How companies pay each other is important. All enterprises need access to effective B2B (Business to Business) payment systems in order to compete effectively. So, what's changed, given the current economic environment?
The payments market has been the target of disruption.
That said, despite the introduction of new innovations, traditional payment methods are still dominant in the B2B marketplace. It's a highly challenging financial system for many businesses, with a lack of transparency causing difficulties for decision-makers.
Traditional commercial bank transfers are not fast enough to make B2B payments management a streamlined process. In the cross-border arena, these challenges are magnified due to high costs.
Furthermore, the slow digital transformation of B2B payments means that established systems are unable to cope with the current global pandemic. Therefore, the B2B payments ecosystem must evolve.
B2B Payments Market Development
According to the latest worldwide market study by Juniper Research, the total value of B2B cross-border payments will reach $35 trillion in 2022. That's up from a COVID-related low of $27 trillion in 2020, representing 30 percent growth.
However, the long-lasting economic impact of the pandemic means that cross-border values will only exceed 2019 values by 2022, highlighting the effect that this major economic disruption will have on businesses around the world.
In the post-pandemic recovery phase, businesses will be more cost-conscious, meaning that cross-border payments vendors must offer compelling lower-cost solutions to their customers, or they will fail to recover lost transaction traffic.
The new market study identified that instant payments, services where funds settle in 10 seconds or less, will account for 9.3 percent of B2B transactions by volume in 2022 -- that's up from 6 percent in 2020.
Meanwhile, instant payments will only account for 6.3 percent of B2B transactions by value in the same year, illustrating the predominantly low value of these payments, due to low transaction limits.
Moreover, the greater value of B2B instant payments adoption is in new capabilities.
"Instant payment schemes are built on ISO 20022, which unlocks additional messaging capabilities. These can be used to inject transparency and build new services such as automation, which will add significant value to complex accounts payable processes," said Nick Maynard, lead analyst at Juniper Research.
Outlook for B2B Payment Transaction Innovation
According to the analyst assessment, this efficiency -- enabled by services including RippleNet and Visa B2B Connect -- will be critical in allowing these financial services operators to compete with innovative fintech start-ups and other non-bank industry players.
Legacy financial service providers must trial new systems now, and refresh their business models, or they will likely lose market share in a highly commoditized post-pandemic B2B payments environment.
Given that the current method of processing invoices and payments is so manual, there is significant upside potential for the introduction of automation to reduce transaction costs, increase processing speed and avoid currency exchange rate calculation errors.
The payments market has been the target of disruption.
That said, despite the introduction of new innovations, traditional payment methods are still dominant in the B2B marketplace. It's a highly challenging financial system for many businesses, with a lack of transparency causing difficulties for decision-makers.
Traditional commercial bank transfers are not fast enough to make B2B payments management a streamlined process. In the cross-border arena, these challenges are magnified due to high costs.
Furthermore, the slow digital transformation of B2B payments means that established systems are unable to cope with the current global pandemic. Therefore, the B2B payments ecosystem must evolve.
B2B Payments Market Development
According to the latest worldwide market study by Juniper Research, the total value of B2B cross-border payments will reach $35 trillion in 2022. That's up from a COVID-related low of $27 trillion in 2020, representing 30 percent growth.
However, the long-lasting economic impact of the pandemic means that cross-border values will only exceed 2019 values by 2022, highlighting the effect that this major economic disruption will have on businesses around the world.
In the post-pandemic recovery phase, businesses will be more cost-conscious, meaning that cross-border payments vendors must offer compelling lower-cost solutions to their customers, or they will fail to recover lost transaction traffic.
The new market study identified that instant payments, services where funds settle in 10 seconds or less, will account for 9.3 percent of B2B transactions by volume in 2022 -- that's up from 6 percent in 2020.
Meanwhile, instant payments will only account for 6.3 percent of B2B transactions by value in the same year, illustrating the predominantly low value of these payments, due to low transaction limits.
Moreover, the greater value of B2B instant payments adoption is in new capabilities.
"Instant payment schemes are built on ISO 20022, which unlocks additional messaging capabilities. These can be used to inject transparency and build new services such as automation, which will add significant value to complex accounts payable processes," said Nick Maynard, lead analyst at Juniper Research.
Outlook for B2B Payment Transaction Innovation
According to the analyst assessment, this efficiency -- enabled by services including RippleNet and Visa B2B Connect -- will be critical in allowing these financial services operators to compete with innovative fintech start-ups and other non-bank industry players.
Legacy financial service providers must trial new systems now, and refresh their business models, or they will likely lose market share in a highly commoditized post-pandemic B2B payments environment.
Given that the current method of processing invoices and payments is so manual, there is significant upside potential for the introduction of automation to reduce transaction costs, increase processing speed and avoid currency exchange rate calculation errors.