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6 B2B payment trends in 2022

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Archives, Banking, Global Trade Daily

6 B2B payment trends in 2022

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CFOs face a daunting list of challenges in 2022: Managing cash flow and controlling overhead. Getting access to capital. Protecting the organization against fraud. Supply chain chaos. The Great Resignation and the talent shortage. Digital transformation.

How a business makes its payments touches on all of them.

The new imperatives of work from home drove more change in the long overlooked area of B2B payments than we’ve seen in decades. But there’s more room for improvement. This is a huge market–$22 trillion domestically–where banks still have 90% market share. The bank to fintech share shift movie we’ve seen in consumer payments over the past decade is really just beginning to play out in B2B. Here are some of the things I think we’ll see unfold in the year ahead:


 

Check use declines

Just a few years ago, over 50% of US B2B payments were made by check. Now we’re closer to 40%. That’s still a lot of checks, but the percentage will keep dropping. In Europe and LATAM, they don’t use checks, period. They have to transmit data to the government to report and remit VAT. They have to be able to transmit data across borders and banking systems. Imagine trying to do all that using paper.

Checks have persisted in US businesses because they are the only payment method that enjoys near universal acceptance. But as the whole world becomes more digital, maintaining manual check processes will become an increasingly unacceptable burden.

Greater focus on efficient processes

According to the 2022 AFP Payments Cost Benchmark Survey, efficiency–rather than cost savings–is now the top reason for moving to electronic payments. But just shifting to electronic payment types doesn’t create efficiency.

What does payment process efficiency look like? Technology that gives you a single workflow for any type of payment; centralization of digitized information in the cloud; support services such as error resolution, and outsourced vendor enrollment and data management.

Fintechs gain market share

There are a lot of companies in the check elimination business, but not all approaches are equally effective. Banks mainly offer check replacements such as cards or ACH. They’re not offering the combination of technology and services that companies need to become fully digital.

For example, enrolling vendors for electronic payments, and managing and securing their data has historically been a big obstacle to digitization. It can be cost prohibitive to do in-house. Fintech providers use both technology and services to offer a complete solution.

Cards see wider adoption

The percentage of card payments will rise because credit cards simply offer too many benefits to ignore.

On the customer side, you get an electronic process that reduces costs and makes expense tracking and reconciliation easier. Cards free up working capital, and generate rebates. They fight fraud–it’s easier to cancel payment, and to control spend through limits and category blocks.

On the vendor side, payments are received and cleared faster, and they don’t bounce, all of which means improved cash flow. You get better remittance data than you do with an ACH or even with a check. Perhaps more subtly, it enhances the image of your business when you’re big enough to accept credit cards.

Fighting fraud at scale

Criminals always follow the money. When money moved by stagecoach, they robbed stagecoaches. When it moved by train, we had train robbers. As money moves digitally and more people become computer literate, hackers are the new robbers.

Unfortunately today’s robbers enjoy all the same advantages of scale that legitimate businesses do. As it gets harder and harder for individual companies to keep up with fraud at scale, they’ll turn to payment service providers that take on the risk for them.

Blockchain yes, crypto not yet

Cryptocurrencies and NFTs made headlines in 2021. But, it’s still too early to fully understand how cryptocurrencies and blockchain/distributed ledgers will impact business payments.

Blockchain has made banks a tad bit uncomfortable with promises of being able to offer close to real-time transactions while reducing operational costs. In fact, FLEETCOR already partners with RippleNet in our global payments business. Their distributed ledger technology lets our clients pay their beneficiaries in hours instead of the days it would take using the SWIFT settlement network. For customers that are on RippleNet, all the KYC (Know Your Customer) and AML (Anti Money Laundering) information is vetted and there are bank accounts–not crypto accounts–on either side.

Cryptocurrencies still don’t have those required regulatory frameworks in place. Their untraceable nature, volatility, and lack of widespread acceptance are big challenges that must be overcome before we see mainstream business adoption.

In a nutshell

The digitization of B2B payments is happening. It will take a lot longer than it has with consumer payments, because change happens slower and the market is so big. There’s also more complexity. It’s not enough just to move the money electronically. You have to make all the surrounding processes electronic too.

In 2022, we’ll continue to see companies replace checks with electronic payments. But we’ll also see a growing realization that this isn’t true digital transformation.

Even if you’re making 100% of your payments via ACH and credit card, you still have people doing manual work that could be done much more efficiently through a full service payments provider. That reduces your costs, frees up people and capital, generates rebates, and makes your vendors happier because it’s more efficient for them too.

Rick Fletcher, Group President of Corpay Payables, entered the world of payables through leadership roles at Deloitte Consulting, GE Capital, and Comdata. His passion lies in helping customers operate better through making better decisions and gaining payment efficiency. Rick holds a degree in management from Northwestern University.

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Archives, Banking, Global Trade Daily

How Streamlining Payments Helps Build Vendor Relationships

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I’d like to dispel some common misconceptions about B2B payments. First, the misconception that vendors don’t want to be paid by check. Next, let’s dispel the notion that vendors won’t take card payments.

I’ve worked in payments for a couple of decades now. I’ve managed cash handling, check processing, and lockbox operations. I’ve spent the last 10 years or so in the Mastercard B2B space. Based on my experience, I can tell you what vendors really want: convenience and choice.

Doesn’t everyone?

New choices

It used to be that the customer could dictate a payment method and vendors had no choice but to accept. That has been slowly changing. We saw a lot more vendors raising their hands to ask for electronic payments during the COVID-19 Pandemic, but this shift began even before that. Fintech companies have introduced a lot of new payment options, and vendors are more aware that they have choices.

It now falls to buyers to give vendors the convenience and choice they want, without overburdening their accounts payable departments. That means using automation to streamline payment and vendor enablement workflows. AP can then easily accommodate all payment types and let vendors choose what’s most convenient for them.

Different definitions of convenience

When vendors want to be paid by check, it’s often because they have some sort of mechanism that makes it easy to process them. In larger companies for example, that often means using their treasury bank to do lockbox processing for them. Banks will often provide this service for free to win other, more profitable business.

The bank collects all the checks from the lockbox, keys in the data and deposits them. All accounts receivable has to do is absorb a file that has all of the check data. That is a pretty clean process, and a compelling reason to be paid by check.

What about ACH? There’s no paper to handle, and the vendor gets the money faster. Why wouldn’t they want ACH payments? Well, ACH fraud is on the rise, and not all vendors want to risk exposing their banking data to their buyers.

Vendors might actually prefer a single use credit card. The common wisdom against that thought is that vendors won’t want to pay credit card fees. The reality is that virtual cards are gaining in popularity because you get paid fast and fraud risk is low. You don’t have to expose your banking data, and the card number becomes unusable once it’s been processed. For some vendors, that’s worth the fee.

No limits

The point is there’s a market for all payment types. For a buyer to limit themselves to just one or two payment options is to potentially limit whom they can do business with. With all the supply chain problems we’ve been experiencing it’s incredibly important to keep your vendors happy. The best way to do that is to make sure they get paid on time, in the manner of their choosing.

The problem, as many AP teams learned during the pandemic, is that doing electronic payments at scale is a lot harder than it seems at first glance.

You need to have the resources to enable vendors for electronic payments, on an ongoing basis. That means continual outreach to find out which vendors will accept a card or an ACH. It means collecting and verifying their banking data when you onboard them, and having processes in place to verify any requests to change bank account information. It means having a way to know if a virtual card payment hasn’t been processed, and a way of dealing with a card that is still open.

You also need very strong systems and processes in place to protect your organization against ACH fraud. If you’re not up to speed on using technology to validate and secure vendor information, and fend off fraud attacks, you’re putting your organization at risk.

AP teams already tend to be short-staffed. Turnover is high, and the amount of process documentation they have is low. They don’t have the capacity to take on this extra work.

Here’s where it gets good: AP teams shouldn’t have to take on extra work to make electronic payments work. The whole process can be streamlined by working with a payment automation provider. Automation providers typically provide a single workflow for all types of payments. All the person in AP has to do is select who to pay, and the provider will pay each vendor by their preferred method.

More importantly, automation providers take on all the work of enablement, including outreach and safeguarding vendor data. They also indemnify their customers against fraud. It couldn’t be more streamlined–all AP really has to do is click pay.

Convenience and choice for all

Checks have been the prevalent B2B payment method for a very long time, and for some very good reasons. The COVID-19 Pandemic, and our current supply chain woes, have made many organizations reconsider check use.

Vendors are increasingly aware that they do not have to let the buyer dictate how they get paid. Vendors now know that they are able to come to buyers and say, “We’ve got three payment options for you to choose from,”.

Fintech companies are providing new choices for buyers, too. Payment automation lets them offer vendors convenience and choice, without inconveniencing themselves. It’s a win-win, and that is the best possible way to build a relationship.

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Kim Lockett is Vice President of Customer Success and Services for Nvoicepay, a FLEETCOR company. She has more than 30 years of experience in payments, with a heavy focus on back-office operations and customer engagement. Prior to Nvoicepay, Kim held operations management and leadership positions with Comdata, Crestmark Bank, and Regions Bank.

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Archives, Commentary, Global Trade Daily

9 Spend Duplicates Only AI Can Catch

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What prevention methods does your company have in place to prevent duplicate spend? Most modern invoice automation systems can look out for two invoices with the same invoice number, or the same amount, and stop a payment that appears to be a duplicate. But this doesn’t find typos in invoice numbers, duplicates across expense and AP systems, or a number of other scenarios you may not even be considered.

AI can help. When it comes to duplicate spend, AI takes an expansive view, looking across all back-office systems, identifying duplicate spend across multiple payments, and more.

By taking advantage of the structured data in your spend systems as well as the unstructured data in your invoices and receipts, you can identify duplicates with ease.

Below are nine types of duplicates that only AI can catch.

1. Manual keying errors

Invoice processes often rely on manual data entry, which is error-prone. An employee might mistype the letter “O” as the number “0”, or “SEPT” as “SEP.” These types of duplicates are preventable and common, but wouldn’t be caught by a traditional invoice system. AI can find manual entry errors in invoice numbers or dates that typically fly under the radar in invoice automation systems and flag them for review.

2. Different supplier divisions

Your company might do business with multiple supplier divisions. These names may be listed separately in your supplier master list, so if you receive the same invoice from these entities, your AP automation system may not detect it. AI can flag duplicate invoices for the same deliverables sent from a supplier’s headquarters and international divisions.

3. Different company divisions

Similar to the example above, your own company’s internal divisions can create confusion. Each division within your company may have its own AP organization and approvals process, and wouldn’t know if an invoice was already received and paid by a separate department. AI can flag duplicate invoices for the same deliverables that are sent to different divisions.

4. Overlapping or cumulative

A supplier may send several invoices and then a quarter-end cumulative invoice, for example, three separate invoices at different amounts (one for $8,500, one for $4,000, and one for $13,200) and then a quarter-end invoice for $25,700. Traditional invoice systems may not catch this, but AI will flag these invoices for review.

5. Line-level

AP automation systems may not extract line details from an invoice. AI will check for duplicates at the line level and discover that, for example, the same services were included in two separate invoices.

6. Different AP systems

Maybe you have several back-office systems because of company mergers. When duplicate invoices hit different systems, your company may never know it. AI integrates with multiple invoice automation systems and flags duplicates regardless of which system they’re in.

7. Duplicate crossover spend

Your company likely doesn’t have visibility across its invoice automation and expense systems, causing you to pay twice for the same service if it’s submitted via T&E reimbursement and again via accounts payable. AI flags this so payments aren’t sent twice.

8. Duplicate expense claim submitted by two different employees

Maybe this is a mistake, or maybe the employees know that expense reports aren’t cross-referenced (especially if they have two different managers, or are in two different departments). Whatever the reason, AI can cross-reference expense reports from any department and flag when the same receipt is found on two different reports.

9. Duplicate expense claim in the same report

After a long business trip, all the receipts may begin to look the same, and an employee might accidentally submit the same expense twice in the same expense report. AI looks at individual line items and flags any duplicates.

How AI can help

Duplicates can take many different forms and can be difficult to find in a manual review process. To gain visibility into their business spend, many companies have embraced AI to achieve 100% visibility into expenses and invoices. Companies that automate their audit process are able to find errors, fraud, and non-compliant spend before payment.

To learn more about how 100% visibility into business spend means to you and gain additional insights on auditing business spend with AI, download our latest research report, The State of Business Spend. The findings focus on the impact of auditing with AI, the risk hiding in expenses and invoices, risky spend, and more.

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Josephine McCann is a Senior Marketing Associate at AppZen, the world’s leading solution for automated expense report audits that leverages artificial intelligence to audit 100% of expense reports, invoices and contacts in seconds.