Over the past decade, business-to-business (B2B) payments and their processes have become increasingly digital. In addition, it is widely acknowledged that the COVID-19 pandemic has had a considerable impact on the global payments industry, particularly on B2B payments. COVID-19 acted as a catalyst to further accelerate the digitalisation of both Accounts Receivable (AR) and Accounts Payable (AP). This has resulted in an increase in investment within the B2B payments ecosystem that aimed to enhance product development and support new use cases to address payment-related pain points for corporates.

Due to COVID-19, the size of the global B2B payments market decreased by 4% between 2019 and 2020, and the recovery has been slowed by the conflict in Ukraine. However, the market has since experienced a strong rebound, and Edgar, Dunn & Company (EDC) estimates that the global B2B payments market will grow from USD 113 trillion in 2023 to USD 137 trillion in 2027, with a CAGR of 5%. This growth illustrates the significant size of B2B payments and the many opportunities it creates.

EDC has conducted a compelling research study to understand the current state of B2B payments and the payment-related challenges that corporates and small and medium enterprises (SMEs) face. The study is based on more than 100 interviews with corporates and more than 50 interviews with all stakeholders in the B2B payments value chain: issuers, payment schemes, payment gateways, acquirers, procure-to-pay platforms, and fintech companies.

‘The digitalisation of B2B processes and payments offers significant opportunities for corporates and other stakeholders in the B2B payments value chain. The B2B payments market is undergoing significant changes, driven by substantial investments and the level of innovation of new digital solutions. This drives changes for many use cases in B2B payments, including, but not limited to, B2B ecommerce, B2B marketplaces, B2B money transfers, and supply chain payments. From our perspective at Edgar, Dunn & Company, it is important for payment providers to understand key payment-related pain points and then leverage the seven best practices we have identified to develop a successful B2B payments strategy.’ – Greg Toussaint, Director, Edgar, Dunn & Company

From these interviews, EDC identified payment-related challenges that corporates and SMEs encounter, as well as the following seven best practices payment providers can implement for a successful B2B payments strategy.

1. Address pain points with the smart use of technology

Using technology to alleviate B2B payment-related pain points is imperative. EDC recommends corporates identify a list of all challenges related to B2B processes and payments. Corporates should then prioritise these areas of concern to address the ones with the greatest impact on their business first (e.g., automation of manual processes).

2. Develop a balanced value proposition for buyers and suppliers

The value proposition of commercial cards has traditionally been unbalanced with relevant benefits to buyers – including financial rebates, extended payment terms, and easier financial reconciliation – but without many advantages for suppliers, who had to bear the increased cost of payment acceptance. However, this is changing. Many stakeholders in the value chain are beginning to acknowledge that the value proposition needs to be more balanced between buyers and suppliers.

3. Create partnerships for a stronger value proposition

The B2B payments ecosystem has become increasingly complex as many actors expand in the value chain and new entrants target specific use cases and niches. Corporates have increased expectations, and they progressively require payment providers to address some needs beyond their core offering. In the past, payment providers developed most of their capabilities in-house, but this is no longer the case. As the pace of innovation accelerates and time to market becomes a key differentiator, payment providers steadily rely on partnerships to create a stronger value proposition.

4. Propose a modular ‘all-in-one’/‘end-to-end’ and flexible value proposition

Interviews with corporates and payment-related actors revealed that corporates looked at two main criteria when assessing B2B payment solutions:

• End-to-end B2B payment solutions: corporates consider future-proof solutions that could potentially meet all their needs with ‘all-in-one’/‘end-to-end’ solutions covering B2B processes and B2B payments.
• Modular and flexible solutions: corporates seek B2B payment solutions that integrate easily with their other current IT systems and current processes. Corporates look for API-based modular solutions to select specific modules based on their needs and the status of the automation journey of their B2B processes.

5. Leverage indirect sales channels to increase reach and exposure

Partnerships are important to create a stronger value proposition for corporates and offer a modular ‘all-in-one’/‘end-to-end’ flexible value proposition. Partnerships with third-party providers can go beyond technical integration to develop real commercial relationships and become indirect sales channels.

In an increasingly competitive payments ecosystem, it is important to turn distribution channels into a strategic tool to increase reach and exposure. Indirect sales channels also strengthen the ability to create a network effect to connect corporates on both AP and AR sides and generate additional benefits for corporate clients.

6. Facilitate the integration of payment solutions with existing B2B platforms

A critical success factor for corporates when assessing providers is the ease of integration with their current B2B platform. The more effort required by corporates to integrate a solution, the less likely it will be selected. More specifically, corporates often assess the number of man days required for integration. The higher the number of man days, the more difficult the internal buy-in process will be, and the longer it will take to make the integration a priority. EDC’s research highlights it is very important to facilitate integration and have a clear implementation strategy.

7. Quantify the benefits of investment in B2B payments

One of corporates’ main pain points is not having a good understanding of their direct and indirect costs, which makes it difficult for them to assess the potential return on investment (ROI) of a solution. Quantifying the benefits of a payment solution facilitates the sales process and supports the internal decision-making process of corporates. These benefits can be used to create a business case to quantify the investment required by corporates and to facilitate the internal buy-in to convince senior management. This is particularly important in the B2B payments market, an industry that previously has not always acknowledged the significant need for innovation compared to the B2C payments market.

Get instant access to Edgar, Dunn & Company’s 7 best practices to capture opportunities within the fast-growing USD 137 trillion global B2B payments market whitepaper. EDC has a strong track record of collaborating with corporates and payment providers across the B2B payments value chain on strategy work, including company corporate strategy, product development strategy, market entry strategy, profitability analysis, product benchmark assessment, and market research. EDC would be pleased to discuss further about B2B payments by leveraging their B2B payment expertise and the insights from this research.

The article was first published by the PayPers. The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).