What Is B2B Payment Processing? Definition, Methods & Trends

A study by Gartner predicts that 80% of B2B “buyer-supplier” sales interactions will be digital by 2025. However, a 2022 report by the Association for Financial Professionals said that 86% of organizations still use checks for outgoing payments.

Paper checks take longer to process. First, checks usually need several approvers before they are issued. Second, they need to be snail-mailed, which can take two days to two weeks. Then, they must be approved. It takes two to five days for a paper check to clear the bank. However, businesses also use paper checks because they make an easy audit trail.

Further, paper checks can be used to “buy” time. If a business does not have the funds immediately, they may issue a check in anticipation of the funds being available when the check is cashed. They can even request you hold the check. This, of course, makes a problem for you if they time it wrong and the check bounces.

According to NACHA, it costs about $1 to $2 to receive and process a check when accounting for manpower and other costs. Other payment methods can be cheaper, depending on the amount of the invoice.

ACH payments are made through the Automated Clearing House and are essentially bank-to-bank transfers of cash. They work great for invoices and recurring payments. ACH payments are fast, often taking as little as 24 hours, and are more secure for several reasons:

1. They require an American bank account, which gives identification for law enforcement in case of fraud.
2. They have a guarantee of payment—no chargebacks.
3. NACHA enforces rules and regulations while keeping numbers confidential.

Most payment processors can handle them, making it easy to include them in your invoices.

ACH payments generally cost about 1% of the transaction and often have a $10 cap. Some financial institutions don’t charge at all to process ACH transactions because they are more convenient. It’s expected that as companies move away from paper checks, this will become the most common B2B payment type. Already, the Association for Financial Professionals says that 87% of businesses use ACH Credit for payment transactions.

Research by Juniper found that by 2026, 80% of the overall transaction value of B2B cross-border payments will be by wire. They are most popular where ACH transfers don’t work: international payments and payments over $1 million per day.

Wire transfers can make funds available to you within 24 hours and generally cost around $15. One drawback of their use is that they don’t consistently include remittance information, which can be an issue for recordkeeping.

Credit cards are a convenient way to pay for things, from gas or meals on a business trip to an invoice or recurring subscription to business software. However, they can be expensive for both the sender and the receiver. Nonetheless, card use is expected to experience a compound annual growth rate of 7.3% by 2026, according to Beroe.

Credit card processing costs an average of 2% to 4% per transaction, often with an additional flat fee of 5 to 35 cents. Any business can process a corporate credit card, but if you can qualify for Level 2 or Level 3 credit card processing and have a merchant account that offers the discounts associated with these levels, you can save up to 1% on your card processing fees. This is significant, especially with higher-value transactions.

Cryptocurrency is a growing B2B payment field. PYMNTS reported that over 37% of businesses say they are using blockchain and cryptocurrencies for cross-border transactions. Another 13% are considering adopting the technology for that purpose.

This payment method provides speed, predictability, and security—especially seen when dealing with international transactions which otherwise can involve exchange rates, multiple processors, and other hindrances. The disadvantage, of course, is the volatility of the cryptocurrency market.

Cryptocurrency exchanges charge up to 1.5% per trade. Many payment processing systems are also jumping into cryptocurrency processing.

Cash is most often used for businesses doing in-person transactions in the hundreds of dollars range or less. While it costs nothing to “process” a cash payment, you do need to be careful to record the details (amount, date received, etc.) as there is no other printed or electronic “paper trail” for tracking.

Paper checks take longer, may be issued with a future cash date, and have a danger of bouncing, which adds more time pursuing the company for payment (not to mention the bounce fees you’ll pay).

With digital payment processing, if the business cannot cover the payment, you are told immediately so you can request an alternate method or withhold a product or service.

With digital payment processing, customers can click a button—often on the invoice itself—to make the payment. This is automatically reconciled with their accounts, and the money is sent to you.

By digitizing your B2B payments processing, you can give your clients more choices in how they pay, which means they can pay you more easily and quickly. Most payment processing services allow you to accept credit card, ACH, and even cryptocurrency transactions. This, of course, can result in quicker payments, too, as your customer can pick the best method for them.

While there is always a risk of hacking, digitized B2B payments offer secure gateways and regulated platforms to keep your transactions safe. Plus, the transactions are immediate; no checks flying across the country that can be lost or stolen.

With digital payments, you can let the software handle the recording and filing of information. You can even integrate your payment or invoicing software with your accounting software. This saves hours of manpower and prevents mistakes that come from manually typing in information.

You will need to invest in payment processing or invoicing software, but by digitizing your payments, the streamlining of information flow saves money in manhours and correcting mistakes and lets you avoid dealing with bounced checks and late payments.

According to FIS Global, manually handling B2B payments can cost $25 per transaction. Digitizing can result in significant savings. In fact, a report by Flywire states that 92% of businesses surveyed said that a better solution for accounts receivables would increase their earnings per share.

Reduced payment processing costs: By taking advantage of Level 2 and Level 3 payment processing rates, you can also save money on credit card transactions. Check out our article on what Level 2 and 3 payments are and how they work.

When payments are handled digitally, all the associated information is carried along with them. This makes it easier for you to analyze and report any information you need, whether tracking late payments, determining average pay time, or analyzing your customer base’s demographics.

B2B businesses primarily work with other businesses, so it’s really a matter of degree and practice. Learn more in our article on B2B sales.

B2G simply means business to government, where a government entity is your customer rather than a business. There aren’t any specific changes to how you handle payments as far as processing them.

In general, yes. A payment processor will enable you to take credit, more easily process ACH payments, and may even handle crypto for you. If you only choose to take checks and cash, and will work with your bank for wire transfers and ACH, you can avoid getting a merchant account, but you are limiting your capabilities and making things more difficult for your staff, which could increase costs in the long run.

Any business working with another business as a customer accepts B2B payments by definition. However, if you take credit card payments from businesses, you may want to check with your merchant account or payment processor about qualifying for Level 2 or Level 3 card processing. These are B2B/B2G rates but require extra security and have transaction volume minimums.