By Nicole Baranov, Solution Owner SAP Receivables Management, Treasury & Working Capital Solution Management, SAP
From mid-market businesses to large global enterprises, the impact of Covid-19 has vastly accelerated the move to digital payments, with a sense of urgency not seen before across the B2B landscape.
The pandemic disrupted business as usual and required vast numbers of employees to work remotely, leaving companies with on-premise legacy payment systems stranded in locked buildings and paper checks piled up in office inboxes across the country.
All of this came at a time when working capital was desperately needed to help businesses keep the lights on, while both suppliers and buyers realized that without the right digital options, they couldn’t properly access or reconcile payments.
The transition to digital payments, of course, has been on an upward march for years. Cross-border payments, which require fast, seamless money movement, is projected to grow to $35 trillion by 2022.
Virtual card adoption has increased — Juniper Research recently found it will total over $5 trillion in transaction value by 2025. And payment initiatives meant to speed up payments have expanded ~ including SWIFT gpi, SEPA Instant Payment and same day ACH.
In addition, the overall volume of B2B transactions is also accelerating: According to Deloitte, B2B payments in the US were expected to rise from $16.5 trillion in 2014 to $20.1 trillion in 2020.
Still, while many businesses may have wanted to implement digital payments, or made plans to do so, the truth is that until recently there was no compelling reason for them to rush to transform.
Around Fifty-one percent of small businesses and over 56% of large enterprises in the US continued to accept payments by check, even though check use had nearly vanished in Europe. Companies tended to struggle with an inefficient, mixed bag of B2B payment methods, platforms and solutions filled with manual processes and fragmented systems.
The pandemic, however, changed all that nearly overnight. Many organizations realized they lacked the visibility, flexibility, and agility they needed to adjust to the new remote, work-from-home model. With no one going to go to the office to physically collect checks or reconcile payments, companies suddenly had to urgently and quickly implement a digital payments transformation.
Nearly 75% of respondents from IDC’s COVID-19 IT Spending Survey specified that technology-led DX projects are a top priority going forward. By 2025, the survey predicts, 40% of businesses will use digital B2B payment providers to handle their finance functions for speed, reduced terms, financing and cross-border access. Payments modernization is no longer a maybe — it has become a must-have.
Changing the Game: Cloud-Based Digital Payment Integrations
The latest modern digital payments technology has changed the game: AI and Machine learning, APIs, digital currency and mobile payments technology has helped scale B2B payments to move at the speed of business.
However, it hasn’t always been easy to implement new digital payment methods, including connecting business applications to payment service providers such as credit cards or PayPal.
“In the past, this effort required point-to-point connections that meant IT departments had to handle complex implementations and intensive maintenance,” says Suhas Gosavi, SVP and GM of B2B solutions at fintech firm Fiserv, which recently integrated its SnapPay enterprise payments app with SAP’s digital payments add-on solution. There was also the risk of the loss of critical data stored within ERP systems to contend with, he adds — a major challenge, since ERPs are typically an enterprise’s core internal system of record, encompassing finance, procurement, and inventory and/or asset management.
The latest digital payments integrations, on the other hand, such as SnapPay and SAP, marry business sales processing and B2B payments and offer a variety of out-of-the-box benefits, including:
- Cost reduction and time savings. A modern, automated solution can slash the cost and time spent on invoice processing by removing labor-intensive manual processes.
- Secure transactions. Integrated digital payments solutions are better able to monitor potential weak points in supplier management, treasury systems, and payment files.
- Better visibility. The latest payment management solutions squarely address the drive for cash visibility and financial operational agility.
- Increased efficiency and accuracy. A modern B2B payments solution means staff spends less time on manual payment-related tasks, making them more efficient and less error-prone.
As an example, 100% of sales by one large global engine oil supplier is to distributors. Historically, those B2B customers did not pay upfront and demanded 30-60 day terms, while payment reconciliation was a lengthy process.
Now, with a new digital payments solution that integrates SnapPay with its SAP ERP system in real time, the suppliers’ ERP can provide accurate and timely information reflecting which invoices have been paid.
A mid-market global producer and distributor of home decor also found its IT organization empowered by this flexible, efficient integration, which served both their accounts payable and accounts receivable needs. The solution reduced their overall cost of doing business and simplified their payment card industry compliance.
No Turning Back: The Future of B2B Payments
There is no turning back to manual, inefficient, paper based B2B payments. In 2019, for example, IDC saw payment capabilities becoming more integrated into expense management, while the market clearly began to move away from paper-based payments. Since Covid-19 began in March, customer habits have taken root and those preferences will likely remain long after the pandemic.
“This is a watershed moment when it comes to B2B payments,” says Gosavi. B2B customers have long wanted the ability to pay digitally, he explains, the way they do in their daily lives.
Now, mid-market and enterprise-level companies can leverage B2B digital payments to support their success and growth in 2021 and beyond. “The benefits of moving towards integrated B2B digital payments vastly outweigh the challenges of starting the transformation journey,” he says.
To learn more about the benefits of integrated digital payments, read our latest research report from IDC.
