“The greatest danger in times of turbulence is not the turbulence—it is to act with yesterday’s logic.”
Across industries, functional areas, and seniority, the general consensus in business today is that it’s a complicated, fascinating time to be a contributor. Norms are being challenged, rules are being rewritten, and the organizations that embrace change are finding themselves able to compete on levels that many would not have thought possible just a few short years ago. As humans, we have a natural inclination to shy away from change, and to fear the unknown – and this is why I’ve always found Drucker’s quote to be so powerful. Obstacles and uncertainty (in their purest form) are just manifestations of opportunity – and when I look at the state of the payments (especially within the context of B2B), I see a great deal of opportunity.
While payment trends in the B2B will inevitably lag what is happening in the B2C space, B2C continues to be a good “leading indicator” for where things in B2B will eventually end up. (Don’t forget that, at their core, your colleagues and customers really are retail consumers who inexplicably change their expectations, habits and processes around certain aspects of their life – like payments – for 40 hours a week).
With that in mind, here are three key B2B payment trends we see emerging in the B2B space that you should be keeping your eye on.
#1 Increased Disintermediation
The traditional workflows and quirks of the banking industry continue to be targets for ambitious fintech organizations looking to make their mark today – but one of the most interesting areas I’m keeping an eye on is blockchain. As we approach the end of 2018, I’m sure many of you have had your fill of articles and trends about this topic, so I’ll keep it simple. Why we’re all still holding our breath to see this technology truly commercialized, the potential for it to turn cross-border payments on its head is fascinating – and the fact that banks and card providers are jumping on board (in a big way) is evidence that we’re moving out of the “fad” zone and edging closer to real-life applications in 2019.
#2 The Need for “Now”
In many facets of life, we’ve been accustomed to instant gratification. Whether it’s the feedback we get on social posts or the ability to watch our favorite show without commercials, we’ve become accustomed to the notion that we can get whatever we want, whenever we want it…except for digital cash transactions between two parties. A great deal of work continues to go into building this infrastructure – which will be interesting to continue to follow, due to the fact that many business processes have been built around the traditional time and processing delays associated with paper checks. I have a sneaking suspicion that many of the businesses that proclaim to be excited about real-time payments haven’t thought through the digital transformation this is going to force on them.
#3 The Demand for Flexibility
This one hits home for me – as a career marketer, the teams I’ve been a part of have always prided themselves on being nimble and responsive…that is, until we had to request an “emergency check run” to get a vendor paid for work we required on short notice. These emergency runs inevitably took a few days, lots of paperwork, and cost us a few projects. I share this because this will not be the norm – tomorrow’s “emergency check run” will actually just be a quick payment made by credit card or ACH, that lands within 24 hours of being sent (or sooner…see #2).
Earlier I alluded to the fact that, ultimately, businesses are comprised of a group of consumers united under a common cause for 40 hours a week – and these consumers are not paying for their Amazon Prime subscription by check. We’re already seeing the migration towards increased electronic payment options, and the ability to access these payment options on demand, 24/7 – and adoption of this approach will continue to increase significantly through 2019.
As a leader and critical thinker, at this point you should be asking yourself “Why should I care?” – and fair enough. I’ve always discounted articles on trends that didn’t shed some light on why those trends really mattered. With that in mind, here’s why these three trends should continue to be top of mind.
First, all three combine to ultimately give businesses faster access to their cash by leaving less of it tied up as a receivable. With the cost of capital projected to go up in the near future, reducing DSO will have an even larger impact the bottom line. Second, there will be an ongoing reduction in the amount of manual effort it takes to collect and apply payments as the ratio of digital payments continues to increase. Leading businesses are maximizing this opportunity by re-deploying valuable human capital towards strengthening customer relationships and increasing customer lifetime value. Finally, these three trends provide inherent cost savings opportunities – from operational to fiscal efficiencies, businesses that embrace digital transformation are setting in motion a cyclical opportunity to reinvest savings in ongoing growth platforms to drive their business forward.
Ultimately, Drucker said it best – ““The greatest danger […] is to act with yesterday’s logic.” Will 2018 be the year that you’ll look back on as a key turning point for your organization?