Academic journal article ABA Banking Journal

B2B Pay: Quiet Innovation: No Flashy P2P Payments Here, but Steady Movements to Electronic Payments and Better Integration of Payables and Receivables

Academic journal article ABA Banking Journal

B2B Pay: Quiet Innovation: No Flashy P2P Payments Here, but Steady Movements to Electronic Payments and Better Integration of Payables and Receivables

Article excerpt


If payments had a personality, business-to-business (B2B) payments would be an introvert and consumer payments would be the life of the party. While innovations in consumer payments such as person-to-person (P2P) and mobile tend to attract media attention, much is quietly happening in the B2B payments space. (See "Payment Innovations: Are you in?" in the July digital issue for more information on consumer payments. Go to

Today, small business and corporate payment innovations are bubbling up from both consumers and small businesses, whereas traditionally they have trickled down from large corporate customers, according to Bob Reitz, managing director at $63 billion-assets BBVA Compass. "Consumers and small businesses are transforming how our corporate customers consider payments," he notes.

Small-business and corporate B2B payments is an area that is ripe for innovation, since businesses are still heavily reliant on checks, unlike consumers who have largely abandoned paper, explains Tom Berdan, vice-president of product management at Harland Financial Solutions. Harland sees a strong market for direct electronic billing and presentment for small and mid-sized businesses.

Getting paid is not the problem

Interestingly, one of the biggest account receivables challenges that businesses face isn't getting customers to pay, but posting those payments to their internal accounting systems, according to Nancy Atkinson, senior analyst with Boston-based Aite Group. Payments that cannot be posted--perhaps due to a discrepancy in the payment amount--can impact a company's ability to extend credit to suppliers and also prevent customers from making purchases.

Blaine Carnprobst, managing director for the receivables product line at BNY Mellon Treasury Services, which processes an average of 170,000 global payments transactions worth $1.4 trillion daily, concurs that posting receivables is tricky. "Companies struggle to post their accounts receivables and identify which customers have paid and what they are paying for and how to handle exceptions." Carnprobst adds, "Cash may still be king, but information is the ace."

The problem, he explains, is that B2B payments can be initiated in a multitude of ways, including ACH, check, mobile, commercial cards, and wire transfer, and each payment type sends remittance information in a variety of formats. Even the same payment type, such as ACH, can create unique remittance data depending on how the ACH was initiated, explains Carnprobst.

Further, just a slight payment discrepancy can trigger exceptions that will require a manual intervention. According to an Aite Group study, only 55% of receivables are actually processed as straight-through transactions.

"As B2B payments move from paper to electronic, corporate customers are challenged by the large number of exceptions, making it more difficult to post receivables in a timely manner," says Larry Buettner, vice-president of innovation at Wausau Financial Systems. The company's integrated receivables hub includes a deduction management function that allows corporate customers to establish criteria to ignore certain exceptions based on dollar amount.

Getting rid of checks, or at least drastically reducing check volumes, is a lofty goal, but it's also a double-edged sword for businesses, since checks contain visible remittance information, explains Ann Smith, senior vice-president, Global Treasury Management at Minneapolis, Minn.-based U.S. Bank. "As more payments become electronic, translating remittance data into an easily accessible application is an industrywide challenge," says Smith. "If there is a payment dispute, it takes time for corporate customers to resolve the problem."

For banks, integrated receivables are an untapped opportunity. Half of corporate customers would prefer to implement an integrated receivables hub from a bank, while only 29% would prefer to receive the solution from a vendor, and 17% are interested in building the hub in-house, according to Aite Group research. …

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