No Remittance Data Means Lots Of B2B Payments Friction

February 19, 2021

For all of the talk of accelerated digitization and modernization of the enterprise over the past year, corporates still face plenty of friction in their business-to-business (B2B) payment workflows. These pain points lurk anywhere in the payment cycle, impacting buyer-supplier relationships, reconciliation, cash allocation and everything in between.

At the heart of many of those challenges is data. PYMNTS and Flywire have collaborated on a new research report, Payments 2021: Assessing The Digital Gaps In Business Payment Flows. More than one-fifth of decision makers surveyed at technology firms, education institutions and travel companies identify a lack of access to real-time data as a major source of friction in their own payment operations. That lack of access to data is exacerbating other challenges, from managing vendor relationships to reconciling receivables.

Yet there is plenty of technology available from financial service providers today eager to transform B2B payments for corporate customers. So, what’s holding back organizations from adopting these tools and alleviating their own payment pains?

Ryan Frere, executive vice president and general manager of B2B at Flywire, points to the tendency of the commercial payments space — and of corporates themselves — to take an inefficient route to payments optimization.

“It’s complicated, and it doesn’t need to be,” he told Karen Webster. “And as a result of it being so complicated, companies feel they have to get payment expertise and build up the payments function internally, just to manage payment service provider vendor relationships.”

A History Of Complexity

Ironically, Frere said he often sees corporates attempting to ease the complexity of managing vendor relationships by working with more payment service providers. It’s a baffling tactic that has its roots in the business-to-consumer (B2C) payments technology landscape. Historically, companies had been forced to adopt multiple solutions and platforms to be able to accept a variety of payment methods and loop into various payment rails.

The result was not only a multitude of payment vendors those firms had to manage, but also a back-office infrastructure of disparate platforms that were unable to interconnect and failed to provide real-time data visibility. It’s a pattern that may be repeating in the B2B payments landscape as more solution providers introduce new products to the market that vow to tackle different pain points.

“Everybody’s stuck in this layer of managing those relationships, managing their own payment operations, as opposed to taking a step up and asking, ‘Is there a way for us to solve this through software?’” said Frere.

Just as Stripe began to consolidate the way businesses consume B2C payment technology, other software vendors are introducing solutions that not only address individual pain points of high value B2B transactions like reconciliation or card acceptance, but to streamline the entire B2B payment ecosystem so that businesses no longer have to tackle each pain point one by one.

As Frere explained, this value proposition isn’t about alleviating pain points, it’s about removing them from the equation altogether with technology that can provide the necessary payments functionality and enhance automation, compliance and real-time data visibility. For example, rather than figuring out which local vendor to use to support cross-border transactions from a new jurisdiction, businesses can adopt software that handles that process for them and use those resources instead to actually invest in that global growth.

Expanding The Focal Point

Although organizations have long expressed frustration from various disruptions within the accounts payable (AP) department, the survey conducted by PYMNTS and Flywire revealed nearly one-quarter of respondents are concerned with the struggle of supplier management. It’s a revelation that has broader implications for the strategies organizations deploy when modernizing their B2B payment workflows, with the vendor relationships becoming a more important factor in the process.

“If you look at the way the industry has developed over the years, it has been a lot of focus on AP,” noted Frere. “But the biller really begins the conversation of how to get paid, so it’s really important that the biller is taken into consideration.”

Expanding the focus to include accounts receivable (AR) points of friction can help guide organizations (and their service providers) in how to elevate the payments experience for everyone involved. After all, a supplier waiting 75 days to get paid isn’t simply facing a cash flow bottleneck. They’re also exposed to foreign exchange (FX) fluctuations, the potential for failed transactions, and other risks, resulting in a high volume of yearly write-offs.

In addition to potentially accelerating payment to suppliers, B2B payments modernization initiatives can improve cash flow predictability by boosting the availability of real-time data for both sides of the equation. Data is also critical to ensuring that a supplier receiving payment can apply that cash to the appropriate invoice, Frere said.

Once again, easing pain for both buyer and supplier is another opportunity for corporates to consolidate their service provider base and choose payment technologies that can play double-duty. Software that can facilitate automated reconciliation across payment rails, for instance, and inject significant efficiency within the AR department.

At the end of the day, said Frere, the ability to move the needle on optimizing B2B payments is all about dollars and cents. Calculating a clear return on investment (ROI) on payments technology investment is key for corporates and their suppliers, and as businesses accelerate their efforts to digitize, removing costs will be a top priority. Demonstrating how a cost-cutting tool can then remove complexity is typically the tipping point for finance leaders when choosing the right tools.

“When you talk about what companies are looking to do, you can digitize payment flows in a way that really starts to provide a benefit,” said Frere. “You’ve removed massive complexity that people didn’t think was possible.”