Paper checks are finally losing ground in the B2B payments world, at last being replaced by ACH payments and other electronic methods. These are usually quicker and more secure than the way we used to pay, but it's an evolving landscape, one that's worth watching.
Single-Use Virtual Card Payment Programs
These types of programs offer the benefits of P-card programs with some important differences. Since there are no cards and no cardholders, the risk of cardholder misuse or abuse vanishes. And since the account numbers are used just once, the risk of fraud is reduced as well.
The “virtual card” is truly just a payment vehicle. Invoices are entered against the vendors, spend information is captured, and a payment file is sent to the issuer.
However, virtual card payments share a drawback with a standard P-card program: reluctance of many vendors to accept this type of payment. The primary reason for their reluctance is the fee that they must pay to receive their payment. Therefore it’s important to work with the card issuer to create a plan of attack to convince reluctant vendors that this method of payment benefits them as well as AP.
On the plus side, this method offers the significant benefit of rebates to the payee, and is gaining traction.
B2B Online Payment Solutions
PayPal used to be primarily for person-to-person (rather than business-to-business) payments for purchases made online. That's changed. It now offers B2B payment services, and many other similar payment portals have sprung up of late, including Fundbox Pay, Square, QuickBooks, and others.
These services automatically keep track of payments, create reports, and may also integrate with your accounting system to further simplify matters.
The advantage for vendors is that they receive their payments very quickly compared to the mail float and processing time associated with paper checks. However, do your research to see whether there's a fee associated with this option and establish who will be paying it.
As with virtual cards, it may be in the best interest of the vendor to pay the fee if it means they receive their payments faster, but that may take some convincing.
Mobile payments are in the news everywhere, and some big names are jumping into the business of providing digital wallets—including Google and Apple. These digital wallet tools are meant to make payments at a vendor’s site via the payer's smartphone.
There still appears to be more hype than real world experience regarding paying via this method, however, especially for business usage. But for organizations with a large group of traveling employees, wide use of digital wallets by these employees may be fast approaching.
While organizations are unlikely to be early adopters of this means of payment, the technology has the potential to evolve into business usage. Stay tuned.
Bitcoin, along with numerous other virtual currencies, have been making the news over the past several years, but is this a viable B2B payment option? While some retailers accept Bitcoin, Ethereum and other such payments from customers for small-ticket purchases, it's unlikely that virtual currency will become widely popular for B2B payments any time soon.
That's because these currencies are largely unregulated and extremely volatile. Waiting a day or two to pay in Bitcoin can result in an organization paying a value far more than if they paid in a conventional currency. Retailers who purchase inventory like to be able to calculate its value over time, and paying in virtual currency makes this practically impossible because the value of the payment changes so rapidly.
Attempts are being made by some countries to regulate virtual currency, and while it may have a future in B2B transactions, its time has not yet come.
One interesting thing to note, however, is that blockchain, the highly secure technology that underpins virtual currency and makes it work, is being adopted by banks and other entities as a locked-down method of transmitting financial information, as well as other sensitive data. Check it out.
Awareness Is Key
With many ACH payments clearing same day now, the reasons to use paper checks have become fewer and fewer. However, keep an eye out for new methods of payment that will speed the process, provide more business intelligence, and be more secure.