One of the biggest misconceptions in payments is that B2B online payment processing is the same as B2C. But if you’ve ever made a payment with a corporate credit card, you’ll have noticed the extra charges applied in the shopping cart. And while consumer trends reflect a growing need for convenience, business purchasers pay more attention to security when they make transactions online.
Read on to find out the challenges of online payment processing for B2B, and learn how to mitigate the risk of payment fraud with Trustpair, thanks to bank account validation.
What Is Online Payment Processing for B2B?
B2B online payment processing refers to any type of transaction that occurs from one business to another, digitally. Business to business online payment processing could involve invoicing, recurring payments like monthly subscriptions, direct debits or accepting bank to bank transfers.
The payment processor flow entails:
- Finding a payment gateway at the point of sale (pos) through your preferred method, whether that’s a purpose-built payment processor, wire transfer account or credit card reader
- Inputting the sender and receiver bank details
- Checking the exchange rate fee if it’s a cross-border payment
- Waiting for the payment details to be validated (typically takes seconds for domestic payments, but can be longer in international B2B transactions)
- Sending the money
- The payment processor or bank tracking the funds to confirm its reached the correct account
Generally, B2B transactions are more costly than their traditional B2C counterparts, and tend to occur on a regular basis. For example, office leasing requires a monthly payment of the same value to the business landlord, and subscription fees for IT services and software are automatically billed.
How Does B2B Payment Processing Differ from B2C?
When processing B2C payments, customers tend to have the option to go in store or on the checkout page of a website, depending on their customer service preferences. This is a very different buying experience to B2B customers, who typically pay for e-commerce goods or services virtually, and customers can require a demo, but not always.
Depending on the product, B2C transactions can be one off sales, while merchants can make multiple purchases. Take vehicles as an example; the average consumer purchases a car every 5 – 7 years. Yet, businesses typically purchase an entire fleet for their staff, and may upgrade the vehicles every 2 – 3 years, thanks to the tax efficient benefits of these expenses. Many businesses also work with subscription pricing models, which mean regular payments over a defined contract term. Therefore, B2B payment processing may be a more frequent occurrence.
B2C purchases are often associated with a more simplified payment processing system, whereas B2B payments sometimes require invoice matching, the identification of customer records and may also require the performance of certain accounting practices. The technology behind these flows is therefore required to support a more complex system.
What Are the Common Challenges in B2B Payment Processing?
When processing B2B payments, be aware of the following challenges:
- Increased fraud risks
- High transaction fees
- Complicated accounting and approval workflows
Increased fraud risks
93% of UK companies experienced attempted fraud in the past year, and 42% suffered from at least two successful attacks.
With the increase in phishing, accidental data breaches and cyberattacks, B2B transactions are at a high-risk of becoming compromised, largely thanks to their size.
In a business setting, there’s also a higher risk of fraud attempts, and their associated losses, going unnoticed. Unless the responsibility of payment security and verification is specifically given to a certain job role, it could easily fall through the cracks. In businesses, multiple roles tend to have access to finances. asimple miscommunication regarding approvals could enable fraud to occur. A customer making B2C payments may also be targeted by fraudsters, but it’s likely that this targeting is for smaller amounts and using less organized or professional tactics.
Learn more about B2B fraud in our latest fraud report!
High transaction fees
The use of corporate cards in transactions generate higher transaction fees, around four times that of personal cards. In fact, some B2C payments are entirely free to make.
This can be due to a number of factors, including:
- Higher credit limits
- More security features during processing
- More benefits for the cardholder, increasing merchant costs
- Higher frequency of transactions
Payment processors are unlikely to budge on these fees. Businesses should account for them within budgets when making online purchases with the corporate card.
Complicated accounting and approval workflows
With multiple individuals able to make B2B payments, the intertwined web of processing grows more complex.
For example, in order to purchase a new IT software app, a first person may do the research between possible options and gather quotes to follow the ‘Know Your Supplier process. A second worker is chosen to make the ultimate decision as the expert on the business’ requirements, and asks a third for budget approval. A fourth employee is tasked with setting up the direct debit, and, thanks to the four eyes principle, a fifth member of staff must perform the transaction matching process. This is a very complicated and drawn out process, but it’s hard to cut out any one person due to their differing responsibilities.
This complexity further contributes to the opportunities for fraudsters – because of the additional loopholes and lack of transparency. Businesses should therefore consider that their ability to make transactions will be much slower than in B2C purchases, and require lots of checks and monitoring to follow SOPs.
How Can Businesses Optimize Their B2B Payment Systems?
Before making any payments, organizations should consider optimizing their accounting and approval workflows in order to balance efficiency with security. In particular, digital invoicing can help automate the transaction matching process (post-purchase) and reduce the risk of manual error.
Secondly, businesses can optimise their B2B payment systems by selecting the most appropriate payment methods. For instance, using Faster Payments or Bacs for domestic bank-to-bank transfers can result in lower transaction costs for both parties. Bacs payments are typically more cost-effective than CHAPS transfers. However, if speed is critical, CHAPS may be the better option, offering same-day settlement for high-value payments. It’s important to consider the specific needs of the business and determine which payment method offers the right balance of speed, cost, and reliability.
Finally, partnering with a platform like Trustpair will help prevent B2B payment fraud. By continuously monitoring vendor information and automatically validating accounts, it doesn’t matter how many people have access to payment cards and accounts. Trustpair blocks payments to suspicious accounts with mismatched details and mitigates the risk of payment fraud. We offer finance teams more time and peace of mind.
What Role Do Security and Compliance Play in B2B Payments?
Security and compliance are significant parts of the B2B payments process. In recent years as almost all B2B payments have moved online, the number of vulnerability points during the payment process has also increased. This higher risk of operating puts pressure on both security and compliance to work as planned or face dire regulatory, monetary and reputational impacts.
All teams should prioritize their approach to payments through a compliance lens, considering best practice and possible regulatory contraventions during the transaction process. For example, businesses should complete a full due diligence investigation and fill out the necessary documentation in their supplier database before engaging with a new merchant to reduce regulatory risk.
Don’t forget that you can build extra verification into your payments process with solutions like Trustpair. As a robust add-on, we can enhance the integrity of your financial operations and protect the business’ payment security.
Protecting your B2B online payment processing
B2B transactions are very different to B2C, and businesses must prioritize security, compliance and cost. Companies making transactions online can optimize their payment and accounting workflows, choose low cost payment methods and build in security measures through Trustpair to block payment fraudsters .
Our solution provides global account validation thanks to a worldwide network of bank partnerships. With our software, over 400 customers fraud-free and have reduced manual transaction verification, gaining time and efficiency. On top of that, our platform offers flexible integration options – API, native connectors, etc – with the main financial and procurement systems.
