The market size of cross-border B2B payments was $1,000 billion in 2021 and it is expected to reach $2,515 billion by 2030 which means that in 8 years, a growth rate of 10.8% is anticipated for the B2B payments market according to the report of Straits Research. One of the main accelerators of this growth is the digitalization trend taking over the payments industry as an effective solution to overcome the conventional barriers in trade. The technological enhancements pawed the way to a more frictionless, fast and automated cross-border B2B payments environment.
The advantages of digital payments have proven themselves in B2C (Business to Consumer) transactions already. Therefore, B2B (Business to Business) businesses are acknowledging their growth potential with the help of digitalization in their cross-border transactions. The B2B organizations that successfully notice and address the challenges in the global trade and payments area adopt and apply three main digital trends into their businesses to ensure growth in their cross-border payments which are diversifying their payment methods, incorporating a system similar to the B2C style and integrating automation into their payments system.
The Shift Towards Cross-Border in B2B Payments
One of the most obvious outcomes of digitalization in almost all the business areas is going more global and borderless. Occasionally, it is no surprise that B2B businesses are looking to grow their cross-border commerce and payments. According to the statistics, by the year 2040, it is thought that 95% of all purchases will be actualized online and by 2027, the value of all global payments is estimated to be $250 trillion. These data demonstrate that there are a lot of opportunities in the cross-border payments area to be discovered in the upcoming years. As new technologies such as AI (artificial intelligence), DLT (distributed ledger technology) and machine learning are integrated into the payments industry, it will be easier for businesses to benefit from the automation in payments and to overcome the challenges of cross-border trade.
Three Steps to Take to Increase Growth in B2B Cross-Border Payments
In order to increase the domination in the global trade, it is essential for the businesses to first make sure that they comprehend the challenges of the ecosystem and then take actions and steps accordingly. There are three main identifiable steps that the B2B businesses apply to ensure their successful growth in cross-border trade and payments.
1. Diversification in the payment methods
There is an increasing tendency among B2B customers who receive invoices from and make payment to the B2B businesses that they prefer and use different and generally more innovative payment methods. The data indicate that credit card payments constitute 21% of those payments while wire transfers cover 13% and ACH (Automated Clearing House network) or regional bank transfers make up 12% of the payments realized for B2B transactions. As the data speak for itself, the Progressive Payments Report on The Current State of B2B Payments reports that 53% of B2B organizations stated that they are keen to incorporate additional digital payment methods including digital wallets and visual cards as the traditional payment methods require more manual work and therefore time.
2. Embedding the B2C style into B2B transactions
The simplicity and ease of access in the B2C digital payment methods attract many B2B buyers as only 31% of the B2B customers can use online and mobile payment methods while the majority of them are still expected to use traditional methods such as phone or paying in person. In the competitive global trade environment, the B2B businesses who prioritize adopting a technology driven, advanced payment methods into their payment systems will likely to thrive in enlarging their businesses overseas successfully.
3. Integration of Accounts Receivable (AR) automation
The traditional payment methods depend highly on manual intervention and result in delays or complications most of the time and eventually cause malfunctions in the cash flow of the businesses. However, digital solutions using the automation technology for the payments processes such as the AR automation offer an overall enhancement in the payment systems since they do not need human or manual intervention and they provide faster transaction completion. It is vital for the B2B businesses to recognize that embedding the right technological solutions into their payment systems instead of the traditional methods is the most effective way to overcome the challenges of the cross-border payments environment.
Incorporating the right technological payments solution into the regular business model for growing the B2B cross-border payments is only one of the important parts of the whole picture. The other essential part is the local card acquisition.
Most of the B2B businesses tend to use the payment process services in the locations where their headquarters are settled and not in the locations where their potential consumers are present. Local card acquiring will enable the B2B companies to increase their authorization rates and recruitment of customers around the globe.
The complete formula for the success of B2B businesses achieving growth in their cross-border payments lies in the combination of adopting digital payment and invoicing solutions and supporting local payments with the local card acquisition. Partnering with the right global payments company along with the operation of the combined solutions mentioned above will ensure the businesses to increment their growth in the cross-border payments environment prominently.