The way businesses pay each other has evolved in recent years. Instead of mailing a check once services are rendered, businesses pay their vendors electronically, transferring money much more quickly than through traditional methods. However, the process of paying providers continues to evolve for businesses, giving them more options than ever. Here are a few trends affecting B2B payments this year.
Virtual Cards
One of the easiest ways to pay vendors is through the use of a credit card, since no special account setup is required. Businesses can simply input the number on their corporate credit card and authorize payment. However, businesses full control over the amount charged on a card. With virtual cards, banks issue a temporary card number good for a one-time purchase for the amount stipulated by the account holder. If the vendor tries to charge an additional amount or sneak in a recurring payment, the transaction will be declined. Virtual cards can be attached to a business’s existing ERP or accounting system, making it easy for employees to make payments without manually inputting information each time.
ACH
Automated Clearing House (ACH) payments are nothing new, but in recent years they’ve become more efficient, with financial institutions promising same-day deposits for those willing to pay a fee. Faster payments are a priority for the industry, though, with the Federal Reserve Bank of Atlanta recently signing a dealwith IBM to come up with software that will expedite ACH payments. The two groups will work together to upgrade the system the Fed uses to process ACH transactions in 12 districts. This will streamline the process, saving money and speeding up transactions for businesses and consumers. Businesses and suppliers will see some of the biggest benefits from faster ACH transactions, since they’ll avoid the multiple-day slowdown that usually happens with these types of payments.
Electronic Checks
Like bank drafts, electronic checks go through the ACH, serving as a direct transaction between two financial institutions with the ACH acting as the intermediary. However, while bank drafts require a business to provide account information and authorization to the sending party, electronic checks start as either a paper check or an automated transaction through a financial institution. PayPal is one of several online payment sites that offer echecks as a payment type. Instead of handing over information to the recipient, echeck payers can input that same account information into a payment processor’s secure portal and let the processor handle the transaction. As the process currently stands, electronic checks take several days to move from one bank account to another but the funds are verified at the time the transaction is initiated, offering a level of safety not provided by paper checks.
Peer-to-Peer Payments
With peer-to-peer payments, one person sends another a payment directly. Services like Venmo put these transactions in a social interface, while messaging apps like Facebook Messenger use a text-based platform for the transactions. Apple is reportedly working on its own version of text payments, which will let device users send payments to someone through text message. As peer-to-peer payments grow in popularity, they’ll likely begin to appear in the chat platforms businesses use to communicate with their clients. Since many businesses communicate with clients through email, peer-to-peer payments may eventually emerge as a feature in popular business email solutions like Gmail and Outlook.
Businesses have a variety of options for paying vendors and those options are increasing with each passing year. As technology continues to evolve, paper checks will eventually phase out completely in favor of more efficient, more secure transactions like peer-to-peer payments, credit cards, and new and improved ACH payment technology.
