The COVID-19 pandemic resulted in 2020 being defined by a huge uptake of business-to-customer (B2C) payment services, such as contactless transactions and online shopping.
As businesses across the globe assess how they will bounce back and upscale their capabilities, there are unprecedented opportunities for the acceleration and adoption of fintech innovation in the business-to-business (B2B) space.
Breakthrough fintech technology in postpay options will result in a revolutionary and transformative year for B2B payments in 2021.
The past year has been a boon for B2C focused fintechs, such as the explosion of buy-now, pay-later (BNPL) and pay-by-installment services. However, there continues to be a substantial gap in the B2B financial services market.
The universal challenge for B2B trade continues to be the time it takes to get paid and following up debtors.
These issues impact a company’s cash flow and access to capital. The reasons for slow payment times include:
● Inconvenient payment processes - for suppliers and customers. Manual invoicing and paper cheques are time consuming.
● Data entry errors – such as keying in incorrect credit card details. In Australia, most B2B payments occur using bank transfers, which expose a business to mistakes, fraud and security breaches.
● Poor integration – between payments and other business systems and processes. Businesses should embrace new B2B payment options in 2021 to resolve these issues.
Australia leads the way in the Asia-Pacific region for offering trade credit to customers. Trade credit now accounts for more than 70 per cent of the total value of B2B sales for Australian companies. This trend is likely to continue because BNPL is a quick way to sell goods and services.
A major flaw with BNPL is that all of the financial risk remains with the supplier until the invoice is paid. Fintech innovations next year will help reduce this risk by offering an AfterPay type solution in the B2B space designed to help businesses get paid quicker.
An intent to pay framework incorporated into advanced software will allow overdue payments to be scheduled in installments, which gives businesses more flexibility in settling overdue debt and certainty in debt recovery.
Pay-one, pay-all invoices
This unique payment option allows customers to track, group and batch-pay all of their outstanding invoices simultaneously.
Paying many invoices at once and then having these payments connect and feed information automatically into both parties’ financial systems with a few clicks, saves time, money and resources.
Workflow payments allow for the pre-authorization of a credit card enabling a business to be automatically paid when a good is delivered, a milestone reached or a service completed.
This effortless transaction allows business owners to get paid quicker, increases security as customers never have to give their credit card details out over the phone and increases the efficiency with which debts are paid.
Once a payment is made, the supplier automatically receives a remittance and the business customer receives a notification that payment has been made. The transaction is completed ledger to ledger, providing efficiencies and improved cash flow for both parties.
Integrated payments software supports most small business accounting software such as Xero, QuickBooks and MYOB and can also be connected to ERP systems.
Integrated systems will also automatically update warehousing, procurement and logistics to provide a single source of digital truth for all data across a business.
Fintech payment innovations will drive economic growth through quicker and streamlined B2B transactions and improve cash flow, which will in turn bolster the economic resilience of businesses.
Adrian Floate is the Managing Director of Australian software company, Cirralto. As an entrepreneur at heart with a fascination for emerging business technologies, he has spent the last 20+ years solving complex problems surrounding global business efficiency. The culmination of his experience and passion resulted in the launch of Spenda – a fully integrated digital payments and business solution that enables businesses to boost their sales, efficiency, revenue and customer experiences.