Consumers largely ignore business-to-business payments due to their lack of relevance to everyday life, but they are essential to maintaining a successful flow of capital through the world economy. In their simplest form, B2B payments are exchanges of currency between a buyer and supplier, often based on a pre-existing contractual agreement. These payments are more relevant than ever before, given the ever-changing marketplaces of the 21st Century.
Types of B2B Payments
Despite what you might expect, B2B payments are largely made using paper checks — some 80% of these crucial transactions were completed using paper checks in 2020, with the remaining transactions being completed using ACH payments or wire transfers. The staying power of checks as a payment method is largely due to their traditional usage and convenience.
ACH payments, completed electronically through the Automated Clearing House, are increasingly popular for their ease of use and rapid speed. These transactions are used to pay employees and constitute most forms of direct deposit. Many businesses already utilize the ACH system for their payroll, which means that it is easily accessible even for companies that lag behind in technological innovation.
Wire transfers are by far the rarest method used for B2B payments, making up less than 1% of all business-to-business payments. Despite this meager ratio, wire transfers constitute 93% of all currency transferred as B2B payments – this is because they’re often used to make the largest payments. Their security and ease of validation are the crucial reason that wire transfers have remained relevant.
Credit cards and cash are, to a lesser extent, still used for these payments – credit cards are ever-less popular for B2B payments because of the processing fees associated, but cash is still a common choice for many small businesses that would prefer not to bother with electronic payments or writing checks.
As the 21st Century has taught us, conditions are always changing, and trends can deviate without any warning per global events, but B2B payments are such a crucial part of the marketplace that they will remain relevant for the foreseeable future.