The business-to-business (B2B) payment landscape is still rife with inefficiencies and not enough straight-through processing (completely electronic B2B payments), according to a speaker at NACM's 120th Credit Congress in Las Vegas last week. Meanwhile, businesses often don’t receive enough remittance information and handle too many paper checks.
These payment issues are among those addressed by Claudia Swendseid, senior vice president of the Federal Reserve Bank of Minneapolis, in her presentation A Faster, Safer, or More Efficient Payment System: What Do Credit Managers Want? Citing the Fed's work with its national Remittance Coalition, of which NACM is an active member, a majority (52%) of businesses surveyed in late 2015 said they tried to increase the use of the Automated Clearing House (ACH) system for payments. Just 3% said they’ve tried to increase payment from checks. The use of checks often depends on the size of the firm; large firms handle about 50% of their payments in checks, mid-sized about 75% and small companies about 90%, Swendseid told Credit Congress delegates.
B2B use is higher than other payment areas, perhaps unsurprisingly. However, check usage in the B2B environment has remained mostly stagnant from 2006 to 2012. That may partly be due to ACH’s higher accuracy rate, convenience and better fraud protection, not to mention that it’s usually the least costly payment option, she speculated. Meanwhile, 45% of businesses are trying to increase the use of credit cards for their convenience and easier use for working capital management.
While businesses work to sort out how they will be paid going forward, Swendseid pointed to some of the Remittance Coalition’s products—available for free—that can aid them in their use of electronic B2B payments. These resources include a small business payments toolkit and a B2B Directory, which is like a public phone book containing payment identities of payees that accept various types of electronic payments.
“We’re trying to help businesses complete transactions beyond a check,” she said.
- Nicholas Stern, editorial associate