In 2022, CFOs will face a daunting list of challenges: Controlling overhead and managing cash flow. Obtaining financial resources. Defending the company against fraud. Chaos in the supply chain. The Talent Shortage and the Great Resignation Transformation to the digital realm.
The manner in which a company makes payments has an impact on all of them.
The new demands of working from home prompted more change than we’ve seen in decades in the long-overlooked area of B2B payments. However, there is still room for improvement. This is a massive market with a $22 trillion domestic market share that is still dominated by banks. In B2B, the bank to fintech share shift that we’ve seen in consumer payments over the last decade is just getting started.
Here are some of the trends I believe will emerge in the coming year:
1. Keep an eye on usage declines
Over 50% of US B2B payments were made by check just a few years ago. We’re getting close to 40% now. Although there are still a lot of checks, the percentage will continue to decrease. Checks are not used in Europe or Latin America. They must send data to the government in order to report and remit VAT. They must be able to send data across international borders and banking systems. Consider attempting to do all of this on paper.
Checks have remained popular in American businesses because they are the only form of payment that is nearly universally accepted. Maintaining manual check processes will become an increasingly unacceptable burden as the world becomes more digital.
2. A stronger emphasis on efficient processes
According to the 2022 AFP Payments Cost Benchmark Survey, the top reason for switching to electronic payments is now efficiency rather than cost savings. However, simply switching to Digital payment methods will not result in increased efficiency.
What does the efficiency of a payment process look like? Technology that allows you to use a single workflow for any type of payment; cloud-based storage of digitized data; and support services like error resolution and outsourced vendor enrollment and data management.
3. Fintech companies are gaining market share
There are a lot of check-eradication companies out there, but not all of them are equally effective. Check replacements, such as cards or ACH, are primarily offered by banks. They don’t provide the technology and services that businesses require to become fully digital.
Enrolling vendors for electronic payments, as well as managing and securing their data, has traditionally been a significant barrier to digitization. Doing it in-house can be prohibitively expensive. Fintech companies combine technology and services to provide a comprehensive solution.
4. The use of cards is becoming more widespread
Because credit cards offer too many benefits to ignore, the percentage of card payments will rise.
Customers benefit from an electronic process that lowers costs and simplifies expense tracking and reconciliation. Cards help you save money by releasing working capital and generating rebates. They combat fraud by making it easier to cancel payments and set spending limits and category blocks.
Payments are received and cleared faster on the vendor side, and they don’t bounce, resulting in improved cash flow. You get more remittance data with this method than with an ACH or even a check. When your company is large enough to accept credit cards, it enhances the image of your company in a more subtle way.
5. Large-scale fraud prevention
Criminals are always on the lookout for money. They robbed stagecoaches when money was moved by stagecoach. We had train robbers when it moved by train. Hackers are the new robbers as money moves digitally and more people become computer literate.
Regrettably, today’s robbers benefit from the same economies of scale as legitimate businesses. As it becomes more difficult for individual businesses to keep up with fraud on a large scale, they will turn to payment service providers to assume the risk.
6. Blockchain, yes; cryptocurrency, no
In 2021, cryptocurrencies and non-financial tokens (NFTs) made headlines. However, it is still too early to know how cryptocurrencies and blockchain/distributed ledgers will affect business payments in full.
With promises of being able to offer near-real-time transactions while lowering operational costs, blockchain has made banks a little uneasy. In fact, FLEETCOR already has a global payments partnership with RippleNet. Our clients can pay their beneficiaries in hours rather than days using the SWIFT settlement network thanks to their distributed ledger technology. All KYC (Know Your Customer) and AML (Anti Money Laundering) information is vetted for RippleNet customers, and there are bank accounts – not crypto accounts – on both sides.
Those necessary regulatory frameworks for cryptocurrencies are still missing. Their untraceability, volatility, and lack of widespread acceptance are all significant obstacles that must be overcome before mainstream business adoption occurs.
That’s it in a nutshell
B2B payments are currently being digitized. Because change is slower and the market is so large, it will take much longer than it has with consumer payments. There’s also a higher level of complexity. It’s not enough to simply transfer funds electronically. You must also make all of the processes that surround you electronically.
Companies will continue to replace checks with electronic payments in 2022. However, there will be a growing awareness that this isn’t true digital transformation.
Even if you make all of your payments via ACH and credit card, you still have people doing manual work that could be done much more efficiently with the help of a full-service payments provider. This lowers your costs, frees up people and capital, generates rebates, and makes your vendors happy because it saves them time and money.
Learn more from business and read How to Accept Crypto Payments as a Small Business.
