The shift to digital in global B2B payments
How new technology is transforming the payments landscape and enabling global commerce
$145Trillion
Fintechs and neo-banks ... are keen to grab a share of a lucrative industry worth $145 trillion globally.²
We’ve long talked about the consumerization of business payments – professionals today expect to complete business transactions with the same ease as they do as consumers – and we’re seeing a rapid transformation to meet this need.
Fintechs and neo-banks are increasingly moving into the global B2B payments space to take advantage of the opportunity to digitize an industry that traditionally has been hesitant to adopt new payment methods. They are keen to grab a share of a lucrative industry worth $145 trillion globally.²
Part of the reason suppliers have been slow to adopt payments other than ACH and cash is the presumption that these methods are the most cost-efficient. Increasingly, however, there’s an understanding that there are efficiencies and opportunities beyond these traditional payment modalities that new payment methods afford. This and the expectation that people will accept these new payment formats are leading to real change.
The future of payments is digital
While legacy payment types remain, a recent report found that ACH, electronic funds transfer (EFT), SEPA Credit Transfers, and BACS payments account for approximately 30% of commercial payment volume in North American and European markets among current users of those tools.³ This trend is most pronounced in countries where there is no tradition of using ACH, resulting in a rapid shift toward digital methods. Electronic payment methods, which include digital wallets, cryptocurrencies, peer-to-peer payments, and real-time payments (RTP) have all shown strong growth.⁴
Core to what these new payment methods offer as a differentiator is data and analytics. They enable businesses to track in real-time what money is coming in and what’s going out. And with the introduction of AI and Large Language Models, businesses are increasingly able to automate the generation of expense reports and other reconciliation processes, reducing the need for manual processes.
These emerging payments methods can be faster and more secure than traditional ones. Their ability to increase the velocity of money is growing the payments volume/total addressable market.
Empowering SMBs and large corporates to expand their global reach
Accepting a variety of digital payment types enables businesses to expand their geographic reach. This is particularly important for SMBs, who are looking to grow globally. In a recent survey, nearly 79% of SMBs cited selling across borders as an opportunity for growth.⁵ Digital payments can enable SMBs to readily make and accept secure payments, track and monitor spending, increase security, improve efficiencies and grow around the world. Payment innovations can also have working capital management implications, allowing companies to achieve shorter cash conversion cycles and fewer days payable outstanding (DPO),⁶ especially for large corporates. For businesses where cash-in-hand is equivalent to survival, these opportunities are truly a lifeboat.
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The shift to digital in global B2B payments
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Emerging solutions are transforming payments
Technology innovations occurring outside of the payments industry are increasingly being applied to it. The advent of cloud infrastructures have contributed to investment and capital cost savings associated with building critically important applications. At the same time, Open Banking APIs have helped to increase the prevalence of pay-by-bank, and encouraged greater standardization, which ultimately should drive further innovation.
Distributed ledger and blockchain technology have also spurred a great deal of payment innovation. Blockchain technology is powering a variety of digital currencies, particularly stablecoins and central bank digital currencies (CBDCs). These digital currencies hold potential for B2B payments, particularly in facilitating fast and cheap cross-border flows. Today, stablecoins are primarily being used in B2B and remittance flows, while CBDCs are still in their development stages. Stablecoins, which are commonly denominated in U.S. dollars, promise to make access to dollars easier and further “dollarize” global commerce and trade.
Embedded payments are also transforming how companies can do business. They streamline the end-to-end payments experience, adding significant value to cross-border flows. This allows merchants to accept a variety of local payment methods in one experience, enabling buyers to make purchases through B2B marketplaces or send money without having to leave the app/website. Embedded payments also make it much easier for organizations to reconcile payments and financials, as all transactions are recorded in databases and pulled into company financial systems. This makes straight-through processing (STP) possible, reducing the need for manual intervention and driving automation for payments operations - saving time and money. A global survey found that 54% of companies queried indicated embedded payments would be extremely important to them in 2024.
Advancing security objectives
In addition to driving efficiency and lowering the cost of payments, AI is also advancing security objectives. Of course, AI has existed in payments since the 1990s, particularly in fraud and risk analytics engines. As AI models continue to evolve and grow, they are improving fraud detection pre-transaction and ultimately make the payments ecosystem safer.
AI is particularly well-suited to this task because it is designed to take in massive amounts of data, detect patterns, and then distill it down into a simple response or action. Machines can far more easily and rapidly identify fraud patterns by consuming more and more data types, while learning from past errors and actions.
Technology innovations, such as network credential tokenization, have been introduced to help tackle security challenges. Parties participating in the payment flow can use tokenization to reduce their liability around fraud and data usage/management violations. Blockchain applications that leverage this technology are currently being developed and piloted, offering promising new use cases.
The future of B2B payments is bright
As generational shifts and globalization change expectations around money movement, banks, fintechs and card processors have an opportunity to work together to advance new payment solutions. The market for business-specific payment opportunities is wide open and growing. Payment companies that get in early can help these small businesses grow – and grow right along with them.
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- Tracking the Digital Payments Takeover: Can New Use Cases Drive Consumer Use of Digital Wallets, PYMNTS Intelligence and AWS, February 2024.
- McKinsey Global Payments Map 2022, EY Visa Direct Global Market Sizing Study 2022, Visa analysis.
- Commercial Payment Trends, Datos Insights (formerly AiteNovarica), December 2022.
- Commercial Payment Trends, Datos Insights (formerly AiteNovarica), December 2022.
- Visa’s Global Back to Business Study, 7th edition, conducted by Wakefield Research, March/April 2023.
- PYMNTS Intelligence & Visa Growth Corporates Working Capital Index 2023 – 2024.
In a recent survey, nearly 79% of SMBs cited selling across borders as an opportunity for growth.⁵
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