Even as payments become increasingly digitized, a large number of US companies are still reliant on writing cheques for B2B payments. In fact, 42 percent of B2B payments in the US were made by cheque, as reported in the Association for Financial Professionals (AFP) 2019 Electronics Payments Report. However, this form of payment comes with many downsides, including issues with tracking and delays in payment. The manual processing of cheques also makes it difficult for a business to get adequate information on current cash flow. Therefore, the use of new fintech solutions in the Accounts Payable space to accelerate the process is on the rise as a permanent way of doing business.
Digital bank transfers are making B2B payments quicker, simpler and more secure. How are privacy and compliance concerns driving the need for more seamless solutions for corporates?
Solving the problem of fraudProbably the biggest downside to cheques is the propensity for fraud. According to the AFP, 74 percent of US organizations experienced cheques fraud in 2019—up from 70 percent in 2018.
Reducing this risk has led more companies to turn to digital payments to facilitate business transactions. In turn, B2B payments companies have seen strong interest from private equity and the venture capital community.
Following a lull in investment during the first quarter of 2020 due to recession fears sparked by the pandemic, Trustlyin June gained a major round of funding from investors led by BlackRock, reportedly valuing the Stockholm, Sweden-based online bank payments fintech at more than $1 billion. In mid-July, Privacy.com, a virtual card payment startup that enables users to generate virtual and disposable payment card numbers, raised $10.2 million in a Series A fundraise.
Finding a seamless solutionFor corporates, finding the right and most secure B2B financial platform among the many fintech providers can be a time-consuming, costly and arduous process, especially when it has to be integrated into a company's existing Enterprise Resource Planning (ERP). The proliferation of new entrants into the B2B process with varying products and services makes it challenging for companies to find a solution to meet their needs.
Geraud Haissat, Head of the Multinational Clients Group at BNP Paribas CIB Americas, notes that corporates can often find themselves in the unrelated business of managing their fintech providers. While digital payments are routinely handled via a fintech vendor, the ability to evolve the function even further, taking B2B transactions in-house to a company's financial institution, removes an extra party to the transaction.
BNP Paribas offers corporate clients an in-house digital B2B payments solution that seamlessly integrates into a company's ERP. CSI, a fintech partnership developed by BNP Paribas' US retail subsidiary, Bank of the West , created V-PAYO, a virtual corporate card technology that offers a simple procurement and payment process by automating a company's accounts payable function.
A unique virtual card number (VCN) is created for each payment through V-PAYO, resolving reconciliations and security concerns. In turn, the B2B payments process becomes faster, safer, transparent, and much more reliable than drafting an old-fashioned cheque.
"For corporate clients in this environment, virtual card technology checks all the boxes in terms of speed and security," says Geraud Haissat. "At the same time, the ability to accelerate customer payments within a linear solution has led to increasing acceptance from suppliers as well."
Regulatory and security issues haunt B2B paymentsStreamlining the B2B payments process can help to eliminate the many touchpoints between company, third-party vendor and financial institution that routinely add to security concerns.
There is an advantage to keeping all of the process internal, says Keatron Evans, president at KM Cyber Security, a McLean, Virginia-based computer and network security company focused on incident response, penetration testing and digital forensics. Evans notes "it would all be under the same security controls that everything else is, which should simplify security management and administration of the resource."
Regulatory and data security issues also present unique challenges when it comes to B2B financial transactions. For example, as a contracted partner of BNP Paribas, CSI is mandated to meet all of the bank's regulatory requirements, including those concerning data security and privacy.
Confronting the Covid-19 challengeThe Covid-19 pandemic may make converts out of the businesses still reliant on cheques. Dominique Fracchia, Head of Commercial Card Americas for Bank of the West, says, "The current pandemic has only accelerated the need for digital payments, especially with staff in purchasing departments working from home, or simply the fear of processing paper cheques."
Fracchia notes migrating to digital solutions such as V-PAYO for B2B transactions provides the added feature of a commercial card credit line to float vendor payments – increasing liquidity, which is at a premium in the post Covid-19 environment. The flexibility and security of the product has attracted clients across such industry sectors as automotive, construction and media.
Looking to the futureThe next frontier in B2B digital payments is global solutions that facilitate cross-border transactions. According to a McKinsey report, B2B cross-border transfers were about $124 trillion in 2018. B2B payments are the largest percentage of cross-border transactions by both volume and revenue, making an integrated and seamless digital B2B payments solution even more essential to a company's success.
Geraud Haissat says, "As adoption of digital payments platforms continues to grow, large corporate clients will demand one solution or system that provides a seamless experience everywhere the firm does business."
 Bank of the West is an affiliate of BNP Paribas.