Legacy payment technology has held back B2B businesses for years. But today, fit-for-purpose digital solutions are providing a route forward.
The business-to-business (B2B) payments market was worth well over $850 million in 2020. And it’s expanding fast: with a growth rate of more than 10 per cent a year, it’s predicted to reach nearly $70 billion by 2030.
An increasing demand for and supply of digital solutions is contributing to the sector’s surge in value. Most recently, the pandemic has encouraged organisations to streamline their processes as a way of bolstering profits.
Business owners are realising that the methods they use to take payments impact the overall effectiveness and success of their business. With better technology, there are now better ways of taking money. These go beyond just relying on bank transfers or cards – the latter of which have never been great for B2B thanks to their inflexibility, high costs and delayed payouts.
Digital payments services and embedded finance products such as iwocaPay are capitalising on these trends. This is because they solve a number of problems B2B businesses typically face.
iwocaPay makes it easier for the B2B retailer
Existing payment and finance solutions haven’t worked well together historically – making B2B payments hard to get right.
B2B suppliers need to provide a simplified and cost-effective payment experience, as well as offering flexible payment terms – this requires expertise in providing finance and taking payments.
On the payment side, 80 per cent of B2B businesses still rely on bank transfers to get paid. Bank transfers are cheap but carry friction. In fact, B2B suppliers could get paid twice as quickly by offering a digital payments solution. However, the main alternative, card payments, comes with expensive fees, delayed payouts and chargeback risks.
But a lack of good payment methods is only half the problem. Payment terms have always been a crucial part of B2B transactions. B2B businesses are twice as likely to offer payment terms as B2C businesses – typically of at least 30 days. While extra time to pay helps their customers manage cashflow and make larger purchases, this cashflow burden is usually pushed onto suppliers, who are forced to take on the risk and underwrite their customers. This problem is substantial. The average SMB is owed more than £10,000 at any one moment. B2B businesses are frequently exposed to long payment terms which adversely affect cash flow, making it harder for them to grow, or sometimes even survive.
The good news is that this is changing, as new, better fit-for-purpose B2B payment options emerge. One of the first to launch in the UK, iwocaPay helps to solve the B2B payments problem by thinking beyond just the payment – addressing both the payment experience and the payment terms. With iwocaPay, B2B businesses get a cost-effective, frictionless payment solution with built-in 90-day payment terms. Suppliers can offer their customers the flexibility to choose how and when they pay – either there and then or over three months. And any customer can pay instantly with a two-click solution built on secure and seamless open banking technology. It has all the cost-effectiveness of a bank transfer, with the bonus of being even easier to use than a card. Business customers can spread the cost over 90 days, while their supplier gets the funds in full as soon as they complete check out. Using this holistic solution, iwocaPay brings the best of payments and finance to the point of transaction. As a bonus, it all syncs up to accounting platforms such as Xero to make reconciliation automatic.
iwocaPay makes it easier for the customer
iwocaPay also makes things easier for businesses that are buying from other businesses. How? B2B buy-now-pay-later.
Most business customers need access to credit as a way of enabling their organisations to grow – a process which is usually clunky at best. With traditional banks frequently refusing them this credit, many businesses look to suppliers to provide it instead. So if the suppliers don’t have this offering, they may lose the sale. In fact, research in iwocaPay’s paper Levelling the “Paying” Field shows that as many as 22 per cent of small businesses say they have not worked with a supplier because of their payment terms.
However, offering credit can be very risky for both suppliers and their customer: the supplier takes on most of the credit risk, while their customer takes on operational and reputational risks with no guidance on affordability.
By offering built-in payment terms, iwocaPay can provide immediate access to credit in a way that dramatically reduces these risks. Affordability checks take place, without impeding the customer experience. This creates a smooth process that satisfies business customer expectations by emulating the experience they have as ordinary consumers when they are shopping online. It’s B2B buy-now-pay-later at its best.
|Catering equipment supplier – eCatering – tells us why they use iwocaPay
eCatering works with thousands of foodservice operators, supplying them with all kinds of professional catering equipment, from commercial refrigerators and freezers and stainless steel kitchen furniture to cooking equipment and food prep machines. Our customers in the hospitality sector were heavily impacted by the lockdowns: many needed new equipment for their reopenings after spending a lot of time being out of action, but because of extreme downtime and big losses, businesses found themselves unable to pay for items outright and needed alternative payment methods to be readily available.
With traditional banks frequently refusing them this credit, many of these restaurants, hotels and pubs looked to their suppliers – such as us – for alternative finance options. So we adapted quickly to try to support them, and began offering financing solutions for them on the equipment we sold. We did this through iwocaPay, which allowed us to offer built-in payment terms and provide immediate access to credit for our customers. It meant we were able to start offering foodservice operators a buy now, pay later service.
Operators were able to get the equipment they needed straight away, but were able to spread the cost of it over 90 days, with the first 30 days free. It’s become a very popular option for our customers. Being able to use a stable pay-later method helps both us and them with cash flow as the industry recovers from the pandemic.
iwoca: building the future of the payments industry
iwoca’s success is demonstrated in the fact that the lender has made finance available to well over 50,000 small businesses. Lara Gilman, co-lead at iwocaPay, said: “Despite the pandemic we’ve continued to invest heavily in expanding our capabilities to offer the most appropriate product to businesses, when and where they need it.”
The future of the payments industry is flexibility, powered by technology. Buyers want the frictionless and simple payment process that iwocaPay enables. Suppliers need to access their funds quickly and unlock money tied up in invoices: iwocaPay allows them to get paid faster with funds from sales in their account instantly. And both suppliers and customers want flexible payment terms to be available to a wider range of buyers, something that becomes possible because iwoca is taking on the credit risk.
Unlike traditional payment methods, iwocaPay brings together instant payments, free transactions and flexible financing. By eliminating the stress of getting paid, it allows SMEs to focus on what they’re good at: growing their business.
iwocaPay is part of a suite of products. With recent UK pandemic-linked products such as the Coronavirus Business Interruption Loan Scheme (CBILS) and the Recovery Loan Scheme (RLS), iwoca has built out the capability to provide larger and longer-term loans which some businesses need when making bigger investments. It recently launched a Revenue Based Loan, which is proving very popular with small businesses and embedded finance partners. With Open Lending, iwoca is now reaching more than two million businesses where and when they need it through embedded finance partners. And now, with iwocaPay, it has created a first-of-its-kind B2B checkout product which gives buyers control of the payment terms they want and gives sellers peace of mind.
The flexible terms that can be offered through iwoca’s digital solutions are increasing sales and improving customer relationships for B2B suppliers. This is because iwocaPay blends the best of finance and payments – suppliers get paid immediately and buyers get the flexibility they need.