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B2B Payment Gateway Pros and Cons: Payment Processing For Businesses In 2023

Updated December 7, 2023  |  8 min read

As a business owner, you need to be able to quickly and securely accept B2B payments from customers in order to thrive in 2023. With the adoption of digital payment technology increasing exponentially over the last few years, it’s become essential for businesses of all sizes to have an efficient gateway system that is tailored specifically for their unique operations.

By selecting the best possible B2B payment processing solution for your company’s B2B needs, you can gain an advantage over other businesses competing for sales by offering superior customer service experiences and making sure customers are satisfied with every transaction.

Let's discuss some key considerations when choosing a pay gateway—sometimes known as a payment processor or an online payment hub—and explore some popular options available on the market today.

B2B payment options allow companies to make their own payment terms.
Key Takeaways
  • A payment gateway is an online payment processor that enables businesses to accept B2B payments from customers through a variety of methods, such as credit cards, debit cards and other digital wallets.
  • B2B payment processing gateways provide secure connections with financial institutions, allowing businesses to process business transactions quickly and easily.
  • COVID reduced the number of electronic payments taking place, but it also convinced many businesses and customers of the advantages of contactless payments from various payment processors.
  • Using payment hubs can improve cash flow, expand the number of payment methods you accept, help track B2B payments, and save time via automation.

What Are B2B Payments?

Digital B2B payment solutions make it easier to send, receive, track, and record B2B payments. This is beneficial for both the buyer and seller in terms of accuracy, speed, and efficiency.

Electronic records enable businesses to have a more comprehensive view of their financial activities. It also helps businesses identify any payment gaps or irregularities with ease. These types of B2B payment solutions can facilitate the entire payment process between the parties involved, reducing manual processing time and enabling real-time transaction status updates.

There are many benefits of digital business-to-business payments: they provide secure business transactions with data privacy features, better auditability, improved cashflow management, simplified reconciliation processes, faster payments and settlements, tax compliance capabilities, as well as flexible payment options with recurring payment solutions.

All of these advantages allow buyers and sellers to process payments, reduce transaction fees, and solidify their payment terms while improving customer relationships through more efficient payment management, including improves bank account transfers.

Processing fees can be avoided with some of the most popular payment methods.

The 7 Most Popular Types of B2B Payments

  • Cash
  • Credit Card
  • Bank Transfers / Wire Transfers
  • ACH Payment
  • Digital Payment Platforms/Mobile Payments
  • Direct Debit
  • Check or eCheck

How B2B Payments Are Most Commonly Made

Let's take a closer look at these B2B payment methods and how each works.

Credit Card Payments: Pros and Cons

Credit cards have become one of the most common and convenient ways for businesses to conduct transactions and manage financial obligations. Credit cards offer a variety of benefits that make them attractive for businesses and consumers alike.

  • Credit card payments are easily tracked due to the electronic or paper statements provided by the credit card issuer. This allows businesses to accept online payments and accurate records of their spending, allowing them to budget more sensibly or even avoid transaction fees.
  • If a business pays off its revolving balance on time, it will be able to access extra funds without incurring any additional interest rates. In this way, it can be viewed as a kind of "debit card" that is paid off each month instead of accruing debt.
  • Many credit cards come with added security features, such as virtual credit cards that have single-use numbers. This helps protect businesses from cybercrime as each number can only be used once and then becomes null and void.
  • Interest (APR) will be incurred if the credit card is not paid off in full each month.

ACH Payments (Automated Clearing House) Payments: Pros and Cons

ACH payments have become an increasingly popular form of digital payment for businesses in recent years. Unlike traditional methods of sending paper payments, ACH transactions are processed electronically and can be used to transfer funds from one entity to another using a routing number or a bank account.

  • The primary advantage of using this digital method is the speed and convenience it offers, while also providing cost savings compared to other forms of payment.
  • Organizations that regularly make B2B payments can benefit immensely from using ACH payments as their primary transaction type. Not only does it reduce the amount of time taken for manual processing, but also has a positive impact on cash flow when used for recurring payments.
  • Tracking and monitoring these payments is much easier than with paper checks; results are immediately visible on the month-end statement, and they can easily integrate into enterprise resource planning (ERP) systems and other applications.
  • ACH transactions are highly secure, meaning sensitive financial information stays safe throughout the entire process. Since most financial institutions offer these services at no additional cost, organizations can save money by switching from paper check transactions to ACH.
  • Furthermore, since payment amounts are predetermined prior to settlement, businesses have greater control over their finances without having to wait for a certain date every month before making any payments or receiving funds.
  • ACH can only be used within the United States.
  • Due to its batch processing system, there is a daily cut-off time for ACH payments, so businesses must make sure to submit their transactions before this deadline in order to have them processed that day.

Bank Transfers/Wire Transfers: Pros and Cons

Wire transfers are a popular and convenient payment method for businesses to send and receive secure payments. As an electronic form of payment, this form of payment offers real-time transactions with quick access to funds.

  • Online payments can be sent from one account to another, with no need for physical cash. In addition, bank transfers are a viable payment service for companies that make global payments.
  • Compared to the Automated Clearing House (ACH) system, wire payments have the advantage of not using batches and having a faster turnaround time. When companies require funds in a hurry, they often find that wire payments have the best terms and timing.
  • There are two types of wire transfers: cash-based and digital. Cash-based transfers involve sending funds to a cash office where they can be collected by the recipient. Digital transfers involve sending funds electronically between banks or other financial institutions.
  • To ensure the successful delivery of funds via a wire transfer, it’s important for businesses to provide accurate information about the sender and recipient accounts as well as any applicable transaction fees or taxes associated with the transfer.
  • Businesses should understand the regulations in their country related to sending international payments and any costs associated with foreign exchange rates if applicable.
  • Some wire transfers may still have daily cutoff times.

Checks or E-Checks: Pros and Cons

Despite the significant decrease in recent years, many companies are still using checks to make B2B payments due to the need for additional security measures and data exchange.

Paper Checks

  • With paper checks, businesses can better manage their cash flow and inventory, since they create an audit trail.
  • Paper checks offer different security than digital payments. This type of security is more important to some companies than others.

E-Checks

An e-check is an electronic version of a traditional paper check. It is used to make payments online, typically via an automated clearing house (ACH transaction). Instead of writing out a paper check and sending it through the mail, the user provides their bank account information, which is then electronically sent to the recipient's bank.

  • E-check digital payments make transactions faster and more secure than using cash or a paper check.
  • E-checks will clear faster than paper checks and typically cannot be "held," i.e., the payee can't decide to delay depositing the check at the payer's request.

Cash: Pros and Cons

Does it seem weird to have cash on this list when talking about a B2B payment method? Like checks, it's not used nearly as much as many of the other methods, but cash still has its place in B2B eCommerce.

  • Cash payments are often preferred by business clients since they provide instant confirmation of payment, as some businesses will need payment immediately and don't have the time for certain payment methods to be verified.
  • Cash payments eliminate the need to pay transaction fees associated with other payment methods, such as credit cards or wire transfers.
  • Some businesses are run by an old-fashioned owner who simply loves the feeling of carrying around cash and making a large deposit at the bank.
  • There's also the darker side of cash flow, as some business owners use it as a way to hide illegal activity or avoid paying taxes.

Direct Debit: Pros and Cons

Much like an e-check, direct debit involves funds being removed from a checking account. Direct debit is a payment method where funds are directly withdrawn from a payer's account and transferred to the recipient's account.

  • Direct debit is typically used for recurring payments, such as for bills or subscriptions.
  • It eliminates the need for paper checks, cash payments, or manual processing of card payments.
  • Direct debit also ensures that payments are made promptly and securely, reducing the risk of late or missed payments.
Direct debit helps with payment processing that contains a recurring payment.

Market Growth in the B2B Payment Systems Market

The B2B payments market has seen exponential growth over the past two decades, with more and more payment methods becoming available. Digital transactions have become commonplace and businesses around the world have embraced them as a viable option for making and receiving payments.

How COVID Negatively Affected Electronic Payments

This trend has been disrupted by the global COVID-19 pandemic. According to McKinsey’s 2020 Global Payments Report, global payments revenues were down by 7% in 2020 compared to 2019.

This decrease is felt across all payment types, but especially so for cash payments. In the U.S., cash usage dropped by 7% during the pandemic, according to data from the Federal Reserve Bank of San Francisco. This is a far higher rate than the 1 or 2 percent annual average decline we’ve seen in recent years due to the increasing adoption of digital payment methods.

How COVID Positively Affected Electronic Payments

Despite this setback, COVID-19 may likely have long-term effects on the B2B payments market that could accelerate its growth. As consumers become used to contactless and digital payment solutions, they may be more likely to continue using them even after restrictions were lifted.

This could lead to an increased demand for these solutions beyond what would normally be expected. Also, as more countries make moves towards digitizing their financial systems, we could soon see a surge in demand for digital paying solutions from both consumers and businesses alike.

The Most Recent Trends in B2B Payments

In the B2B payments industry, there are a number of emerging trends that businesses should be aware of.

Fewer Paper Checks

The use of paper checks for payments is on the decline due to newer, faster payment forms like credit cards and digital platforms. Even though their usage has dropped significantly since 2012, with 22.5 billion checks written compared to 16 billion in 2018, the rate of decline has slowed from 1.54 percent between 2015-2018 to 1.02 percent between 2018-2020.

With this trend continuing, it looks likely that businesses will almost completely phase out these slow manual processes in favor of quicker digital solutions over the next decade.

Mobile Payments in Business to Business

The convenience of using mobile devices for B2C transactions has started to become popular in the B2B world as well. Examples of businesses that could benefit from this are transportation and food supply, where a driver can accept an order and payment outside of their regular standing order.

By having access to mobile wallets and payment portals, companies can gain more flexibility and automation in their processes. As demand continues to grow, more companies will introduce these capabilities, allowing businesses to make use of the autonomy that comes with it.

(Even) Faster Processing

The trend for real-time payments is growing, with the development and deployment of immediate B2B payment processing systems and infrastructures being seen in many countries. Companies are becoming more reliant on speed, ease, convenience, security, and uninterrupted processing when it comes to their payments, leading to an increase in innovation and disruption within the industry.

A payment provider helps with processing payments from credit card companies.

Top Reasons Companies Use B2B Payment Gateway Software

Businesses use B2B payment gateway software for a variety of reasons, primarily for the added security it provides when transferring funds online. It also allows for improved scalability, providing businesses with more opportunities to expand, as well as allowing them to streamline their accounting and financial operations.

On top of that, B2B payment processing software facilitates international payments by allowing money to be quickly sent across borders without the hassle of currency exchange or other associated costs. Let's look at these a little closer.

Better Cash Flow

One of the primary issues that leads to failed businesses is cash flow mismanagement. To ensure a more reliable and profitable outcome, streamlining processes and automating B2B payments can help avoid any cash flow issues.

Businesses should always consider how easy it is for customers to pay them. Payment portals are available that allow merchants to securely accept payments online via credit card or ACH/bank transfer without having to wait for checks or other paper transactions to arrive in the mail.

These solutions not only save time but also make it easier to track payments, maximize profits, and improve customer experience by providing a seamless payment process.

Simpler Accounting

A comprehensive B2B payment solution is an effective way to streamline accounts payable and accounts receivable, eliminating manual labor and reducing the risk of errors. By implementing this software with B2B payment features, check payments can be scanned, recorded, and stored automatically with no need for human intervention.

In addition to delivering convenience and accuracy, this type of payment solution can also integrate with popular enterprise resource planning (ERP), accounting, or bookkeeping programs.

A B2B payment system also helps businesses manage their finances more effectively by providing visibility into cash flow and tracking where money is coming in and out of the organization.

Save Time

Adopting B2B payment solutions is a great way to save resources such as time, money, and effort for businesses and customers alike. Instead of having to write and deliver checks manually, merchants can now utilize digital systems which automate the entire process.

By leveraging AI-driven automation solutions, you can also free up your team’s valuable time and direct their efforts toward critical core products and services.

In addition to saving time and money, B2B payment hubs also help streamline tracking payments from customers as well as keep an accurate record of all transactions made. This allows for better transparency in business operations along with more efficient reconciliation processes which reduce the need for manual labor that would otherwise take too much time and energy.

B2B payment helping a company manage cash flow.

The Challenges of Digital Payment Options

B2B payment methods continue to evolve, as some become more common while others are slowly phased out. But with the introduction and expansion of these payment methods, problems obviously arise.

Let's talk about some of the challenges you'll need to address as you investigate electronic payment platforms, specifically with the digital version of these payments.

Security

Digital payments involve the exchange of sensitive financial data, and thus must be secured to protect against cyber-attacks and fraudulent activities. Specialized encryption measures, such as two-factor authentication, should be employed to ensure that customer data remains secure.

Compliance

Governments and other organizations regularly update their rules and regulations regarding digital payments, requiring businesses to keep up with the changing landscape in order to remain compliant. Failure to do so can result in costly fines and penalties for non-compliance.

User Interface

The user experience of payment portals should be simple and straightforward in order to maximize adoption by customers. If you don't, they are likely to switch to competing services that offer a better experience.

Costs

Implementing digital payment systems requires an investment of capital, including costs associated with technology, infrastructure upgrades, security measures, personnel training, and more. All of these add up quickly for businesses on a tight budget, so it's important to find a payment portal that isn't expensive in the first place and offers ways to avoid fees associated with electronic funds transfers.

Integration

When switching from one digital payment system to another (e.g., from cash registers to eCommerce), businesses need smooth integration between existing databases and software processes in order for the transition to occur without disruption. This process may require technical expertise or help from software engineers in order to integrate the new system into the existing architecture properly.

Fees

One of the biggest downsides of accepting digital payments is associated fees, which can cut into businesses' profits if not managed properly. Transaction fees, processing fees, and merchant services fees can all add up quickly, eroding any potential profits that may have otherwise been achieved through digital payments.

Some services, such as mobile and eCommerce payments, are typically more expensive than traditional payment methods like cash or check, which puts them at a disadvantage when competing for customers.

Which B2B Payment Processing Is Best for Your Business?

Choosing the right pay gateway provider for your business can be a daunting task, and it's important that you compare all of the options before making a decision. Not only is there a variety of payment options to accept, but there are multiple companies vying for your business; each of them will accept different forms of payment.

Some smaller businesses will accept credit card payments, while others will balk at the 2-4% fees that processors charge. Larger B2B businesses may only take ACH as their preferred payment method. Cutting-edge companies will brag that they only take crypto.

So, which gateway is the best payment service to ensure that every B2B invoice is properly handled?

A Payment Hub That Helps Avoid Fees

We can't tell you exactly which payment and B2B invoicing is right for your business, because we don't know your business and its needs...

...but we want to!

We'd like to offer you a complimentary discovery process, a one-on-one meeting where we can show you exactly what the Clarity Payment Hub can do. If it's right for your company, we'll tell you even more about it. If it's not right for you, we'll point you in the right direction. Get in touch for a no-hassle demo.

Payment Hub.

FAQ

 

B2B (Business-to-Business) wire transfers refer to the electronic exchange of funds between two commercial entities. These transactions involve the transfer of money from one business's bank account to another's, typically for goods, services, or other business-related transactions. Wire transfers are secure and swift, conducted through financial institutions or online platforms.

This method ensures timely and efficient B2B payments processingwith set payment terms, enhancing the speed and reliability of business transactions. B2B wire transfers play a crucial role in facilitating seamless financial interactions, enabling businesses to engage in cross-border trade and maintain fluid financial operations on a global scale.

 

A B2B payment platform is a digital system used to facilitate business-to-business payments. This payment processing enables companies to securely make and receive payments via multiple digital payment methods, with funds moving directly between two bank accounts from business to business.

B2B payment processing typically includes features such as B2B payment processing, transaction tracking, invoice automation, accounts receivable processing, international payments processing, recurring payments, and secure data sharing, allowing businesses to streamline their payment processes.

 

B2B payments are important for businesses as they provide a secure, efficient, and cost-effective way of transferring funds between companies. By streamlining the payment processes, companies can save time and eliminate any manual errors that arise from traditional payment methods.

B2B payments processors also facilitate faster reconciliation of funds from both sides, allowing businesses to better manage their finances and reduce the risk of fraud. Such a service can bolster security for many digital payment methods.

 

PayPal payment processing is both a B2B payments (business to business) and a B2C payments (business to consumer) payment solution. For B2B payments, PayPal's payment service provides an easy way to accept payments from customers around the world and make payments to vendors or suppliers with ease. As a consumer, a user can use a PayPal payment processor for online purchases, peer-to-peer transfers, and bill payments.

 

B2B payments differ from B2C payments in a few key ways. B2B payments typically involve larger sums of money, as businesses are often making large purchases and may need to spread out the cost over time. Also, B2B payments involve more complex processes with additional layers of security and compliance checks.

Businesses also usually have more stringent payment terms compared to consumer transactions. Because of their complexity, B2B payments require support from specialized technology solutions such as enterprise-grade payment gateways or automatic clearing houses that enable seamless transactions between parties.

 

ACH (Automated Clearing House) payments are electronic transfers of funds between bank accounts in the United States. They facilitate various transactions, such as direct deposits, bill payments, and business-to-business transactions. ACH payments provide a secure and cost-effective alternative to traditional paper checks, allowing for seamless and automated money transfers.

Businesses, government entities, and individuals all utilize ACH payments for different purposes, with different payment processes for each. Employers use ACH for payroll deposits, companies employ it for vendor payments, and consumers utilize it for recurring bills like mortgage or utility payments. ACH transactions offer efficiency, reduce processing time, and minimize the risk of errors associated with manual transactions. These secure payments play a pivotal role in modern banking and financial transactions, benefiting a diverse range of users by streamlining the movement of funds electronically.

 

Reputable B2B payment gateways adhere to data protection laws, such as the General Data Protection Regulation (GDPR) and Payment Card Industry Data Security Standard (PCI DSS). It is essential for businesses to choose B2B payment processing that complies with these regulations to safeguard customer data and avoid legal issues.

Remember that the information provided in this article is for informational purposes only and may not reflect the most current developments or trends in B2B payment gateways. It is always recommended to conduct thorough research and consult with experts before making any business decisions related to B2B payment processing.

 

B2B payment gateways handle international transactions by offering support for multiple currencies and complying with international banking regulations. These payment processors facilitate cross-border payments by providing competitive foreign exchange rates and ensuring secure payment processing.

Through encryption protocols, fraud detection systems, and adherence to data protection laws, B2B payment gateways prioritize security in international transactions. B2B payment processing also streamlines the complexities of international payments, allowing businesses to transact seamlessly across borders, ultimately enabling efficient and reliable global payment solutions.

 
B2B payment gateways employ various security measures, such as encryption protocols, tokenization, multi-factor authentication, and fraud detection systems.B2B payment tools also adhere to industry standards and compliance regulations to ensure the highest level of security for their users.

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Author
 
Stephen Beer is a Content Writer at Clarity Ventures and has written about various tech industries for nearly a decade. He is determined to demystify HIPAA, integration, and eCommerce with easy-to-read, easy-to-understand articles to help businesses make the best decisions.