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5 Trends Changing Business Payments in 2019

5 Trends Changing Business Payments in 2019

Suddenly, business payments are hot. 

I’d say there’s a growing level of understanding of the space and a feeling that B2B payments are starting to come of age. That is good news for customers, considering decades have passed since there was innovation in this space.

Here are 5 trends for business payments in 2019:

B2B payments innovation has begun

Many of the people who wanted to meet me were venture capitalists and private equity partners. B2B payments is a very, very large market—36 trillion in payment volume—versus about three billion for consumer payments. Most business customers are still paying with paper checks. This has always been an interesting category because it’s so big, and so far behind in digitization. Now, as the consumer payments technology market is becoming saturated, B2B payments have captured the attention of the investment community. There are a lot of new investments happening, so look for offerings related to B2B payments in the next few years.

Payments as a backbone

Vendor payments are tied to a lot of other processes. Once you digitize payments, it opens up opportunities with procure to pay, dynamic discounting, supply chain financing, and lending to name a few. For example, we’ve already seen Uber experiment with making auto loans to its drivers and taking the loan payments directly out of their pay. Companies should look to digitize payments with an eye to efficiency and cost savings now, and as a springboard into other innovation opportunities down the road.

Full payments automation

The first wave of new entrants in B2B payments has already hit the market, and many of their value propositions sound the same—cloud, simple, automated. But, not all of them are really in the cloud, simple, or automating the whole process. B2B payments have long been plagued by partial automation, and that’s a big reason why so many businesses are still stuck on checks. Cards and ACH make the transfer of funds electronic, but they also introduce new manual processes for file preparation, reconciliation, and vendor enablement. New, truly automated solutions can handle every part of the process. The person in accounts payable should only have to select the bills they want to pay and click the “pay” button. Buyers need to look past the marketing language and check under the hood.

Banks embrace fintechs

Five years ago, the relationship between fintechs and banks was adversarial. There was a lot of talk about fintechs using technology to take over different aspects of banking and to do it faster, cheaper and better. Over the past 18 months or so, we’ve seen the conversation shift. There is a growing recognition that banks and fintechs have very different strengths and that they will be stronger together. Bank and fintech relationships are now starting to form. Examples include’s relationship with JPMorgan Chase. The idea is to bring’s solution to small businesses through the bank channel. Chase’s recent acquisition of WePay provides an application for three-party payments for platforms such as ConstantContact and GoFundMe. This is just the tip of the iceberg; we will see many more partnerships and acquisitions in 2019.

Blockchain is still a technology to watch

Blockchain, the distributed ledger technology that underpins Bitcoin, is still very much part of the conversation. This is the only technology that truly has the potential to change banking and finance as we know it, providing a new set of instantaneous, decentralized, global payment rails. Banks and fintechs such as Ripple and Earthport are collaborating and getting traction, demonstrating they have a value proposition. But, if banks find ways to control it, it may end up being a better experience, but it won’t be any less expensive than current options.

All of these developments are great news for customers because the market is picking up speed and companies will have a lot more choices than in the past. B2B payments are far more complex than consumer payments, and there’s next to no technological innovation applied to them until very recently. Companies have lived with the status quo for decades. That is all about to change.

As fintechs encroach on core bank activities like lending and payments, banks are going to step up their game by either improving their own services or teaming up with the innovators. 

Karla is Chief Executive Officer, Co-founder, and member of the Board of Directors at Nvoicepay. She has 20 years of experience in management, finance, and marketing roles in both large and early stage companies. Along with the founding team, she has grown Nvoicepay into a leading B2B payment network

Payment options for shipments of export cargo and import cargo in international trade.

Four ways to evaluate international payments

It used to be that only large companies did business internationally. In the past few years, increasing globalization, reduced trade barriers, the internet, and new business platforms such as eBay and Alibaba, have made crossborder trade more accessible and affordable. Now it’s much more common for SMEs (small and medium-sized enterprises) to do business with suppliers internationally, too.

Along with this opportunity comes new challenges. One such challenge is payment. United States-based SMEs buying from international suppliers are finding it difficult to pay the right amount on time using bank wires (the traditional solution for international payments.) The problem is, sending money by wire is a costly manual process that doesn’t scale. Fintechs are stepping in with payment solutions for this emerging market.

A new phenomenon

Paying international suppliers isn’t such a big deal for large multinationals. They typically have international offices with localized treasury functions. They set up local bank accounts to hold capital in different countries, and they pay employees and suppliers in local currencies. They may also have sophisticated currency trading and risk management programs. This makes sense when doing a large volume of trade in a given country or region.

It doesn’t make sense for SMEs to expand supplier relationships globally when only making a few hundred, or even a few thousand payments a year. For most of these businesses, their bank is the first place they go for help making international payments. But banks haven’t innovated for this trend with a product that makes sense for these customers.

Bank-based products typically provide a portal for customers to send international wire transfers. Customers can use it to set up their suppliers, but every time they make a payment, they must key in the amount and remittance information by hand.

Once the transaction is complete, accounts payable must enter that data manually into their accounting system. Sometimes they don’t see the real costs of that payment or know how much money landed in the supplier’s hands. This lack of visibility is a problem. Suppliers who struggle to receive money reliably, or can’t see remittance details for the funds, are more likely to charge you extra for the hassle.

No visibility, but plenty of fees

With so much manual work, errors will happen. These are often harder to fix than domestic payment errors. The first problem is that you lack visibility (and so does the bank) from the time the payment enters the portal until it lands in the supplier’s hands. The money passes through multiple corresponding banking partners in different countries. You may not know that a payment has failed until you get a call from the supplier asking where the money is. Then you must do your own detective work to find the error. It can be a long process, and many banks will charge you for time spent investigating a payment.

This fee is accompanied by whatever the bank is charging for the transaction. The actual transaction fee is unclear, and most SMEs are not getting a good rate because international payments remain a source of high profitability for banks. Banks charge more on crossborder payments than card processing—somewhere around 300 basis points, which is significant when the average international B2B transaction is between $5,000 to $20,000. Most businesses do not question the cost because they don’t understand the foreign exchange rate they’ve been charged or aren’t aware of alternatives.

Paying international suppliers through a bank portal is a painful, expensive process that creates unnecessary friction for burgeoning crossborder trade. There are better fintech alternatives, and here’s how SMEs should evaluate their options.

Initiation process. It should be simple to initiate international payments right from your accounting system using the same automated workflow as you use for domestic payments, without manual effort.

Fee transparency. Many banks say you can send wires internationally for free. But banks pay fees to other banks in this process, and they’re going to make money on the transaction. If it’s not from the transaction fee, it’s going to be from the currency translation rate (foreign exchange rate), which is harder for the customer to track. If you can’t see the currency translation rate before you send the money, this is a good indication that you might not have the best rate. Look for a provider who is transparent with all fees pre-transaction.

Support. Even with automation, payment errors are inevitable. Watch your payment as it travels. If your bank isn’t right on top of the mistake, they will charge for things like investigating the error—and that’s absurd. Look for a provider that supports the payment on the back end. Review the visibility into the progress of the payment. Ask how fast they react to problems. Do they charge extra for support services?

An opaque market. Banks have enjoyed the lion’s share of crossborder payment business for some time, and as a result, it’s very opaque market. Manual payment initiation and data entry, hidden fees and lack of support aren’t such a big deal if you’re only paying a handful of vendors internationally. But once making hundreds or even thousands of payments, it reveals a huge pain point.

It’s not just the direct costs either. Companies report that crossborder payments account for just 20 percent of payment volume but typically take 80 percent of accounts payable’s time. That’s simply not scalable. You can’t just keep throwing people at this problem.

In the future, there is potential for blockchain technology to transform the market for international payments, and this is one of the reasons you see so many banks investing in it. Banks don’t want to lose out, and they’re moving as fast as they can to keep up with fintechs.

But, I think we’re still three to five years out from a robust, complete blockchain solution for international payments, and that’s not helpful if you’re trying to scale your business globally right now. Fortunately, alternative fintech solutions exist to help companies make scalable international payments now, freeing SMEs from at least one obstacle to achieving global ambitions.

Karla Friede is co-founder and CEO of Nvoicepay, the leader in payment automation software for the enterprise.