The demise of paper checks in the business-to-business (B2B) space has been anything but rapid, but that has not slowed the change on the payments landscape. For treasury and finance professionals, the high cost of check transactions has provided ample motivation to embrace electronification and automation of payments whenever possible.
This trend is borne out by the recent 2015 AFP Payments Cost Benchmarking Survey that revealed nearly 80 percent of organizations are in the process of transitioning their B2B payments from checks to electronic payments. The survey also found that "more than two out of three organizations would replace checks with e-payments if there was a cost benefit of doing so, while 88 percent cited increased efficiency as the primary reason for transitioning to electronic payments from paper checks."
Clearly, the B2B payment landscape is a dynamic one that is being greatly influenced by the business-to-consumer (B2C) marketplace where online banking and electronic transactions are becoming ubiquitous.
It comes as no surprise that the proliferation of mobile options, such as Apple Pay, has been a prime driver in the widespread adoption of consumer electronic payments. And mobile is beginning to have a similar influence on the treasury space as well. The convenience and efficiency of mobile payments is fast becoming a part of our everyday lives, so it’s little wonder that business professionals are seeing similar potential for the B2B world.
One of the stumbling blocks to wider acceptance of electronic B2B payments has been the significant challenge around the sharing of remittance information between buyers and suppliers. For businesses with hundreds of suppliers, managing this enormous volume of information can prove highly vexing, especially when each supplier insists that their data be structured differently. In the face of such complexity, the opportunity for data collection and payment processing automation is lost.
Recent advancements in payment networks are enticing buyers and suppliers to connect more efficiently with the ultimate goal of achieving full automation. Such automation holds the promise of significant benefits, such as reduced costs and expanded opportunities to manage working capital more effectively.
Payment networks offer a solution by enabling seamless information exchange between buyers and suppliers. In addition to transmitting rich remittance data, payment networks allow each organization to connect in their own preferred manner, thus eliminating the need for peer-to-peer connectivity. Treasury is able to take advantage of critical cash flow benefits, while lowering the overall cost of payments.
Companies wanting to move to fully electronic payments will need to create strong partnerships both internally and externally. This means working across the organization, bringing together stakeholders, such as finance, payables, receivables, sales, and procurement. It also means working outside the organization, in particular with your bank in order to take full advantage of payment networks.
At Fifth Third Bank, we have extensive knowledge and experience working with many different payment networks, which allows us to help our clients get the greatest value from these networks. We act as a trusted advisor, offering insights that allow businesses to develop highly effective strategies that leverage payment networks to meet treasury objectives.
We take our role as an advisor seriously, sharing industry best practices, tools and services that help our clients keep up with the dynamic changes that are exploding across the payments landscape. We work hand-in-hand with our clients to help them onboard suppliers, educating them about the benefits of electronic payments, such as the opportunity for quicker payments, better visibility to the remittance detail, self-service options through an online portal, and greatly reduced payment exceptions.
As the B2B payments landscape follows the lead of the B2C e-commerce world, companies will want to work with their banks to enable e-invoicing, e-payments, card solutions and other functionality in order to automate and streamline their treasury processes. Whether endeavoring to achieve treasury efficiency or make working capital management improvements, company’s need to keep up with the rapid changes that are occurring.