Digital B2B Payments Adoption a Pandemic Silver Lining

An upside to the pandemic according to small business owners is the adoption of digital B2B payments.

Mastercard found in a recent study that 57% of small businesses increased their use of digital systems for business-to-business payments amid the COVID-19 crisis.

A majority of business owners (82%) said they changed the way their business sends and receives payments. Half transitioned B2B transactions to digital.

Cash flow crunch

The pandemic is fueling a cash flow crunch that's making it harder for small businesses in North America.

More than a third of business owners surveyed experienced late payments and slow processing of cash and checks. These existing drawbacks of cash and check payments were worsened by lockdowns and social distancing.

The issues have led businesses to be in dangerous territory. Nearly half said their small business is a missed payment away from being in the red.

“The pandemic has made it painfully clear how labor-intensive current business payment processes are, especially for small- and medium-sized businesses,” Mastercard's Ron Shultz said.

The executive explained that adoption of digital B2B payments is quickening.

"With cash flow more critical than ever, we’re seeing an accelerated shift to digital B2B payments as businesses of all sizes look to safeguard their operations today and prepare for the future,” he said.

Silver lining in digital B2B payments

Small business owners say that a silver lining amid the pandemic is modernizing their systems out of necessity.

About two-thirds said that being prompted to upgrade to electronic business payments is an upside to the pandemic. Of those who have upgraded, 81% said that their customers are more satisfied with the system.

Small business owners also cite speed and security (91%) and transparency (82%) as priorities in their shift to digital business payments.

Mastercard found that online card payments increased by 60% from the start of the pandemic, while use of cash and check for business payments decreased by 34% and 24% respectively.

In terms of digital services adopted, small businesses have started to use electronic payment collection (50%) and electronic invoicing (26%).

The advantages are clear for most business owners that 70% said they are willing to invest in technology to upgrade their payment systems. Meanwhile, 73% say that digital payments are the new normal for their business moving forward.

Permanent changes

It’s not only small businesses that are upgrading their systems. Similarly IDC Research says that even large businesses are adopting digital B2B payments.

Nigel Wallis, IDC Research vice president, said that data reveals that consumers have cut use of physical currency to half of what it was before the pandemic. That's because of the increased use of contactless forms of commerce, including e-commerce, local delivery, and curbside pick-up.

The trend means that digital payment systems are not just a temporary fad, Wallis explained. Businesses are integrating digital payments and e-commerce in their existing B2B workflows. Similarly, they are also expanding into direct-to-consumer channels.

“In IDC’s view, these aren’t temporary changes,” he said. “This is the evolution of business going forward.”

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