The Evolution of B2B Payments

Set of eyeglasses looking over an invoice from a B2B service.

The world of B2B payments can often feel like a blast from the past. Nearly half of businesses still rely on checks as their primary source of payment. Paper invoices remain common, and most accounts payable teams still process payments manually. However, the payment innovations that have taken the consumer world by storm are now moving into the business side.

Tech tools designed for business payments are making processes easier and faster, improving security, and even providing new sources of revenue. Companies that get on board now can add efficiencies to their AP and AR operations, saving the organization time and money in the process.

The Automation Game

Checks represented 47% of the total payments B2B payments volume in 2018. That percentage has been rapidly declining, as ACH and other electronic forms of payment take hold. That's because paper checks are not only expensive, but they also require a fair amount of manual handling—they need to be issued, signed, and mailed.

Such manual processes reflect the long-held standard in the B2B payments space. For instance, 19% of AP departments report that they have no automation in their payments process. On the flip side, just 5% report that they’ve fully automated their payment process.

In fact, payment automation is one of the biggest changes impacting business payments today. Multiple fintech tools, combined with evolving banking capabilities, make it possible to automate nearly every aspect of the payment process, from receiving and approving invoices to issuing and making the payments. Companies that are leveraging this technology are already reporting positive results. One study, for example,shows that payment automation cut invoice and payment costs by 83% and approval times by 73%.

B2B Gets Real

Beyond automation, real-time payments are finding their way into the B2B space. The demand for companies to make faster payments is increasing, especially when it comes to improving payroll transactions and paying contract or gig workers. Faster payments offer a host of benefits to all sides of payments. Overall, they provide more security and reduce fraud risk as compared to paper checks.

On the AR side, shortening the time to receive payments helps the organization improve its capital management. And for AP, the ability to pay in real-time reduces payment costs and provides better data regarding cash and payments.

Fifth Third and other financial institutions have responded to the demand for real-time payments (RTP) by providing real-time payment integration for their corporate clients. While the trend is still in its early days, corporations are turning primarily to their banking partners for RTP information and resources. In fact, 66% of companies report that they see banks as the best financial institutions to handle RTP.

Reducing the Payment Risk

An astounding 79% of businesses have been victims of some kind of payment fraud. The good news is that advances in B2B payment technology are reducing fraud risk along with adding efficiency and speed.

Business email compromise and vendor email compromise are the most common scams facing companies. In each case, bad actors send fraudulent emails on behalf of a contractor to change payment information or request payment. In some cases, they even use online forms to update and change payment details so that businesses route payments into alternate accounts—and unknowingly, to criminals.

While the threat is real, technology tools are helping companies and banks combat financial crime. Virtual cards, for instance, allow companies to pay vendors with a virtual card number designed for a specific payment. Fifth Third’s payments solution does just this, making it easier for companies to restrict access to payment information and activities.

Artificial intelligence tools are also proving invaluable in the fight against fraud. False positives have plagued many payment fraud detection systems, but with machine learning, the tools are getting smarter. In one example, the travel company Priceline relies on an AI tool to spot risky transactions. The analysis examines not just identity information, but also payment patterns—such as how an individual populates payment information. If it appears to be a cut-and-paste activity, then the system may flag the account.

The world of payments is changing fast. Explore how these trends may play out in your own business, offering efficiencies, improved security and better data to your B2B payments processes.

The views expressed by the author are not necessarily those of Fifth Third Bank, National Association, and are solely the opinions of the author. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank, National Association or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever. Deposit and credit products provided by Fifth Third Bank, Member FDIC.