Despite delivering convenience, speed and a better user experience in the
consumer payments market,
alternative payment methods (APMs) feature less prominently in the world of
B2B transactions.
It’s high time this changed.
To understand why APMs are become increasingly important in B2B payments,
let’s first clear up some confusion:
What are APMs?
APM is a catch-all term to describe any payment method that does not require
the use of a credit or debit card. There are three main types:
- Bank transfers: Bank-direct payments and direct debits – essentially, ecommerce transactions where buyers approve purchases using an online banking facility.
- Wallet-based solutions: A secure digital space, usually on a smartphone, with access to funds – either directly from a bank account or through a debit / credit card. Apple Pay and Samsung Pay are good examples.
- Cash-ins / pre-paid: Prepaid cards need to be loaded with value in advance of the user performing a transaction, and comprise of cards that run both on and off traditional payment rails.
As a rule, APMs provide flexibility, accessibility, and convenience for
users. More often than not, they are also more cost-effective for issuers
than traditional payment methods.
So why the hesitation in B2B markets?
When a consumer APM transaction is performed, it is usually low in value and
involves just two players, like buying a coffee with Google Pay.
In contrast, B2B payments are usually for larger amounts, and require more
complex workflows like PO systems, customer numbers and invoicing processes.
They often involve multiple parties, too. The perception is that APMs are
not designed for more complex transactions, which is why business demand has
remained low.
Perception rarely equals reality, however, and certainly doesn’t here. When
delivered as an integrated part of a digitised B2B payments platform,
APMs can offer businesses just the same savings in time, money, and effort
that consumers have been enjoying for some time.
An APM-ready platform that pays
Integrated payment platforms, provided as a cloud service from dedicated
third party specialists, enable transacting businesses to move away from
manual payments processes,
and tap into a whole raft of new features that both enable greater
efficiency and drive down the cost of initiating and accepting payments.
They enable automated reconciliation and invoicing,
for example, which does away with manual paperwork, streamlines internal
processes and boosts efficiency. They increase financial visibility for both
buyer and supplier through the provision of bespoke
payments portals, and facilitate the rapid onboarding of new suppliers. By
promoting easier, faster and more cost effective integration between buyers
and suppliers, they open the market up for everyone
by giving each party access to a broader range of potential partner
firms.
APMs only add to this suite of benefits. Not only do they further increase
convenience by enabling B2B payments through mobile devices,
they also reduce costs and processing times, particularly in the case of
bank-direct payments.
Crucially, APMs also simplify cross border payments in two key ways. First,
because most have been designed for use internationally,
they were built in compliance with international payments regulations.
Reducing the burden of payments compliance when a business is expanding
overseas,
(or buying or supplying internationally) is hugely attractive to businesses
of all sizes. Second, both consumer and corporate buyers favour business
relationships
that offer more payments choice. APMs not only offer a range of different
ways to pay, they also promote familiarity and trust between businesses,
since many APMs
(such as Paypal, for example) are known and well regarded globally.
As the trading world continues to shrink, the need for businesses to
initiate and accept cross border payments will rise. According to the
WorldPay
Global Payment Report 2017, over half of all online transactions will be
made using alternative payment methods by 2021.
While initial growth is coming from consumer payments, B2B supply chain
payments will soon catch up. The payments platform providers
that have the vision to provide early stage APM support, without the need
for invasive system updates, will be best placed to serve, and grow, this
new market.