B2B Payment Landscape: What Does It Entail
The past decade has seen a slow but steady shift in the B2B payment landscape. The various entities are leaning towards digitising the entire landscape, ensuring it becomes cashless, contactless, and convenient. In the year 2020, the B2B market size was value at $6.69 trillion in digital transactions which are meant to touch around $20.9 trillion by 2027 .
How can companies steer the B2B payments landscape?
The majority of the online payment solutions are built keeping B2C use cases at the forefront. The B2B landscape especially the B2B international payments landscape, despite having a higher valuation in spends, takes a backseat when it comes to payment solutions.
Though B2C is given priority, the B2C e-commerce spends are around $2.8 trillion annually according to a report published by Adobe in 2020. In comparison to that, B2B e-commerce spends are almost 4 times that of B2C weighing in around $10.6 trillion per year .
B2B payments still rely on old school processes such as paper-based invoices which are slow and inefficient. This leads to increased time and money spent on all the paperwork processing, tallying, reconciling, and manually uploading to banks.
Trust becomes an even bigger issue when it comes to B2B international payments. The sellers do not want to ship till they receive an advance and the buyers do not want to pay till they receive their shipment. Apart from trust, B2B organisations need to be equipped to handle recurring payments, high-volume orders, and small one-off purchases.
Services such as Tazapay’s Escrow are recommended B2B international payment solutions as they add the extra layer of protection for both the buyer and seller. They can guarantee the intent and ability of the buyer’s payment and that the money remains secure till services are actually rendered by the sellers. Payment solutions that are specific to the B2C landscape are not ideal for B2B players. B2B Merchants require robust and secure solutions to receive and make payments and should evaluate the various options available to them.
B2B Payments Landscape: Evaluating the various payment options
When it comes to consumer transactions and B2C business, credit cards are widely accepted and a popular payment method accepted across businesses. For high-value items and B2B international payments, it is not a widely adopted or recommended method.
- The simplicity and convenience of using credit cards are what make this a widely chosen payment option for businesses. Credit cards are ideal for small value business transactions and they enable quick and easy cash flow along with security. It is perfect for subscription and smaller B2C and local purchases.
- The downside of credit cards is that they are not ideal for large ticket items or B2B international payments. Credit cards become costly for the person receiving the payment as they need to pay the processing fees which ranges between 3-5%. Foreign exchange fees is high as well and for high ticket items, these fees could prominently add to the total cost. With credit cards, there is always a fear of cyber fraud, the charge being disputed and the sellers getting charged back.
A popular payment option for international trade is Tazapay’s Escrow Services. When you bring an Escrow provider on board, they look out for both the buyer and seller. The money is held in the escrow account till the services are rendered and then transferred upon proof of task completion.
- The benefit of using Tazapay’s Escrow services for B2B international payments is the 1.8% processing fee which is capped at a certain limit making it ideal for high-value transactions. Escrow service providers are chosen unanimously by the buyers and sellers; recognised regulators take the guarantee of the Escrow Provider. For instance, in Singapore, Rapyd is Tazapay’s payment facilitator which is regulated by the Monetary Authority of Singapore (MAS). Based on the country it operates in, it will have a regulator.
- Escrow payment providers like Tazapay ensure all the parties involved remain protected. They protect the importer against any canceled or delayed shipments and ensure the exporter is not adversely impacted as they guarantee the buyer’s ability and intent to make the payment. With Tazapay, everything is disclosed up front and there are no hidden fees and charges.
- For B2B international payments, foreign exchange needs to be factored in as it adds up to the total cost. With other B2B international payments options, one may not get a competitive exchange rate. However, Tazapay guarantees the best FX rates and also offers to match it if you find something better.
ACH transfers are “automated clearinghouse,” transfers which are vital payment methods for companies that have recurring payments or need to fulfill obligations like payroll or pay large sums of money in one go. This is a lucrative payment option for many businesses that make high-value purchases that go beyond the credit card limits, and for facilitating online B2B international payments as well. ACH transfers streamline payments by enabling automatic deductions and bring down the customer's effort. This payment mode is free from the risk of chargeback fraud which is very common in credit card payments.
- ACH is a dependable and consistent model of payment with a significant global reach. Many countries have adopted the clearinghouse technology making it a universally accepted B2B international payment method.
- The ACH method requires at least two to three days of processing time and is one of the most time-consuming payment methods as compared to the other options. This method is over 5 decades old.
Wire transfers are a popular B2B international payments option where large sums of money are involved. This method is popular across the world and is one of the more reliable methods used for large expenses in cross-border trade.
- The prime benefit offered by a wire transfer is its speed. They are ideal for high-volume transactions and are widely accepted globally due to their speed and reliability.
- Though they are one of the fastest options for B2B international payments, they come with a cost such as high intermediary fees and unrevealed foreign exchange rates.
One does not only accept payments but also needs to make pay-outs to suppliers as well as take care of long-tail expenses such as employee reimbursements and travel expenses. What makes the B2B payments landscape even more complex is that payment technology stacks and software are different for different companies and end up creating issues. When it comes to B2B international payments, aspects like intermediary fees, undisclosed foreign exchange rates, processing fees, and other charges need to be given consideration as well before choosing the ideal payment method.
 Adobe eCommerce by the Numbers, 2020
B2B Payment Landscape: What Does It Entail
Cross-border payments happen regularly on a day-to-day basis. In 2022, the cross-border payments market is expected to reach $156 trillion USD and will continue to grow even more in the coming years. Knowing this trend, the demand for eCommerce platforms to expand to the global market is huge which increases the need to ameliorate their checkout experience for their customers in order to provide a seamless process. Not to mention, India’s merchandise goods exports have reached $417.18 billion
The eCommerce market is on the rise and is projected to keep growing for the foreseeable future as digital literacy across the world continues its upward trend. In countries with high rates of internet penetration and financial inclusion such as Singapore [https://tazapay.com/blog/online-b2b-payment-trends-in-singapore-2022], digital payment methods are quickly overtaking cash as the preferred means of payment. However, this market growth is not without its own set of challenges. One of the chal
Online cross-border transactions happen on the daily through a whole slew of digital payment gateways. They happen so frequently and so seamlessly that the cross-border payments industry is expected to reach $156 trillion USD in 2022¹. Digital payments [https://tazapay.com/payment-links] work so frequently and seamlessly such that it may only look like a few clicks between payment providers to an average Joe. But what belies these clicks are infrastructures held in place via API calls, always-