While the business-to-business payments landscape is still dominated by conventional methods like checks and ACH, there is a growing appetite for faster, more convenient ways of accepting payments. This is largely fueled by a need to reduce days sales outstanding (DSO), improve cash flow, reduce fraud, and simplify the payment experience for their customers.
If you’re an independent software vendor (ISVs) that serves B2B customers, this shift in mindset presents a major opportunity for you. By integrating digital payment acceptance into your software (credit card, debit card, and ACH/eCheck), you not only are helping your customers achieve their goals, which drives retention and loyalty, but you are opening a whole new revenue source for your business.
Read on to learn how.
Three B2B Payments Must-Haves
It makes complete sense that today’s business owners desire the same fast, seamless, intelligent payment capabilities they use in their everyday lives as consumers. This expectation manifests across three key capabilities that ISVs must enable when designing their integrated payment offering.
- Frictionless workflows. Like their B2C counterparts, B2B software users want payment processes that integrate easily into their existing operations and systems—thereby avoiding the context-switching and manual intervention that accompany non-integrated payment methods. To meet this need, you must ensure your payment integration enables your software users to initiate, track, and complete transactions within the context of their existing workflows.
- Visibility and control. Modern businesses expect comprehensive, real-time visibility into their financial operations. When it comes to B2B payments, this transparency must encompass granular information including instant payment confirmations, processing timelines, detailed transaction histories and status updates—all of which enable businesses to make intelligent, well-informed decisions.
- Self-service capabilities. Echoing the trend in the consumer payments space, many B2Bs want self-service capabilities that enable them to manage their payment operations independently. This includes tasks such as configuring settings, establishing approval workflows, and resolving routine issues without requiring support intervention.. To fulfill this need, you’ll want to offer self-service tools that are not only comprehensive, but also intuitive.
These and other B2B payment capabilities are enabled through a variety of tools designed to make payments swift, simple, and secure – thus transforming B2B payments from a cumbersome, largely manual process into an opportunity to realize powerful savings and efficiencies.
Below are some additional capabilities ISVs can offer their B2B customers to enhance their value proposition:
Virtual Card Acceptance
Virtual cards enable businesses to make B2B payments with a high degree of convenience, control and security. These electronic-only cards contain unique numbers that can only be used for a specific transaction or with a particular vendor. Because these single or limited-use card numbers won’t work for other types of payments, they’re essentially useless if they fall into the hands of fraudsters. Along with these security and spending control benefits, virtual cards also streamline reconciliation processes by automatically categorizing expenses and providing detailed purchase data to accounting systems.
Accounts Receivable Automation
Integrating accounts receivable automation in your software makes billing and collecting receivables much more efficient, expeditious, and accurate for your users. At a minimum, your automated AR should include:
• Automatic invoice creation and delivery
• Real-time payment matching and financial updates
• Automated reminders for due or late payments.
For software customers, this translates to lower AR overhead, greater cash flow, and improved customer relationships.
Level 3 Payment Processing
Level 3 processing is a type of credit card transaction that requires transmitting additional information about the sale during the process. Examples of the required information include line-item detail, tax breakdowns, shipping charges, and invoice numbers. This advanced data reporting is designed for large organizations, government agencies, and merchants handling high-value or frequent B2B transactions. The purpose is to reduce the risk of fraud. In exchange for passing this information, the credit card companies charge a lower interchange rate for these transactions. For many businesses, the cost savings is significant. Not all payment gateways can handle the transmission of this additional data, so it’s important to investigate Level 3 capabilities before partnering with an integrated payments provider.
Strategic Considerations for ISVs
Successfully integrating B2B payments capabilities requires thoughtful strategic planning. After you’ve identified the need to enable payments in your software, your next decision is a critical one. Should you partner with a Payment Facilitator (PayFac) or with an integrated payments provider? Be very careful with your partner selection as your responsibilities are often much greater in a PayFac relationship. Prepare to ask questions to get to the core of what you are responsible for delivering to your customers and what your provider will deliver. Too often we’ve seen ISVs get so distracted by high revenue potential and instant onboarding that they don’t realize the magnitude of the sales, service, and support they will be tasked with providing. All of that requires resources and payment expertise. That’s not all bad – unless it takes you by surprise and catches you unprepared to deliver.
Related Content: Seven questions to ask when choosing an integrated payments partner
The Bottom Line
The evolution of B2B payments is driving a fundamental shift in what businesses want from their software providers. ISVs that recognize payment experience as a strategic differentiator and invest accordingly will strengthen their competitive position and create long-term value for their software users.
Moreover, beyond satisfying a growing need in the B2B world, integrated payments will open a new, and potentially substantial, source of revenue for you. As such, it is not an opportunity you will want to postpone. For guidance on navigating your ISV’s B2B payment modernization journey, connect with us here at Wind River Payments. We can help you to explore the best path toward a payments integration that will transform your platform’s value proposition and your bottom line.
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