Why B2B Businesses Are Slow to Adopt E-Payment Solutions

Electronic payments, which were once considered a promising trend, are now becoming a reality for many businesses. According to research, 71 % of B2B companies can now pay their suppliers electronically. Furthermore, 89 %expect to issue electronic payments through online payment gateway to the majority of their suppliers by 2016.

Despite these figures, the B2B industry has a long way to go. According to a recent survey conducted by the Association of Finance Professionals, only 50% of B2B payments are made electronically. Furthermore, this figure represents a significant slowdown in e-payment adoption, which fell from 23% between 2007 and 2010 to only 7% since then.

So, why has the other half of B2B companies been so slow to adopt e-payment solutions? This question can be answered by three reasons.

1. Philosophical challenges

One of the most difficult challenges that e-payments face is the pervasiveness of checks. Checks have been the preferred method of payment for businesses for decades. Buyers and suppliers in every industry are familiar with them, understand how to deal with them, and are often hesitant to give up this level of comfort for something else. This has given rise to the popular belief among businesses that have yet to implement electronic payments that if their current solutions work, why change them?

This is exacerbated by the fact that most businesses prefer to invest their time and resources in projects that will generate more revenue for them rather than simply cut costs. Despite the fact that many businesses cite the long delays and subsequent costs of their current invoicing processes as a top challenge, and despite the significant potential savings of electronic payments (up to $15 per transaction), this type of thinking remains a formidable barrier.

2. Technological innovations

Checks have remained dominant in many countries for so long, thanks in large part to technological innovations that have made them so simple to use. Check truncation and remote deposit capture, for example, have made it possible to convert physical checks into digital images that can then be deposited into an account. This has alleviated many of the burdens associated with paper checks while also extending their usefulness.

In an ironic twist, such innovations have kept the industry from embracing other advancements. Companies don't have to worry about gathering the additional data, such as bank account information, required for an electronic payment through the best payment gateway because checks require a minimal amount of information (just a name and address) and can now be deposited with such ease. As a result, they miss out on the early payment discounts and other benefits that e-payments provide.

3. Suppliers

According to a report, the biggest barrier to implementing B2B e-payments is on the supplier side. Although 71 %of companies are ready to fully begin paying their suppliers electronically, nearly half of suppliers (46 %) reported that the cost of converting to electronic payments is prohibitively expensive, and another 30 %stated that they lack the general capabilities to do so. A further 22% of suppliers lack even the managerial structure required to implement the necessary change for electronic payments.

This challenge highlights one of the primary challenges of e-payments: they cannot be implemented independently, but rather require collaboration between buyers and sellers to ensure that both have the necessary technology and knowledge to send and receive payments. This process will entail businesses educating suppliers about the information needed for electronic payments, addressing any security concerns, confronting upfront costs, and much more.

Conclusion

There are already many excellent solutions in place to address the supplier issue and assist the remaining 50% of B2B payments to become electronic. For example, UPIC codes can make sharing bank account information as secure as writing a check, while supply chain financing and early payment options can help with upfront costs. We'll look at some of these e-payment solutions, as well as their benefits and drawbacks, to help you decide which is best for your business.