The digital revolution has taken B2B payments to new heights, with technology making it easier and faster than ever for companies of all sizes to take payments from their customers. Unfortunately, the path to a fully digital experience is fraught with challenges that can’t be overlooked. From inadequate data exchange protocols to outdated hardware and software solutions, there are a number of factors that must be taken into account in order for B2B payments to truly become digitised. However, using B2B digital payment solutions such as KredX can reduce manual processes and improve operational efficiency while reducing risk.
In this blog post, we explore what these challenges are and how they can be conquered in order for the company’s online payment infrastructure to reach its full potential.
What Are B2B Digital Payments?
B2B payments refer to the transfer of money from one business to another. This usually happens when a company buys goods or services from another business, such as for suppliers and customers. The traditional way of making B2B payments is through bank transfers or cheques, which can take days or even weeks to process.
Despite the widespread usage of credit cards and online money transfer services in our everyday lives, many businesses still rely on traditional methods for their B2B payments. This is because the digital payment landscape has not been as accessible to them as it has been for consumers.
With digital payments, it’s possible to streamline and make these transactions much faster and more secure than with traditional methods. The benefits to making B2B payments digital are huge; however, there are still some B2B payment challenges that need to be addressed before this can become commonplace.
How Do B2B Payments Typically Work?
B2B payments are typically initiated by the buyer, who then sends an invoice to the seller. The seller then has to approve the payment and provide a “proof of delivery” document. The buyer then processes the payment with their bank or other financial institution, which can take several days for funds to transfer into the seller’s account. This entire process is laborious and time-consuming, as well as being prone to errors due to manual inputting of information.
However, with digital payments, this process can be automated and streamlined. This means that the buyer can send an invoice electronically to the seller, who can then approve it faster. Then, the payment is processed instantly with fewer chances of errors or delays.
The Challenges Of Digitising B2B Payments
Eliminating paper-based processes and streamlining B2B payments is a great idea, but there are still some key challenges that must be tackled before B2B digital payments become commonplace.
1. Adapting To Different Payment Methods
Navigating the various payment methods available to B2B customers and finding ways to accept them digitally can be a significant challenge. Companies must consider a variety of factors, such as cost, speed, security, accessibility, and compliance requirements, when deciding which digital payment method best fits their needs.
Businesses must ensure that their systems are up-to-date and able to handle the latest technologies, such as encryption, tokenization, and other security measures. This requires a significant investment in time and resources, but it’s essential if companies want to keep their customer data safe from hackers and other malicious actors. Additionally, businesses must also be aware of any new regulations or laws related to digital payments so they can stay compliant with industry standards.
2. Establishing Secure Connectivity
Establishing a secure connection between two entities is essential for providing efficient digital payments. This requires authentication of each side and the need for encryption technologies that protect customer data from unauthorised access or manipulation during transfer.
Also, the two entities must be able to trust each other and have access to a secure platform that can handle the transfer of large amounts of data. This can be a challenge for businesses, as setting up such a system requires significant time and resources.
3. Overcoming Legacy System Limitations
Many companies still rely on outdated legacy systems when it comes to making B2B payments, and these systems may not be compatible with newer digital payment solutions. Companies have to assess the feasibility, costs, and benefits of upgrading these systems before being able to move forward with modernising their payments processes.
Not only can this be expensive, but it also requires a significant amount of time and resources to implement. Additionally, companies must also ensure that their systems are secure and able to protect customer data from cyberattacks.
4. Integrating Payment Platforms With Business Systems
To facilitate efficient processing of payments, companies must integrate the payment platform they choose with their existing business systems, such as account receivable software, accounts payable software or ERP systems. Achieving this integration is often complex and time-consuming due to the different technical specifications and protocols used in different platforms.
This can be a challenging task for businesses as it requires a great deal of effort and resources to ensure the integration is successful. Additionally, businesses must also make sure that the data is secure during transfer and that all transactions are compliant with industry regulations and standards.
5. Adhering To Regulatory Requirements
When it comes to making digital payments, companies must ensure that they are compliant with all relevant regulations related to KYC/AML procedures, data privacy laws, cross-border payments, etc., which can add complexity in terms of ensuring compliance with local laws in multiple jurisdictions.
The challenge here is that companies must be aware of any changes in regulations and laws to ensure they stay compliant. This requires a significant investment in time, resources, and expertise to stay up-to-date with all the latest changes.
6. Ensuring Seamless Payment Processing
Companies also need to make sure that payment processing is smooth and efficient both on the customer and provider side while minimising manual intervention wherever possible in order to maximise operational efficiency gains from going digital in terms of B2B payments processing timeframes and costs associated with it.
Seamless payment processing requires robust processes, infrastructure, and technology to be in place. It also necessitates a great deal of effort and resources to set up such a system, which can be challenging for businesses due to tight time frames and limited budgets.
7. Managing Fraud Risk & Security Breaches
With potentially sensitive financial data being exchanged between two entities during a digital transaction, there is always the risk of cybercrime or fraudulent activity, increasing the potential for loss due to fraud or security breaches if proper buyer risk management measures are not taken by both parties involved in the process.
Though there are many security measures in place to ensure data safety, companies must take the extra step of ensuring their digital payment platforms are secure and that all sensitive information is properly protected. This can be a challenge as it requires additional resources, time, and effort to implement appropriate fraud detection and prevention measures.
All in all, making B2B Digital payments for cash flow management presents many challenges to both companies and customers. Companies must be aware of the potential risks associated with digital payments, as well as the cost, time, and resources involved in making sure their payment process is secure, efficient, and compliant with all relevant regulations. By weighing out the pros and cons of switching to digital B2B payments, companies can make sure they bring the most value to their customers and themselves.
That being said, using B2B Digital Payment Solutions like KredX helps businesses to easily manage and track payments digitally, reducing the risk associated with manual processes and improving operational efficiency.
Book a demo with KredX to see how digital payments can work for your business. Experience the convenience of making B2B payments digitally with KredX!