Over the past decade, business-to-business (B2B) payments and their processes have become increasingly digital. In addition, it is widely acknowledged that the COVID-19 pandemic has had a considerable impact on the global payments industry, particularly on B2B payments. COVID-19 acted as a catalyst to further accelerate the digitalisation of both Accounts Receivable (AR) and Accounts Payable (AP). This has resulted in an increase in investment within the B2B payments ecosystem that aimed to enhance product development and support new use cases to address payment-related pain points for corporates.
Due to COVID-19, the size of the global B2B payments market decreased by 4% between 2019 and 2020, and the recovery has been slowed by the conflict in Ukraine. However, the market has since experienced a strong rebound, and Edgar, Dunn & Company (EDC) estimates that the global B2B payments market will grow from USD 113 trillion in 2023 to USD 137 trillion in 2027, with a CAGR of 5%. This growth illustrates the significant size of B2B payments and the many opportunities it creates.
EDC has conducted a compelling research study to understand the current state of B2B payments and the payment-related challenges that corporates and small and medium enterprises (SMEs) face. The study is based on more than 100 interviews with corporates and more than 50 interviews with all stakeholders in the B2B payments value chain: issuers, payment schemes, payment gateways, acquirers, procure-to-pay platforms, and fintech companies.
From these interviews, EDC identified payment-related challenges that corporates and SMEs encounter, as well as the following seven best practices payment providers can implement for a successful B2B payments strategy.
Using technology to alleviate B2B payment-related pain points is imperative. EDC recommends corporates identify a list of all challenges related to B2B processes and payments. Corporates should then prioritise these areas of concern to address the ones with the greatest impact on their business first (e.g., automation of manual processes).
The value proposition of commercial cards has traditionally been unbalanced with relevant benefits to buyers – including financial rebates, extended payment terms, and easier financial reconciliation – but without many advantages for suppliers, who had to bear the increased cost of payment acceptance. However, this is changing. Many stakeholders in the value chain are beginning to acknowledge that the value proposition needs to be more balanced between buyers and suppliers.
The B2B payments ecosystem has become increasingly complex as many actors expand in the value chain and new entrants target specific use cases and niches. Corporates have increased expectations, and they progressively require payment providers to address some needs beyond their core offering. In the past, payment providers developed most of their capabilities in-house, but this is no longer the case. As the pace of innovation accelerates and time to market becomes a key differentiator, payment providers steadily rely on partnerships to create a stronger value proposition.
Interviews with corporates and payment-related actors revealed that corporates looked at two main criteria when assessing B2B payment solutions:
Partnerships are important to create a stronger value proposition for corporates and offer a modular ‘all-in-one’/‘end-to-end’ flexible value proposition. Partnerships with third-party providers can go beyond technical integration to develop real commercial relationships and become indirect sales channels.
In an increasingly competitive payments ecosystem, it is important to turn distribution channels into a strategic tool to increase reach and exposure. Indirect sales channels also strengthen the ability to create a network effect to connect corporates on both AP and AR sides and generate additional benefits for corporate clients.
A critical success factor for corporates when assessing providers is the ease of integration with their current B2B platform. The more effort required by corporates to integrate a solution, the less likely it will be selected. More specifically, corporates often assess the number of man days required for integration. The higher the number of man days, the more difficult the internal buy-in process will be, and the longer it will take to make the integration a priority. EDC’s research highlights it is very important to facilitate integration and have a clear implementation strategy.
One of corporates’ main pain points is not having a good understanding of their direct and indirect costs, which makes it difficult for them to assess the potential return on investment (ROI) of a solution. Quantifying the benefits of a payment solution facilitates the sales process and supports the internal decision-making process of corporates. These benefits can be used to create a business case to quantify the investment required by corporates and to facilitate the internal buy-in to convince senior management. This is particularly important in the B2B payments market, an industry that previously has not always acknowledged the significant need for innovation compared to the B2C payments market.
Get instant access to Edgar, Dunn & Company’s 7 best practices to capture opportunities within the fast-growing USD 137 trillion global B2B payments market whitepaper. EDC has a strong track record of collaborating with corporates and payment providers across the B2B payments value chain on strategy work, including company corporate strategy, product development strategy, market entry strategy, profitability analysis, product benchmark assessment, and market research. EDC would be pleased to discuss further about B2B payments by leveraging their B2B payment expertise and the insights from this research.
Greg Toussaint is a Director at Edgar, Dunn & Company (EDC) and works in the Paris office. He has over 15 years of consulting experience with EDC in business strategy for clients in Asia, Europe, North America, and South America. Greg has worked in EDC’s London, Sydney, and Paris offices, and he developed global perspectives on payments. Within EDC, Greg leads its B2B Payments Practice globally, working on strategy topics for all actors in the B2B value chain (e.g., corporates, B2B providers on both AP and AR, issuers, acquirers, and payment schemes). Outside of work, Greg plays the saxophone and loves baking cakes.
Edgar, Dunn & Company is a global consultancy specialising in payments and financial services. Since 1978, we have partnered with clients across the globe and developed specialist expertise. We offer an independent voice, and our vision is to be the most trusted global payments consultancy. Today, we serve clients in over 45 countries through our global office network in North America, Europe, the Middle East, and Australia.
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