KEY POINTS

  • The business-to-business (B2B) payments market is a vast opportunity. In the US, B2B payments reached an estimated $18.5 trillion last year, vastly outstripping the consumer-to-consumer (C2C) and business-to-consumer (B2C) realms.
  • The complexity of B2B payments is holding back innovation. The many steps, and players, involved in B2B payments have made digitization difficult. In 2016, US businesses still made over half of their B2B payments via check, according to the 2016 AFP Electronic Payments Survey.
  • But the times are beginning to change. Barriers are beginning to erode as digital technology increasingly infiltrates the wider payments space, sparking greater back-end development and client interest. In fact, 70% of businesses surveyed by AFP in 2016 said it’s very or somewhat likely that the majority of their payments will be electronic in the next three years.
  • The size of the B2B segment, combined with its early-stage disruption, could make it the next frontier for payments firms, including card networks, banks, and third-party startups. In fact, major players like Western Union are already developing platforms specifically for B2B use cases, and others, like Vantiv and Fleetcor, are buying into the space through acquisitions.
  • However, integration is critical for any kind of standard to be set. While firms are already buying, building, and partnering to move into the space, we won’t see any major steps toward a digital industry standard until all the links in the chain, from invoicing to transfer of funds, can operate through a single platform, creating a full end-to-end digital solution.

Introduction

As consumers, the way that we manage money and make payments has moved from physical channels, like cash and checks, to digital methods, like cards or online platforms, with relative ease. For businesses, though, that’s not the case. While the consumer payments industry is largely digitized, the business payments industry is still mostly analog. That’s because the business-to-business (B2B) payments process is complex, boasting so many moving pieces and disparate players that it’s tough to create a digital solution for one portion that speaks to the analog nature of the rest, let alone an end-to-end offering. 

When business money changes hands — between suppliers and buyers, for example — the process isn’t like it is when a customer goes to the store. Instead, it’s a cumbersome, paper-heavy process, involving invoices, letters of credit, and checks, that can take up to several months to be completed. 

But we're starting to see [...]