At the moment, electronic payments are becoming more and more the norm for consumers. However, B2B payments have yet to transition from systems built in the 1970’s onto today’s modern tech stack.
About half of all B2B payments in the US are still executed via check, equating to a staggering 8bn paper checks and a payment cycle time of more than 20 days. The cost to issue those paper checks, combined with the invoice processing associated with them, adds up to nearly $100b in annual spend by US businesses.
There are, however, hurdles to overcome in removing B2B friction. Suppliers, ever concerned about margins, are often unwilling to accept credit card fees. Moreover, ACH is capped at $25k and requires providing sensitive banking information and manually setting up each payment.
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With electronic invoicing, modern payment and remittance infrastructure, businesses could significantly reduce the cost of transacting and improve their working capital. Ultimately, payments should be completely frictionless and Kermit’s royalty checks should roll in via a self-executing smart contract on a blockchain!
Nevertheless, Fed finds continued growth in noncash payments and a fall in check payments between 2012 and 2015.The study (link here), which is conducted every 3yrs, is considered to be among the most comprehensive reports that track payments usage in the U.S.
Recent research indicates that usage of paper checks for B2B payments may have increased slightly in 2016. A key impediment is the highly fragmented electronic payments process across AR, AP, accounting, and reconciliation.
In Africa, B2B payments are increasingly moving digital as companies are indeed paying clients through wire transfers, mobile money, and other means; not necessarily through credit cards. Governments are increasingly encouraging companies and citizens to go digital to help tax collection and anti-money laundering enforcement.
The impact is that more transactions are taking place in the digital ecosystem from Kenya to Nigeria, Ghana to Botswana and beyond.