Castler Escrow

Global Revolution in B2B Payments

Digital adoption is still in its early stages, B2B payments is a Fintech industry with a huge market opportunity, and given that just one-third of B2B worldwide expenditures are conducted electronically, digital disruptors potentially have enormous growth potential.

The year 2021 may be summed up in a single word: digitization. While the COVID-19 epidemic has unavoidably accelerated this tendency, digital transformation affects all industries. Payments are no different. Many of us can agree that the way we pay for goods has changed dramatically in the past few years. Whether it’s food, tickets, or clothes, a rising portion of consumer payments are now made over the Internet.

1. Automated payments

The need for payment automation has never been stronger, especially with accounts payable personnel hiding in place during the epidemic. Although this was already happening, COVID-19 hastened the process, with cloud-based solutions reducing the requirement for on-premises systems and check-printing equipment.

B2B payment automation gives you more control and insight over your payments while lowering your operational expenses and saving you time. Integrating a Payment Application Programming Interface (API) with Enterprise Resource Planning (ERP) software offers a unified solution for managing payments by securely exchanging banking data and facilitating electronic payments.

Electronic payments are a major change in the B2B payments ecosystem: quick, efficient, safe, simple, and rapid, electronic payments provide significant growth potential for buyers and suppliers alike.

2. Flexible payment alternatives

The days of solely accepting cash, cheque, or credit card payments are long gone. Payment alternatives such as purchase now, pay later, and virtual cards are becoming increasingly common in the B2C arena, and it won’t be long until they become the standard in B2B e-commerce as well. Because B2B transactions are often bigger and more complicated than B2C ones, more flexible payment options are required to handle them. This may boost client loyalty and retention, stimulate speedier payments, and save expenses for both you and your consumers.

3. Multifactor authentication

As the number of online transactions grows, the danger of payment fraud and cyberattacks becomes a more serious concern to businesses. Two-factor (2FA) and multifactor authentication (MFA) are based on the use of several authentication techniques, which are classified as knowledge, possession, and inherence. This additional layer of protection safeguards account access and works as a deterrent to hackers and fraudsters.

4. Payment Transaction Management

For far too long, business-to-business (B2B) payments have been distinguished by discrete and fragmented approaches to accounts receivable (AR) and accounts payable (AP). Buyers and suppliers face hurdles because of legacy systems, a lack of data standards, and restricted interoperability.

High expenses, tedious procedures, a lack of payment data, a lack of insight into impending payments, mistakes and fraud, late payments, and cash flow issues are all examples of pain points. These pain points are many, genuine, and serious, and AP and AR workers all around the globe must deal with them daily. However, there is a better approach, and the industry can get there if it works together.

5. Using AI to enhance back-office accounting operations

All is not lost for payments that companies must accept outside of their specific AR automation system. Some accounts receivable automation suppliers have incorporated artificial intelligence into their products to aid AR employees is automatically gathering remittance information and matching it with open receivables.

Back-office accounting operations, such as cash application, are ideal candidates for artificial intelligence since they often include repeated actions and scenarios that a machine-based logic can simply apply to.

6. Digital Escrow Solutions

Escrow is a contractual arrangement in which a reliable third party, recognized by all players, acts as a payment process administrator in a commercial transaction. Before releasing funds, the escrow agent ensures that both parties have met all agreed-upon terms and conditions.

This structure has traditionally been used with great success in mergers and acquisitions, real estate deals, and joint venture agreements, but it may be time-consuming and expensive to set up. Escrow is now available in digital form. This strategy alleviates many of these issues, including those created by the commercial trust gap and operational inefficiencies that hinder smooth commercial flows, especially in online marketplaces.

Benefits of Digital Escrow

  • Due to the neutral ownership of money, monies stored in escrow are shielded against either party’s bankruptcy.
  • An independent party does diligence to help establish if a business counterparty is a trustworthy partner.
  • Payment is contingent on the performance or fulfillment of established conditions, such as delivery vs. payment.
  • Flexibility in payment procedures, such as milestone-based staged money-ins or pay-outs, payment on inspection or delivery.

Future of B2B payments

If we’ve learned anything about payments from the B2C e-commerce industry, it’s that flexible and digital payment options are the future. New digital options like mobile wallets and mobile point-of-sale have been popping up in B2C settings for the last decade, and today they’re some of the most popular ways to make online payments.

However, in the B2B landscape, digital payments are only getting off the ground. With legacy processes ingrained in the industry, it may take some time for electronic payments to make serious headway, but there’s no doubt it’s heading in that direction.