B2B payments on the blockchain are 96% faster than traditional ACH transfers. That speed is crucial for the success of businesses that rely on invoices to get paid. It will also enable more flexible payment options like buy now and pay later, which are increasingly popular among business buyers to preserve vendor relationships during heightened financial risk periods. The importance of secure and reliable tokenization
Faster Transactions
B2B payments–or business-to-business transactions–power a significant chunk of our economy. However, they’re often complex and time-consuming to process. Thankfully, there’s an easy solution to these headaches: digital solutions powered by blockchain technology. The world is on the cusp of a significant transformation in the payments industry. In the B2B space, a major shift toward cloud-based automated payment systems is underway. During the pandemic, 68% of small businesses reduced their reliance on cash and paper checks, mainly due to the protracted processing times that these methods can require. This trend will likely accelerate, and they predict that by 2025, a whopping 80% of B2B sales interactions will occur in digital channels. With B2B payments on the blockchain, business owners can eliminate costly delays and frustration. Unlike traditional bank transfers that can take up to five days to settle, cryptocurrency-based prices are nearly instantaneous. They can be processed around the clock, even on weekends and holidays.
Additionally, crypto payments don’t require a centralized intermediary to execute, and they are much less susceptible to fraud because of their high level of security. While transaction fees still exist, they’re considerably lower than those associated with wire transfers and credit card transactions. And stablecoins, which are cryptocurrencies pegged to fiat currencies like the US dollar, eliminate price volatility, further reducing costs and making them more practical for B2B transactions.
Global Accessibility
B2B payments, or business-to-business transactions, account for a significant portion of the global economy. As a result, they are subject to many more regulations and compliance requirements than consumer-facing payments.
B2B payment systems typically involve multiple intermediaries, which can lead to delays and inefficiencies. Blockchain-based transactions eliminate the need for these intermediaries, enabling near-instantaneous transaction settlements. This streamlined process improves cash flow management and increases automation for businesses. In addition, a digitized payment platform can eliminate manual data entry for both sides of the transaction. This significantly cuts down on human error, which can lead to costly rework and slows down the overall transaction process. Additionally, digital payment platforms can integrate with businesses’ ERP systems to automate reconciliation.
Lastly, the blockchain provides greater access to the financial system for billions worldwide without bank accounts. Unlike credit or debit cards, where users delegate their account management to a third party, blockchain wallets are owned by each user, who retains the public & private encryption keys for their cryptocurrency network identity. A blockchain’s immutable history and file-sharing capability also increase transparency on both sides of the B2B transaction. This helps buyers and suppliers work together on terms such as upfront payments, installment plans or early-payment discounts.
Reduced Reconciliation Costs
After much hype and a ‘Blockchain winter,’ the technology has yet to reach mass adoption. However, the payments space is seeing significant benefits from its use. One of the key areas is B2B payments. Traditionally, B2B transactions are completed using checks, money orders, and wire transfers. These methods can be costly as they require several intermediaries and are prone to fraud. Blockchain solutions based on DLT (distributed ledger technology) offer lower transaction fees and are less fraud-worthy.
Additionally, blockchain-based B2B payments can be completed quickly and easily. The speed of these transactions can expedite cash flow and reduce the need for loans and lines of credit, which are often costly for businesses.
Furthermore, the global accessibility of cryptocurrencies is beneficial for businesses that work with international partners or customers. Traditional payment systems often limit interactions from reaching markets outside their home country, but blockchain technology enables businesses to bridge this gap and expand globally. This allows companies to build relationships and collaborate with a wider range of partners, leading to more business opportunities and growth.
Increased Security
With the proliferation of cyber attacks & data breaches, businesses are looking for ways to secure their payment processes. Blockchain is an effective security measure for B2B transactions because it eliminates the need for intermediaries & ensures that each transaction is secure, verified & immutable. It also supports multiple security measures like multifactor authorization, encryption & tokenization that prevent the unauthorized transfer of funds.
Another aspect of the blockchain useful for B2B payments is its ability to reduce invoice disputes & improve tax compliance. A recent report cited that uncollected sales taxes cost businesses $44 billion annually. By using the blockchain for B2B transactions, marketers can automatically transmit records of each sale to state tax authorities, eliminating the need to call or email each other to verify information manually. The blockchain can streamline business-to-business payments by lowering transaction fees, improving liquidity & increasing the speed of payment settlements. While implementing new technology can be difficult for B2B organizations, a trusted partner can guide them through the process and ensure their legacy systems are updated to the latest blockchain protocols. By doing so, they can unlock several benefits, including lower transaction costs, faster payments, more automation & better security. As a result, companies can boost profitability & gain a competitive advantage by modernizing their payment infrastructure with the blockchain.
