attempt to increase opportunities for local business to integrate with a global trading market and drive an estimated A$30 billion in savings over 10 years for the ANZ region.

Increasing the enhancement of payment and card data in a Big Data world will lead to opportunities for software and applications to leverage this information for purposes outside the optimization of commercial spend. These include, for example, using a transaction’s real-time location data to provide higher levels of duty of care for their biggest assets: their employees. More data will lead to more insights into spend trends, such as aggregating spend data across merchants or suppliers right from the payment platform.

Businesses will continue to leverage digital payment platforms as part of a strategic payment offering if rigorous security and controls are maintained and the cost to adopt decreases. It will be interesting to see for how much longer traditional purchase order and procurement processes will remain relevant.

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Richard Chatterton

About Richard Chatterton

Richard Chatterton is senior solutions consultant at SAP Concur, based in Sydney, Australia. Richard is a full member of the institute of Chartered Accountants ANZ and has over 10 years of commercial finance experience across various industries as a finance and accounting manager and senior finance systems analyst in organizations ranging from private equity to ASX listed. Richard's areas of expertise are finance operating models, processes, and alignment with the associated systems. His interest in technology and digital transformation has seen him lead a number of global finance system implementations, integrations, and application upgrades. His current role at SAP provides the opportunity to promote the intelligent enterprise as part of the SAP Cloud Business Group.