Articles

Five B2B Payment Methods Your Business Needs to Accept

by Sahil Verma SIFIPAY

The majority of online payment processing solutions are designed with B2C use cases in mind. However, while the B2C world spends approximately $2.8 trillion per year on eCommerce, it may surprise you to learn that B2B eCommerce spends $10.6 trillion per year...nearly five times that of B2C. As B2B companies place a greater emphasis on eCommerce sales channels, they may find it difficult to find payment methods that meet their requirements.

Invoices are used to pay for many large B2B transactions, and more than 70% of invoices are printed on paper. These processes are slow and inefficient, with significant hidden costs due to the time spent on paper processing, check runs, and manual file uploads to banks.

Solutions Built Primarily for B2C Don’t Always Fit B2B Use Cases

Invoices also create a trust barrier by pitting customers who refuse to pay until they receive their product or service against suppliers who refuse to ship until they receive payment. This trust barrier becomes even more problematic when selling to international buyers via online channels.

B2B companies must also consider the ability to handle recurring billing, small one-time purchases, and large orders, all of which may require different payment methods through an online payment gateway.

B2B Merchants Often Need Solutions to Accept and Send Payments

You must pay your own suppliers as well as long-tail expenses such as travel and employee reimbursements in addition to accepting payments. These smaller transactions are frequently entered manually, resulting in time-consuming B2B payment processes.

This complexity is exacerbated by the fact that software and payment technology stacks differ across companies, frequently resulting in issues where the payer and payee systems do not communicate well with one another. Each payee may necessitate a distinct payment method: a contractor may necessitate a different payment method than an ad agency, retailer, manufacturer, or service provider.

B2B Payment Methods: Pros and Cons

As B2-B companies shift their focus to online sales models, it's critical to understand which B2B payment methods your company should be prepared to use for both payables and receivables. Here is a list of the most common payment methods that your business should be prepared to use and accept, as well as their benefits, drawbacks, and most common use cases:

Credit Cards: 

Credit cards, like consumer transactions, are a popular payment method for businesses, albeit less so for large-ticket items or invoices.

Pros: Simplicity. When it comes to small business transactions, using credit cards allows for quick, easy, and secure payment. Making payments with credit cards is also a low burden because the payer is not responsible for fees.

Cons: Unfortunately, credit cards are not always the best option for large-ticket items or, in many cases, payees in general. While credit card companies may be delighted to handle a $150,000 transaction because of the handling fees they will receive, the receiver may be charged processing fees of up to 3% of the purchase price. As a result, credit cards are an expensive option for those receiving payments.

Often used for Smaller purchases and subscriptions. 

Global ACH: 

ACH transfers, which stand for "automated clearing house," are regarded as invaluable payment methods for businesses, allowing them to pay obligations such as payroll or move large sums of money at once. Bank transfers are also an appealing payment method through the best online payment gateway India for many businesses making purchases that exceed credit card limits, as well as for facilitating international online transactions. Using bank transfers for transactions also simplifies payments due to automatic account deductions, which reduces effort on the customer's part. Finally, bank transfers eliminate the risk of chargeback fraud associated with credit card transactions.

Pros: The ACH model is a dependable and robust model. ACH transfers have a significant global reach; most countries have similar clearing house technology in place, making it a more widely accepted payment method.

Cons: The ACH method takes approximately two to three days to process and is not perfect: Payments can and do go missing on occasion, and they take longer to process than other options.

Often used for payroll, large expenses, recurring payments and subscriptions, international payments, payouts

Real-Time Bank Transfers: 

ACH transfers are dependable, but they are slow – international transactions can take up to two weeks. Many countries have implemented faster payment rails that allow for near real-time funds transfers in an effort to reduce processing time and allow businesses and individuals to send and receive money more quickly. Faster Payments in the United Kingdom and UPI, or Unified Payments Interface, in India, are two common systems that enable real-time transfers.

Pros: Speed! With processing times reduced to seconds, funds can be paid out and received almost instantly by businesses, resulting in less effort for the payer and immediate payout for the organization or person receiving funds. Such models are popular in areas where they are available; UPI in India transacted a total of $240B USD over 1,000 transactions in its first three years.

Cons: The disadvantages of Real-Time Bank Transfers revolve around limitations and accessibility. These systems frequently have transfer caps (100,000 for UPI and £250,000 in the UK), limiting payments on very large expenses. There are also limitations to accessibility; in order to benefit from real-time transactions, one must use a bank within the network.

Often used for: mid-range expenses, B2B transactions in countries with real-time bank transfers, and real-time payouts to workers and suppliers.

Wire transfers: 

Wire transfers, which are also popular for large sums of money, are dependable and well-known around the world.

Pros: The most significant advantage of a wire transfer is its speed. Wire transfers are faster than ACH payments while still being able to handle large payments. Wire transfers (also known as "rails" in the banking industry) are much more widely used on a global scale.

Cons: In exchange for increased speed, there is an increase in cost. While they are a dependable method of transacting large sums of money, there are costs associated with doing so, making them only one of several payment method tools that a business should be equipped to use.

Often used for: Wire transfers are frequently used for large sums of money when speed is critical, particularly for cross-border and international B2B payments.

Checks: 

Checks are still a popular way for businesses to make and receive payments in many countries and also in India.

Pros: Ease of use. If a payment is required, you can simply mail a check and be done with it, relieving the payer of much of the burden. Checks remain the most common payment method used by businesses in the United States due to the prevalence of bank accounts and the infrastructure in place to move checks.

Cons: Checks can be inconvenient, time-consuming, and easily lost in the mail. Checks also have a higher rate of fraud than other forms of business payment.

Often used for: Contractor payroll, vendor invoices



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About Sahil Verma Advanced   SIFIPAY

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Joined APSense since, August 27th, 2021, From Ghaziabad, India.

Created on Jun 24th 2022 06:47. Viewed 249 times.

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