Apart from being able to provide quality goods and services, a critical concern for B2B merchants is providing customers with secure and flexible payment options. Your business clients already have multiple concerns competing for their attention. Access to a seamless payment process in every transaction they conclude with you should not be one of them.
However, navigating the B2B payments landscape can often be a trying task, especially due to the unique considerations involved. Compared to retail or B2C businesses, firms operating in the B2B and B2G sectors require more sophisticated payment solutions. Security, flexibility, and ease of access are a priority for most clients in this space, meaning your business must go above and beyond to meet customer needs.
Although the payments landscape is being increasingly dominated by retail-focused innovations, B2B payments continue to enjoy a large share of payment volumes. According to Deloitte, B2B payments were about $16.5 trillion in the US in 2016, and per research elsewhere, are set to reach $218 trillion globally by 2022.
However, B2B payments have historically evolved slower than the B2C payments landscape. Perhaps due to the immediate and significant rewards that retail-focused payments innovations provide, there has been a rapid iteration in solutions geared towards this sector.
This has left the B2B payments sector to develop more slowly in comparison. To put things in perspective, while instant payments processing platforms such as Apple Pay, Samsung Pay, and Venmo were gaining ground in retail, 64% of B2B businesses confessed to still making payments by check as at 2019.
Despite the slow-moving nature of things in this space though, there have been multiple innovations that are driving progress in the sector.
Apart from more conventional payment options such as cash, check, wire transfer, and automated clearing house payments, there are increasingly modern payments solutions adapted in the B2B sector.
Online Payment Gateways and Virtual Terminals are evolving payment solutions for businesses, helping them speed up and streamline their payments process. B2B credit cards are also fast becoming an option of choice, supported by major payment brands such as Visa and MasterCard.
Certain businesses are even beginning to offer the option of cryptocurrency on the back of proposed adoption by major bankers like JP Morgan Chase and American Express. All of this indicates that there is healthy room for innovation in the B2B payments space; and for businesses looking to provide an outstanding process for their customers, there is room to get creative.
There are also certain newer innovations that are sweeping across the B2B payments space, some of which include:
Due to the complexities of B2B payments, they will require levels 2 and 3 processing. Generally, B2C transactions only require level 1 processing due to the relatively low transaction values involved. This means transactions can be sanctioned with little information beyond card details and customer addresses being required.
However, as a result of their relatively higher transaction values, and the flexible payments structure that most business clients prioritize, B2B credit card payments will require higher levels of processing.
Levels 2 and 3 processing require B2B merchants to provide additional information on their transactions, especially as the frequency and money value of their transactions increase. For level 2 processing, additional information required includes tax identification, tax amounts, and customer codes. This helps payment processors more accurately verify transactions, and also allows corporate clients to enjoy more control over their payments. They can stipulate upper transaction limits, frequency of use, or how the card can be used.
Level 3 processing requires even more information, running as high as 9 to 14 additional fields that must be filled. Although the additional information required may be a bit troublesome for most companies, it serves to exponentially make purchasing management and reporting more effective in these transactions – an important outcome for B2B and B2G clients.
Perhaps most important, merchants who choose to provide the information required for levels 2 and 3 processing can enjoy lower fees on their transactions. Therefore, you can reduce your fees, and enjoy increased profits, even as you provide a seamless, risk-mitigated solution.
At Merchant Direct, we offer a full suite of solutions to meet the growing needs of B2B businesses in today’s virtual world: