APMs for B2B payments – buzzword or next big thing?
Despite delivering convenience, speed and a better user experience in the consumer payments market, alternative payment methods (APMs) feature less prominently in the world of B2B transactions. It’s high time this changed, argues Pat Bermingham, CEO, Adflex.
To understand why APMs are become increasingly important in B2B payments, let’s first clear up some confusion:What are APMs?
APM is a catch-all term to describe any payment method that does not require the use of a credit or debit card. There are three main types:
- Bank transfers: Bank-direct payments and direct debits – essentially, ecommerce transactions where buyers approve purchases using an online banking facility.
- Wallet-based solutions: A secure digital space, usually on a smartphone, with access to funds – either directly from a bank account or through a debit / credit card. Apple Pay and Samsung Pay are good examples.
- Cash-ins / pre-paid: Prepaid cards need to be loaded with value in advance of the user performing a transaction, and comprise of cards that run both on and off traditional payment rails.
As a rule, APMs provide flexibility, accessibility, and convenience for users. More often than not, they are also more cost-effective for issuers than traditional payment methods.
So why the hesitation in B2B markets?
When a consumer APM transaction is performed, it is usually low in value and involves just two players, like buying a coffee with Google Pay.In contrast, B2B payments are usually for larger amounts, and require more complex workflows like PO systems, customer numbers and invoicing processes. They often involve multiple parties, too. The perception is that APMs are not designed for more complex transactions, which is why business demand has remained low. Perception rarely equals reality, however, and certainly doesn’t here. When delivered as an integrated part of a digitised B2B payments platform, APMs can offer businesses just the same savings in time, money, and effort that consumers have been enjoying for some time.
An APM-ready platform that pays
Integrated payment platforms, provided as a cloud service from dedicated third party specialists, enable transacting businesses to move away from manual payments processes, and tap into a whole raft of new features that both enable greater efficiency and drive down the cost of initiating and accepting payments. They enable automated reconciliation and invoicing, for example, which does away with manual paperwork, streamlines internal processes and boosts efficiency. They increase financial visibility for both buyer and supplier through the provision of bespoke payments portals, and facilitate the rapid onboarding of new suppliers. By promoting easier, faster and more cost effective integration between buyers and suppliers, they open the market up for everyone by giving each party access to a broader range of potential partner firms.
APMs only add to this suite of benefits. Not only do they further increase convenience by enabling B2B payments through mobile devices, they also reduce costs and processing times, particularly in the case of bank-direct payments.
Crucially, APMs also simplify cross border payments in two key ways. First, because most have been designed for use internationally, they were built in compliance with international payments regulations. Reducing the burden of payments compliance when a business is expanding overseas, (or buying or supplying internationally) is hugely attractive to businesses of all sizes. Second, both consumer and corporate buyers favour business relationships that offer more payments choice. APMs not only offer a range of different ways to pay, they also promote familiarity and trust between businesses, since many APMs (such as Paypal, for example) are known and well regarded globally.
As the trading world continues to shrink, the need for businesses to initiate and accept cross border payments will rise. According to the WorldPay Global Payment Report 2017, over half of all online transactions will be made using alternative payment methods by 2021. While initial growth is coming from consumer payments, B2B supply chain payments will soon catch up. The payments platform providers that have the vision to provide early stage APM support, without the need for invasive system updates, will be best placed to serve, and grow, this new market.
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