Bob Kaufman

C2B, or consumer-to-business payments technology, has often led the way for innovation and growth in payments. PayPal or Venmo, which make payments nearly instantaneous for customers, are prime examples.

For B2B payments, this is not always the case. Sending the same payment between companies, or from a company to a customer, can take days or even weeks. This delay is primarily due to measures taken to ensure that all parties are protected. It can be frustrating for merchants having to hold back payments to their suppliers while their own customers delay payments due to decisions made by their accounting department.

In fact, 93% of companies experience late payments, and most payments exceed their average expected terms of 27 days to 34 days. Furthermore, merchants writing off 1.5% of their receivables is deeply worrying, since these margins may be enough to make or break some businesses facing financial pressures.

As growth slackens in developed economies, it can also be attributable to many companies experiencing late payments and razor-thin margins, as well as supply chain problems, labor issues, the ongoing fallout of the COVID-19 pandemic and spiraling inflation. Many businesses could have reinvested that extra 1.5% or used it to simply keep moving forward. If they could be paid on time rather than waiting months — then they could start to put themselves, and the economy at large, on a path to recovery.

Introducing C2B Payments to a B2B Market

The payments industry splits into two entirely different worlds. In the C2B space, many ecommerce sites embed financing options that allow customers to order a new product on their phone whenever they like and with the terms that suit them. With B2B payments, however, many accountants or payments professionals do not have these luxuries and experience late payments regularly. That’s why much of the innovation in C2B payments needs to cross over to B2B.

In 2021, the B2B payments market was worth a staggering $49 trillion and is predicted to be worth $54 trillion in 2023. 10% growth may seem promising, but it actually indicates a “slow recovery in business activity following the impact of the COVID-19 pandemic.” Meanwhile, the C2B space is enjoying new innovations in the form of Buy Now Pay Later (BNPL) and virtual cards. Real-time payments have been a standard in C2B and C2C payments for over a decade. So how can popular C2B technologies influence change and operate in a B2B environment?

Boosting Cash Flow

Cash flow is essential for any company, otherwise everything shuts down.

Lack of cash flow can be a significant challenge since the systems that bring cash into and out of businesses aren’t built to optimize cash flow. Additional to delayed payments, acquirers can hold funds for multiple days before releasing them – sometimes longer if weekends and public holidays are a factor. While some acquirers may be entitled for many reasons to hold funds for a few days before releasing them, we must still be mindful of the impact cash flow problems can have on the wider supply chain. A company that must wait three or more working days will not be able to pay a supplier on time, who in turn has to wait three or more working days to pay their suppliers, and so on.

Therefore, it’s critical that companies can access incoming funds immediately, without the need to wait for settlements.

Realizing the Value of Virtual Cards

Since the global value of virtual card transactions alone is expected to soar from $1.9 trillion in 2021 to an astronomical $6.8 trillion by 2026, the urgent need for companies to optimize their back-office processes will also fuel this growth. There is currently too much time and money spent on the complex processes described above.

Why are virtual cards different? If a company needs to pay a supplier for their goods, the standard payments process could take months. However, the technology does exist to help companies both accept and make payments much faster — in real time. So instead of waiting around for funds to settle or getting a line of credit, companies can get instant access to incoming customer funds, which can then be used to pay their suppliers immediately with virtual cards.

Virtual credit cards contain tight security controls that mitigate fraud risks. However, if the virtual card does happen to be compromised, only the funds contained in the card needed for a particular purpose will be taken, and they can be reclaimed through chargeback procedures. Virtual credit cards also allow for much greater transparency and centralized control that can inform payments decisions and prevent losses. Thus, security for these payments is much tighter.

The Smooth Transition of C2B in B2B

Previously, providers of virtual cards couldn’t connect two traditionally separate payment functions (accepting and making payments) inside a single platform. However, recent innovations in B2B payments technology are now available to give companies immediate access to incoming funds – allowing them to immediately make supplier payments and fulfill transactions in real time.

About the author

Bob Kaufman is the founder and CEO of ConnexPay, a payments technology company that brings together payments acceptance and virtual payments issuing in the same platform.

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