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A guide to payment processing for B2B companies

A guide to payment processing for B2B companies

Mar 31, 2023
Checkout.com

The global value of business-to-business (B2B) payments - transactions that take place directly between two companies - is massive. According to Juniper Research, if B2B payment trends continue, the market could grow by 26% to reach an astonishing $111 trillion by 2027.

These vast sums require a necessarily complex infrastructure. That’s why B2B payments frequently involve multiple stakeholders and, to combat the risk of fraud, incorporate a considerable network of software, systems, and complex approval processes.

This is what makes B2B payments a different, and frequently more challenging, prospect than business-to-consumer (B2C) payments. Nevertheless, if your business operates in the B2B space, there’s a variety of payment options available to suit different requirements and plenty of payment processing support. You just need to find the right payment solution for your needs.

In this article, we’ll cover the most popular B2B payment methods, explain why B2B payments are challenging, and tell you why using a payment service provider could be beneficial for your business.

What are the most popular B2B payment methods?

The following methods are the most popular B2B payment solutions. As long as you have a merchant account, you should be able to accept all of these payment methods.  

Credit cards

Credit cards are a quick, convenient, and relatively secure way to make B2B payments. They’re a great option for everyday payments and can be a good way to improve cash flow, though they can incur processing fees of up to 4% - much higher than some alternative methods - and as they have daily limits, are unsuitable for high value transactions. That said, some providers offer B2B specific credit cards with more attractive rates and rewards, and tailored solutions for businesses with very high spend.

Virtual cards

A virtual credit card is a single-use 16 digit number that can be used to make online purchases without exposing your actual credit card details. Because of this, they’re a very secure payment option for business buyers, who can also place restrictions on the type and size of purchases that can be made and the period the card is valid for. Virtual Cards are booming in the US and, according to Grand View Research, could grow by 20.9% between 2022 and 2030.

ACH / (SEPA in Europe)

ACH stands for Automated Clearing House (Single Euro Payments Area in Europe), a network that facilitates the electronic transfer of funds between bank accounts using a routing number. ACH transactions are processed in batches, typically overnight, and are much more secure and efficient than traditional paper-based payment methods. Some financial institutions don’t even charge for ACH, making it a very cost-effective B2B payment solution. The only downside is that, if you miss your batch, you’ll need to wait for the next one the following day.

Wire Transfers

Wire transfers allow for the quick and secure transfer of money from one financial institution to another, either within the same country or internationally. You can do either a cash transfer, where the recipient can collect the funds from a cash office, or a digital transfer, where funds are sent electronically. Because of their speed and ability to cross borders, wire transfers are ideal for business transactions, and are often used for large or time-sensitive payments.

APMs (Alternative Payment Methods)

Alternative Payment Methods (APM) is a fluid term, but can include digital wallets, prepaid cards, mobile payments, peer-to-peer payment apps and cryptocurrencies. These types of payments are useful insofar as the business you’re doing business with is able to, or has the inclination, to accept them. Their main advantage is that they can often be more efficient and affordable than traditional b2B payment methods.

Checks

In a world of superfast digital payments, paper checks might seem like the equivalent of choosing to travel by horse and cart, but they still have a place in B2B payments, where speed isn't such a concern. The advantages of a check are that it always leaves a definitive paper trail, so both buyer and seller can easily track the payment, and because they don’t need to be deposited and processed immediately, they can help you better manage cashflow. You can also use eChecks, which are essentially a type of Direct Debit processed through the ACH system, and are cheaper and easier to use than paper checks.

Cash

The death of cash has long been foretold, and yet, like checks, some people still use cash for B2B transactions. If there is any advantage to using cash it’s that it’s instantaneous and allows you to avoid the fees associated with other payment methods. However, the downsides are that as it’s vulnerable to theft or loss, cash isn’t as secure as digital payments, and as it’s in a physical form, it’s not suitable for high value transactions.

Why can payment processing be more challenging for B2B companies?

Payment processing is more challenging for B2B companies than it is for B2C companies for one simple reason: it is, by necessity, more complex. Generally speaking, B2C companies are taking a high volume of low value transactions, usually received via card or cash payment.

In contrast, B2B companies take higher value transactions from businesses via multiple payment methods, as well as recurring payments for regular shipments, and have to maintain long term commercial relationships. This results in a number of factors that boost security and trust, but can complicate and slow down payments, including:

  • Multiple stakeholders - every payment has to be approved by several parties, including  procurement teams, and accounts payable and receivable
  • High transaction value - the higher value of B2B transactions demands tougher security procedures to reduce the chance of fraud
  • Differences between sectors - standards and requirements vary by sector, meaning processes have to be adjusted when you trade with a business in a different industry
  • Payment cycles - unlike the near instantaneous payments between consumers and businesses, payment terms between businesses are usually between 30 and 90 days. This can be beneficial for the buyer, but can cause cashflow issues for the supplier
  • Integrations and payment methods - B2B payment methods rely on integrations with multiple accounting systems and support for a variety of payment methods
  • Invoicing is slow - processing invoices is very time-consuming. They’re usually sent by email and then have to be handled manually by someone in the finance team

Learn more: What is TPV (total processing/payment volume)

Benefits of using a Payment Service Provider (PSP) for B2B payment processing

The challenges caused by the above complications can be mitigated by using a Payment Service Provider (PSP). PSPs streamline the payments process for merchants by providing the infrastructure and support they need to accept all manner of online payments. This means the merchant doesn’t need to go through the hassle of establishing relationships with third parties - who manage everything from processing to fraud prevention - themselves.

This brings some key benefits for businesses of all sizes, including:

  • Convenience - thanks to their established relationships, it’s quick and easy to set up with a PSP, and the approval process is essentially instant. They also offer plenty of useful features that you can use for daily finances, invoicing and more.
  • Compliance - as they’re compliant with security standards such as PCI DSS and Strong Customer Authentication, PSPs make compliance easy with both local and international payment regulations, which reduces the risk of fines and other penalties.
  • Improved scalability - as they can handle a high volume of transactions and allow you to accept multiple payment methods, PSPs are highly scalable.
  • Improved security - PSPs use secure payment processing technology and fraud detection technology to protect your sensitive financial information and reduce the risk of fraud and data breaches.
  • Global reach - online payment processing solution gives merchants considerable global reach. For example, Checkout gives you access to every major market, as well as more than 150 currencies and local payment methods.
  • Data - PSPs can provide valuable data and analytics to help businesses understand their customers' payment behavior, make informed decisions, and optimize every part of your payment journey.

Can Checkout.com support B2B businesses with payment processing?

Absolutely, Checkout supports many leading B2B businesses with all their payment processing needs.

We also have solutions for marketplace businesses that can use Checkout.com’s payouts technology to improve the experience for the businesses selling on their platform and drive loyalty.

Unlock your payments potential today

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March 31, 2023 8:23
March 31, 2023 8:23