B2B Electronic Payment Adoption - Where's the market?

Posted by Jennifer Ittenbach on Mar 18, 2015 8:00:00 AM

 

B2B Electronic Payment Adoption 

Where's the market?


 

AvidXchange entered into the payment space in 2011 with a B2B payment solution, and at the time checks were still dominating as the overwhelming payment deployment method. However, each year we’ve seen our customers’ vendors shift toward electronic adoption—in fact, we are now seeing over 50% of vendors convert to electronic options. We always like to take a look at the market, and see where we’re stacking up. So, we wanted to share with you some of latest ePayment trends that the 2013 Association for Finance Professionals' Electronic Payments Survey unveiled.

So long paper…

  • 19% of organizations currently make a majority of their payments to major suppliers using something other than a check (an increase from the 13% reported in 2010).

  • The typical organization makes 50% of its B2B payments by check, down from 74% in 2007, 57% in 2010 and 81% in 2004.

  • A typical organization receives 50% of its B2B payments by check.

  • The transition is most dramatic among larger organizations where ACH and wire transfer payments together outnumber checks for both outgoing and incoming payments made to or from major trading partners.

Hello technology…

How many of you still write snail mail letters to family, friends, customers or colleagues?  We’re going to guess that the answer is a very small number, because you use some form of technology – an email, text, tweet, Skype or the like to communicate. So, it’s no surprise that financial professionals are leveraging (and should leverage) technology for payments.

  • Mobile and email technology is transforming paper-based A/P and A/R processes as more organizations are leveraging electronic payments and mobile check deposit.

  • One in five organizations makes a majority of their payments through electronic means.

  • Larger organizations appear to be more committed to shifting their payments from paper to electronic. Reasons include:

    • Larger companies are in a better negotiating position when convincing busi­ness partners to make the shift from paper to electronic methods.

    • Larger organizations have better access to resources, such as IT, to make necessary investments in modern, electronic payment systems facilitating straight-through processing (STP), etc.

 

 Why is paper becoming a thing of the past?

  • 57% of organizations cite cost savings as a top benefit of transitioning to electronic payments

  • Other benefits financial professionals cite from their organizations’ increased use of electronic payments:

    • Improved cash forecasting (46%)

    • Fraud control (39%)

    • More efficient reconciliation (37%)

 

Staying in the dark ages...

Not everyone is a trendsetter and organizations are still letting barriers such as pushback from customers and IT resources stand in the way.

  • More than 70% of organizations are struggling to convert to electronic payments, citing customer (82%)/supplier(74%) hesitance to adopt and IT barriers as major obstacles. 

  • Other barriers to the adoption of electronic payments are:

    • Shortage of IT resources for implementation (71%)

    • Lack of standard format for remittance information (70%)

    • Lack of integration between electronic payment and account systems (66%) 

Types of Epayments

In one of our previous blogs, we detailed the differences between ACH and wire transfers; research shows both are being used unless the transaction is across country borders.

  • For payments to major suppliers, organizations make an average of 43% of their payments by check, 31% by ACH credit and 16% by wire transfer. 

  • Among organizations that make payments across country borders using multiple currencies, the most widely used payment method is wire transfers (65% of transactions).

    • Contractual requirements and the size/type of transaction are key considerations in an organization’s decision about which payment method to use when making cross-currency payments.

The Crystal Ball of Electronic Payments

We don’t have a crystal ball to look into the future of ePayment trends. Our prediction though would be that electronic payments will continue to increase over the coming years; turns out, that’s what research showed too:

  • Just under half of survey respondents believe their organizations will convert the majority of their B2B payments to electronic methods for their major suppliers within the next three years. 

  • Another 25% indicate that it is “somewhat likely” that their organizations, too, would move toward electronic methods for at least half of their payments to major suppliers over the next three years.

If you want to learn even more about B2B payments and what’s to come, register for our webinar today.

Webinar Description:

It has been 34 years since the first online B2B transaction was completed – and much has changed since then. In a time when payment companies are under tremendous pressure to produce more with fewer resources, many are jumping the traditional payments ship and switching over to electronic payments. On Thursday, March 26 at 1 p.m. EST, MPD CEO, Karen Webster and Rhonda Rogers, VP of Payment Services for AvidXchange, will take part in a live digital discussion on the journey from paper checks to automation in the B2B space, and unveil the power of cloud-based payment solutions on a company’s bottom line.

In this digital discussion, you will also learn:

  • How the cloud-based payment solutions are driving cost efficiencies 
  • How the process of check automation improves businesses’ visibility, control, budgeting and audit processes
  • What companies need to understand and ask themselves before making the shift to electronic payments

 

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Accounts Payable as a Profit Center - Customer Spotlight

Posted by Haley Martin on Mar 17, 2015 8:00:00 AM

 

Accounts Payble as a Profit Center - Customer Spotlight on Duke Realty


Most CEOs would agree that there is one thing that is most important in any business – the bottom line. While every part of the business wants to positively contribute, AP is typically viewed as a cost center, rather than a profit center. However, Savvy CFOs, Finance Directors, and AP managers are beginning to implement AP best practices and are earning annualized returns of up to 36% - or more - on cash, just by paying bills earlier and working smarter with vendors.

Duke Realty is a company that did just that.  As part of their ongoing efforts to streamline operations, Duke Realty evaluated their vendor payment processing system and realized the value in offering recipients multiple payment options. At the time, Duke Realty was paying its vendors by check, but wanted to offer them a variety of payment methods to choose from, including Virtual Card and other electronic payment methods.

Given the number of vendors they have, payments made each year, and internal resources available for a project of this scope, Duke Realty elected to find a service provider to partner to handle payment processing for the majority of their vendors.

By partnering with a Payment Automation provider that could offer several methods of electronic payments, they would be able to pay their vendors faster, reduce processing costs and, possibly, generate revenue for the company. AvidPay, AvidXchange’s business bill payment service, was a good solution because it integrated with Duke Realty’s accounts payable system, was not dependent upon a particular banking system, and was supported by dedicated teams to manage vendor data and identify accepted payment types to maximize electronic payments.

Duke Realty also elected to participate in AvidXchange’s incentive program, which enables them to earn money back on all qualifying electronic payments processed through AvidPay. AvidPay also provides reports that allow Duke Realty to monitor vendor adoption of electronic payment methods, and enables team members to login to the AvidXchange portal for real-time status of payment approvals and execution.

The idea of Duke Realty transforming their AP into a profit center was realized when they were able to greatly decrease their payment processing costs, which were significant with check stock and postage, and start earning rebates on all qualifying ePayments, such as Virtual Card transactions. After only a few months of partnering with AvidXchange, Duke Realty saw a 46 percent vendor transaction adoption rate of qualifying electronic payments, and that number is increasing all the time.

There are two major factors for this high adoption rate: AvidXchange’s robust vendor network and their dedicated vendor team identifying accepted payment types for all vendors. The ever-increasing adoption rate continues to increase Duke Realty’s monthly rebate, which supports their profit center initiative. Vendors are also happy because they now have a variety of payment methods from which to choose.

If you want to learn even more about B2B payments and what’s to come, register for our webinar today.

Webinar Description:

It has been 34 years since the first online B2B transaction was completed – and much has changed since then. In a time when payment companies are under tremendous pressure to produce more with fewer resources, many are jumping the traditional payments ship and switching over to electronic payments. On Thursday, March 26 at 1 p.m. EST, MPD CEO, Karen Webster and Rhonda Rogers, VP of Payment Services for AvidXchange, will take part in a live digital discussion on the journey from paper checks to automation in the B2B space, and unveil the power of cloud-based payment solutions on a company’s bottom line.

In this digital discussion, you will also learn:

  • How the cloud-based payment solutions are driving cost efficiencies 
  • How the process of check automation improves businesses’ visibility, control, budgeting and audit processes
  • What companies need to understand and ask themselves before making the shift to electronic payments

 

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Wire vs. ACH - What's the difference?

Posted by Jennifer Ittenbach on Mar 11, 2015 3:32:19 PM

 

“Wire vs. ACH - What's the difference?"


 

With the security concerns related to checks and cash, electronic payments such as ACH (automated clearing house) transfers and wires have become popular payment vehicles, especially for businesses. In fact, the use of paper checks to make and receive business-to-business payments continues to decline. The typical organization makes 50 percent of its B2B payments by check, down from 74 percent in 2007 and 57 percent in 2010. These stats are pulled from the 2013 AFP Electronic Payments Survey.

So, wire transfers and ACH payments are the same thing, right? Not exactly. Research shows that for payments to major suppliers, organizations make an average of 43 percent of their payments by check, 31 percent by ACH credit and 16 percent by wire transfer.[i] In which percentage do you fall? Do you know the advantages and drawbacks to each? Let’s take a moment to look at the differences of these two types of ePayments.

Wire Transfers

Wire transfers are essentially bank to bank (or credit union) transactions. The downsides are cost and security. The financial institutions are doing most of the moving, and thus charge heavy fees that can be as high as $30 a transfer to send and receive money. The fee to receive a transfer is often less than the fee to send one. The one area to be mindful of is cash wire transfers – this type of transfer can be tricky due to the risk for fraud. The upside is speed. Because the wire transfer is done mostly through financial institution personnel, the exchange can occur almost real time.

ACH Payments

ACH payments are more convenient, more secure and cheaper than wire transfers. With ACH payments, the information is sent in a batch to the automated clearinghouse, which clears the payments and then sends the payments onto the bank. You can think of the clearing house as the middle man. Banks also receive their ACH transactions all at once and process the payments as a single transaction, in a batch. This simplifies the process since each transaction does not require individual attention; it’s all automated unlike wire services, adding even more convenience to the process. Common examples of ACH payments are online bill pay and often when you use your debit card. 

 

We say ACH payments are cheaper because usually they are only one flat rate of around .25 cents per payment (versus the $30 potential of wire transfers). The only drawback of an ACH payment is the time period it takes to move the money, which can be up to three business days.

So which of these ePayments are better to use? If you are looking to transfer money quickly and don’t mind paying the price, then a wire transfer is your best option. If you are interested in saving money and being more secure, an ACH payment is the better choice.

If you’re using ACH or wire services you’ve taken a step in the right direction. Now, think about moving to an automatic electronic payment service. Did you know that payment automation is one of the latest ePayment trends? It’s relatively simple and does not impact your staff or payment process. You continue to make bill payments in your accounting system like you do today, but you never have to print, sign, stuff or mail printed checks again. There is no change to your existing bank accounts or relationships and you have immediate access to real-time payment status. We at AvidXchange specialize in payment automation; the following are some of our automation benefits:

  • Eliminate printing, paper checks, postage and fraud costs

  • Continue utilizing your existing bank accounts

  • Process one file for all payments

  • No longer manage vendor payment information (because the technology does it for you!)

  • Enjoy real-time access to payment status

 

[i] 2013 AFP Electronic Payments Survey

If you want to learn even more about B2B payments and what’s to come, register for our webinar today.

Webinar Description:

It has been 34 years since the first online B2B transaction was completed – and much has changed since then. In a time when payment companies are under tremendous pressure to produce more with fewer resources, many are jumping the traditional payments ship and switching over to electronic payments. On Thursday, March 26 at 1 p.m. EST, MPD CEO, Karen Webster and Rhonda Rogers, VP of Payment Services for AvidXchange, will take part in a live digital discussion on the journey from paper checks to automation in the B2B space, and unveil the power of cloud-based payment solutions on a company’s bottom line.

In this digital discussion, you will also learn:

  • How the cloud-based payment solutions are driving cost efficiencies 
  • How the process of check automation improves businesses’ visibility, control, budgeting and audit processes
  • What companies need to understand and ask themselves before making the shift to electronic payments

 

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In-House ACH Projects vs. Electronic Payment Solutions

Posted by Haley Martin on Mar 9, 2015 12:18:05 PM

 

“What are the differences between in-house ACH projects, and electronic payment solutions?"


What's an ACH?

Automated Clearing House (ACH) is an electronic network for financial transactions in the U.S. and is being utilized by almost every type of business today. Electronic payments via ACH ensure timely payments, increase organizational efficiencies, and simplify financial activities. Businesses that choose to issue in-house manual ACH payments must upload ACH files to their banks, which in turn, issue the ACH electronic payments on their behalf.

The Setup

For companies using multiple banks, multiple integration points with all of the corresponding banks have to be set up and managed as well. Having two different systems – an accounting system and an ACH system – requires a lot of additional work, including updating both systems when exceptions occur. This method is far more efficient than cutting paper checks internally, but it can be difficult to manage. It also requires a separate application and double data entry or data file manipulation to import files into the bank system – in addition to the payment of access fees.

Electronic Payment Services

Because of the difficulty and manual processes associated with ACH, many companies are choosing to use an outside electronic payment solution provider to execute their payments for them. This helps to drive lower transactions costs, reduce staff labor and headaches, and eliminate unnecessary equipment and supplies. Additional benefits of this type of an electronic payment service include:

  • Increased visibility and control

  • A more predictable cash flow

  • Reduced administrative costs

  • Enhanced security to decrease fraud

So, if you’re thinking about adding ACH to your payment methods – or just want to make it easier on yourself, consider using an electronic payment solution like AvidXchange’s AvidPay. Get the flexibility and control to either set up a payment once to be made on a recurring basis or to make a one-time payment when you need to, and then move on to more important matters.

If you want to learn even more about B2B payments and what’s to come, register for our webinar today.

Webinar Description:

It has been 34 years since the first online B2B transaction was completed – and much has changed since then. In a time when payment companies are under tremendous pressure to produce more with fewer resources, many are jumping the traditional payments ship and switching over to electronic payments. On Thursday, March 26 at 1 p.m. EST, MPD CEO, Karen Webster and Rhonda Rogers, VP of Payment Services for AvidXchange, will take part in a live digital discussion on the journey from paper checks to automation in the B2B space, and unveil the power of cloud-based payment solutions on a company’s bottom line.

In this digital discussion, you will also learn:

  • How the cloud-based payment solutions are driving cost efficiencies 
  • How the process of check automation improves businesses’ visibility, control, budgeting and audit processes
  • What companies need to understand and ask themselves before making the shift to electronic payments

 

Read More

Where did credit cards come from?

Posted by Jennifer Ittenbach on Mar 5, 2015 11:28:06 AM

 

“Where did credit cards come from?”


It’s remarkable to me how many times I’m in the checkout line in a store, and I see parents let their children swipe their credit cards and “sign”/scrawl their names with an electronic pen that would look much more natural in their hands if it were a crayon. It’s so common place now though, because credit cards are just the way we pay for things. However, it really struck me the other day when I was in the checkout line at Trader Joes, because the lady in front of me had her little girl hoisted up on her knee so that she would be counter-level to swipe the credit card to pay and in the middle of the transaction the little girl swung her head around and asked a really great question, “Where do credit cards come from?” I won’t share the mother’s response, because it was overwhelmingly incorrect on all accounts. However, it did beg the question in my mind…where did the idea for credit cards actually come from.

creditcardkid1

I will say that the story didn’t begin where I started. In fact, it didn’t even start in the century that I imagined it would. The history of credit cards actually begins in 1888 with a very forward-thinking book ironically named, “Looking Back”, written by Edward Bellamy. The book is centered around a character who falls sleep in 1887, and wakes up in the year 2000. While it is a fictional novel, the author would actually come extremely close to accurately depicting credit cards in his version of the year 2000.

To understand how remarkable this vision really was, it’s important to have a little context as to what the idea of “credit” looked like in 1887 when Bellamy was writing his novel. The idea of credit at this time was only maintained by individual stores that kept ledgers with personal accounts, extending additional items to buyers that they could pay for at a later time. This very primitive idea of credit was Bellamy’s only reference point as he launched into his idea of 2000 with stores that would have warehouses of inventory available with very sophisticated point-of-sale experiences, incorporating credit cards.

He detailed the experience of someone being able to go into a store, shop for the items they needed, and then head to the counter to “pay” for these items with a card, and receive a receipt for their purchases. He envisioned that the receipt would be a way for card users to track their expenses for later repayment to the merchant. He even went as far as to point out some of the benefits of using a credit card, such as not having to worry with currency exchange when traveling internationally.

“An American credit card,” replied Dr. Leete, “is just as good in Europe as American gold used to be, and on precisely the same condition, namely, that it be exchanged into the currency of the country you are traveling in.”
– Edward Bellamy,
Looking Backward, 1888

As farfetched as those ideas were at the time, we are now in 2015 were we not only have traditional credit cards, but all kinds of card-based options that outpace cash transactions every day. As it relates to business, purchasing cards have become a very popular way to control spending and provide better visibility into spending. In addition, virtual credit cards are becoming a leading form of b2b payments, because they are a one-time use card limited to the exact amount that the vendor is owed. This method promotes security for both the payer and the payee.

It just goes to show how one idea can materialize, and change the way that we do business.

Over the weeks ahead we'll be covering current state of electronic payments for the B2B space, where the industry is headed, and how to identify the best vendor payment options for your company.

As a wrap up to the payment blog series, we will be hosting a webinar with www.pymnts.com entitled, "The Evolution of Payments: B2B Meets the Cloud".

Webinar Description:

It has been 34 years since the first online B2B transaction was completed – and much has changed since then. In a time when payment companies are under tremendous pressure to produce more with fewer resources, many are jumping the traditional payments ship and switching over to electronic payments. On Thursday, March 26 at 1 p.m. EST, MPD CEO, Karen Webster and Rhonda Rogers, VP of Payment Services for AvidXchange, will take part in a live digital discussion on the journey from paper checks to automation in the B2B space, and unveil the power of cloud-based payment solutions on a company’s bottom line.

In this digital discussion, you will also learn:

 

  • How the cloud-based payment solutions are driving cost efficiencies 
  • How the process of check automation improves businesses’ visibility, control, budgeting and audit processes
  • What companies need to understand and ask themselves before making the shift to electronic payments

 

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What is an electronic payment?

Posted by Jennifer Ittenbach on Mar 3, 2015 12:19:12 PM


What is an electronic payment?

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