The huge potential of digital payments is being recognised as it becomes one of most favored modes of payments in the Business to Consumer (B2C) segment. However, the Business to Business (B2B) industry is yet to accept digital payments. While it is true that the B2B segment faces many complex problems which are, to a large extent, responsible for the tepid response to digital payments, the industry is also notorious for its resistance to change. Digitization can potentially redefine the B2B industry in terms of payments, like in the case of B2C. But the industry is slowly but steadily moving towards digitization, as facts and figures corroborate.
Comparison between B2C and B2B payments systems
Payments are processed differently in both the segments. Given below are the main differences:
In B2C segment, the customer pays before buying the service or product or immediately after purchase. In B2B segment, the payment is not made at the time or immediately after the product or service is sold.
In B2C segment, all customers are charged the same price but in B2B segment, price varies across customers depending on many factors such as purchase volume and terms and conditions.
Problems plaguing the B2B industry payments system
Unlike that in the B2C segment, the payments process in the B2C segment is complex and tedious. There are multiple processes and systems in the buyer side that delays the clearance of payments. For example, the invoice raised by the seller may need to be validated at many points in the payments chain of the buyer. If the invoice is not validated at any point, the process may need to start over. The problems are aggravated by the resistance to improvements. The current process is also not secure.
How can digitization help?
Digitization can redefine how payments are made in the B2B segment. First, it can speed up a notoriously sloth system and expedite the payments process. Second, it can make the system more secure. Third, it can bring transparency to the system.
Recent trends show that companies have been moving towards digitization of payments although it is a little erratic and slow. Fintech companies and technology companies in the finance domain are also offering payment solutions which points to a better future.
Trends point to digitization of B2B payments in the future. However, there are two caveats: the B2B industry is not known to consistently accept something new at a great speed. It has always been erratic. Second, the pace of acceptance will not be like that in the B2C segment.