• Alex Axelrod, Founder and CEO at Uluky


• 05.01.2024 09:00 pm
#payments #transactions

The efficiency and innovation witnessed in Consumer-to-Business (C2B) transactions stand in stark contrast to the often sluggish nature of Business-to-Business (B2B) payments. 

The streamlined experience of consumer payments is frequently impeded in B2B dealings, where delays are commonplace due to the rigorous compliance measures in place. This poses a significant challenge for merchants navigating the intricacies of payment cycles, as over 80% of businesses suffer from payment delays.

Using the agility of C2B technologies to pave the way for innovation in the payments sector overall is not a new thing. However, doing so requires a thoughtful approach that addresses the unique challenges posed by the differing nature of business transactions. 

Projections show that by 2032, the cross-border e-commerce market is expected to reach $1.5 trillion. Let’s take a look at how B2B payments could stand to improve to contribute to this optimistic future.

Why is the Efficiency of C2C and C2B payments Not Mirrored in B2B?

Retail payments are generally characterized by small transaction sizes and the absence of the need to prepare accompanying documentation, as only legal entities have accounting obligations. As a result, businesses focused on retail transactions can largely streamline the process of making payments while managing associated risks more efficiently.

Not only that but with small payments, the risks are “spread” over the sheer volume of transactions to the point of becoming statistically insignificant. This not only enhances the security of the payment ecosystem but also contributes to the overall resilience of retail fintechs. With this context in mind, the emphasis is placed on reducing the number of steps necessary to complete the payment journey and making it as short as possible time-wise.

By comparison, the development of B2B cross-border transactions is slowed down by a multitude of factors. The very first major difference in the size of the transactions – we are talking about payments of tens and hundreds of thousands, maybe millions of dollars. Moving such sums naturally involves much more in-depth security measures and reporting, which are necessary for both parties to the transaction.

Regulatory intricacies across diverse jurisdictions also introduce significant hurdles, as businesses must navigate and comply with varying legal frameworks, adding layers of complexity to the financial dealings. Moreover, B2B cross-border transactions are marked by diverse payment terms negotiated between entities to accommodate their specific business needs and financial structures. 

All these heightened security concerns contribute to the meticulous and often time-consuming nature of transactions in the B2B space. 

The Main Requirements to Catch up With C2B Developments

Let me give an example: when you have to go through security checks at the airport, you understand that, at the end of the day, this is a matter of your safety. Therefore, despite the inconvenience, you are ready to wait in line and comply with the procedures.

In the world of payments, it is much the same way. The control that governments and banks want to have over the movement of corporate capital is the main reason that slows down the development and speed of business payments worldwide. But it is undeniable that such control is needed to prevent financial crimes, money laundering, and terrorist financing. As such, all enterprises have to follow the very necessary rules and laws that ultimately affect our security and the prosperity of economies on a global scale.

To continue with the airport analogy, to make the line go faster, the security staff eventually came up with the idea of checking the passengers' belongings via X-ray rather than manually. This served to speed up the whole process by orders of magnitude. And yet, we are still required to take out our devices, pocket change, and other metallic objects before going through the scanner. This means that there is room for further improvement – hopefully, we will eventually see measures that can identify and segregate such objects by default, making the whole process go even faster.

By the same token, in B2B payments, we need to learn how to sort all transaction details at the entrance to the ‘control zone’. Doing so will enable payments to go through quickly, without encountering bottlenecks or delays along the way, contributing to a more frictionless experience for all parties involved.

This requires robust technological solutions that align with the diverse and sophisticated operational frameworks of businesses engaged in B2B transactions. Such solutions would have to accommodate varying transaction scales, ensure secure and efficient financial dealings on an enterprise level, and even account for various regulatory nuances. 

In this regard, I would argue that there aren’t any special technologies or know-how that differentiate B2B- and C2B-oriented fintechs. It comes down to the quality of service execution, focused on the client’s needs and facilitating the best possible customer experience. And, of course, this also requires the active involvement of governments in contributing to the development of the global business ecosystem.

B2B Solutions Driven By Customer Experience

The success of both enterprise- and retail-oriented fintechs hinges upon their ability to understand and cater to the unique needs of their clients. As a direct consequence of this, rather than highlighting technological differentiators, the crux of the matter lies in the execution of services, emphasizing a client-centric approach. Achieving a level of service that can meet and exceed client expectations becomes the hallmark of success.

I believe that, in the upcoming future, B2B-focused fintechs will have to prioritize solutions focused on improving customer convenience and reducing operational risks. This will play a major role in driving an increase in both the number of their clients and revenue from operations, facilitating the aforementioned predictions.