Digitized bill payment in the B2B world is a big deal. Over the last 10 years, some B2B buyers and suppliers have been using credit card-led transaction methods designed for individual retail consumers. But it’s not the most efficient method for B2B commerce and lacks traction among many B2B companies.

Erin McCune, partner and payments analyst, Glenbrook Partners

“There has been a disproportionate interest in enabling card transactions between buyers and suppliers for traditional accounts payable invoice transactions,” says Erin McCune, a partner at payments consulting firm Glenbrook Partners LLC in San Mateo, California.

As the momentum behind B2B digitalization trends upward, she adds, it is increasingly clear that traditional bank and payment networks do not have the business process context to embed in their payment systems the transactions between B2B suppliers and buyers.

“It’s not feasible that everyone uses the same solution. There are bound to be conflicts,” says McCune. The fragmented B2B ecosystem is not working well, she adds. Suppliers have customers that use a lot of different accounts payable and procurement applications and services. Some buyers route suppliers to portals where the supplier’s employee signs in to obtain purchase orders, upload invoices, and gain access to virtual cards for payment method, she says.

But that whole process can be difficult and time-consuming for its users. “This led to a phenomenon called portal fatigue in the industry,” McCune says.

And that has sparked a move toward interoperability among payment methods, she adds. Portal fatigue prompted payments providers to connect to one another “and facilitate efficiency on behalf of their respective buyer and supplier customers,” McCune says.

Payment services providers that automate accounts payable and accounts receivable back-office processes have an opportunity to add value and drive efficiency for B2B companies, she adds.

The flurry of arrangements developed in recent years between banks and payment card networks to accommodate transactions between buyers and suppliers will continue, McCune says, providing more options for buyers and sellers. In some cases, B2B companies will use payment functionality in enterprise resource planning (ERP) or accounting software from vendors like SAP SE and Oracle NetSuite.

Still, B2B payment transactions now are increasingly using an enabler firm that sits between the accounting solution and the bank, including such payment services providers as Billtrust, HighRadius and Bill.com, which acquired Invoice2go in Sept. 2021. “All these solution providers automate discrete processes on behalf of the buyer or the supplier,” McCune says.

Payment card networks Visa and MasterCard are working with payment technology companies to serve both buyers and suppliers across various geographies. Visa is working with digital services and consulting firm Infosys to integrate Visa B2B Connect, a network designed to expedite the processing corporate cross-border payments, with more financial institutions worldwide. And Mastercard is working with payments technology firm Previse to use artificial intelligence to expedite invoice management and payments.

Other more traditional payment services firms are also building connections to the various accounts-payable systems. “You see Deluxe doing this,” McCune says, referring to Deluxe Corp., a provider of check-processing and other financial products and services. “They’re an old-school check provider that bought up a bunch of lockbox solutions on the receivable side. Then they built integrations to a bunch of accounts-payable solutions.”

Lockbox services manage incoming paper-based or digital payments and are designed to improve cash flow for client companies; Deluxe provides lockbox services as part of its internet-based Receivables as a Service platform. For the third quarter ended Sept. 30, Deluxe said its payments services revenue grew 114.6% year over year to $160.3 million, as total revenue increased 21.1% to $532.1 million. (About half the increase in payments services revenue came First American Bank, which Deluxe acquired in June.)

The interoperability between payment systems will continue, connecting various ecosystems of buyers and suppliers, rather than making the buyer or supplier use multiple solutions, McCune says. “Buyers work with a lot of suppliers. Suppliers work with lots and lots of customers. It’s ridiculous to think that they’re all going to use the same B2B network,” McCune says. “So, this phenomenon is really intensifying and creating a lot of inherent efficiency because it drives a sort of network of networks effect.”

In addition, the Federal Reserve and the Business Payments Coalition announced in October that they are working on projects designed to improve and expedite how businesses share electronic invoices and remittance information, including the purpose of the payment and the maximum flexibility in payment terms. The two projects follow a 2020 survey of 2,000 businesses, commissioned by the Federal Reserve, that found that more than 90% of respondents want faster payments with more remittance information.

The digitalization of payment transactions and related information, McCune says, is leading to more automation that can increase efficiency in financial management.

“As we digitize invoicing and remittance data, along with the payment transaction, we’re amassing great stores of financial information that can be used to automate back-office processes,” McCune says, adding, “There is a very powerful opportunity to apply artificial intelligence (AI) and machine learning, and even not-so-intelligent robotic process automation (RPA), to all this data in order to drive efficiencies and automate processes for both receivables and payables.”

Sophisticated AI was originally only available to enterprise suppliers and buyers, but now these applications are increasingly available all the way down to small and midsized businesses, McCune says. “So, if you’re a small business using Bill.com, they will read the invoices for you,” she adds.

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