What is a B2B Payments Network?

A business-to-business payments network, also known as a B2B payments network, is a closed system for transactions where businesses can make and receive payments. Businesses typically enroll to pay their vendors, and vendors enroll to receive payments, possibly with the incentive of accounts receivable tools that improve efficiency.

As fraud becomes an ever-greater concern, budgets remain tight, and check payments fade as a viable method, many companies now prefer to outsource part or most of their payments processes to these networks. That has made the once-novel network a fixture in the world of payments, as well as one of the most effective ways to lift accounts payable teams mired in manual work into a more efficient, secure future.

Business payments networks differ greatly in size, scope, and capabilities. Here, we’ll discuss the broad contours of these networks, their advantages over traditional payment programs, and what defines a best-in-class option.

Understanding B2B payments networks

Each business payment network will look at least slightly different, but it is typically set up and administered by either a private company or bank. Often, enterprises customize and re-brand bank-based networks for a given bank’s customers, but not always.

In all cases, the network will be at least two-sided, meaning there will be payers and payees. In a B2B payments network, consumers are not a payee type, though in fringe cases contractors may be. What this means in practice is that in 99% of cases, the network will facilitate a payment between two businesses from receipt of invoice to the vendor receiving and reconciling the funds. It’s as simple as it sounds from the outside.

Behind the scenes, business payments networks use robust functionality to make payments simple. Providers build networks with high (metaphorical) walls to keep fraud out, transform payment processes into fully or mostly automated workflows, and engineer dashboards and reporting that make audits, reporting, and other tasks simple. The needs of businesses and outside threats like fraud and financial sea changes mean these networks are also always evolving.

In short, these networks exist to try to smooth out what has traditionally been a rocky, time-consuming process. Legacy methods like paper invoices and checks could take weeks to fully resolve, with the threat of fraud and data entry errors hanging over every step of the process, but even digital payment methods have challenges outside of networks.

Checks

• Can take several business days to arrive, and the US Postal Service is experiencing greater delays with each passing year
• Checks can be stolen from mailboxes and cashed by clever fraudsters
• Zero rebate potential

B2B ACH Payments

• With batching, processing can take longer than desired
• Payers must acquire and safely store vendor bank account information
• Often limited remittance detail for vendors

B2B Card Payments

• The heaviest processing fees, which can cause vendors to reject them
• Vendors must have the ability to process a card

Business payment networks solve some of these challenges by removing checks from the equation and focusing on processing ACH and card payments in a way that enhances their benefits and limits their downsides.

In a typical network, a vendor will invoice a payer for goods or services either via paper or electronic means. The payer will then process that invoice, either manually or using invoice automation, in order to extract data, verify its legitimacy, and prepare to process and approve a payment to the vendor.

The beauty of a secure network is that vendors receiving ACH payments will already be enrolled, eliminating the need to collect and store bank account information. Fraud prevention technology is necessary for any business thinking about using such a network, given the sensitivity of that data.

For card payments, meanwhile, virtual cards are typically used. Vendors can process these using their existing point of sale system, the details are typically sent through email, and a secure, one-time use code helps protect the funds from interception.

In essence, a network is like any other payment rail for businesses. However, payment networks offer far greater speed and security when compared to legacy payment methods, a difference than can be as stark as that between a bullet train and a steam locomotive.

The advantages of B2B payments networks compared to checks and other digital methods

Checks have been declining as a percentage of global business payments for a decade now, so very few companies are wholly reliant on that legacy payment type. But with checks still making up approximately a third of all B2B payments and 92% of businesses paying some vendors by check as of 2022, it’s worth discussing why B2B payment networks are widely viewed as a superior choice.

The chief reason is that checks are a 1950s technology—machine-read checks were introduced in 1959—trying to huff and puff their way along in the modern era. While they’ve been a fixture for hundreds of years, technology has evolved so rapidly in the past 30 that checks have become antiquated. They are too slow to process, too expensive and environmentally unfriendly to print, and too prone to fraud to return to relevance.

In contrast, business payment networks are some of the most secure ways to pay vendors that currently exist and are both faster (1-2 business days instead of 5-9, in many cases) and less expensive (checks can cost north of $9 in hard costs, ACH payments and cards cost pennies to process).

Business payment networks can also carry advantages over traditional ACH programs, card programs, and homegrown digital payment processes, as outlined in the previous section. Being able to execute payments more quickly and with added protections means greater speed and less risk, two core priorities for almost every finance team.

Why companies prefer B2B payments networks

In a nutshell, it’s those benefits we outlined above, as well as the ease associated with outsourcing core aspects of the payments process.

At a high level, the benefits of a B2B payments network are all about reducing costs, enhancing security, and creating new opportunities for efficiency and speed. Additional benefits include the potential to earn the finance department revenue via rebates on AP spend, freeing up employees to focus on strategic initiatives instead of data entry and processing, and improved supplier relationships thanks to the elimination of errors and delays.

That last item dovetails nicely with the benefits of outsourcing. Good B2B payments networks should handle vendor onboarding and enrollment for you, which includes obtaining and holding sensitive financial information like bank accounts. That removes risk and considerable time from the equation. Outsourcing also allows for your team to focus on the parts of the process that are vital—like review and approval—and not on the tedious parts they never enjoyed doing in the first place.

Businesses prefer these networks, in short, because they represent a massive step forward in convenience, fraud prevention, and efficiency compared to the payment rails that came before them.

What to look for in a network

Your individual business needs will vary, but there are some facets of a B2B payments network that every organization should prioritize.

• Comprehensive security. If the company you’re talking to can’t tell you the difference between a SOC2 and a pair of socks, they’re not going to be able to protect you, your vendors, or your payments. Look for layers of defense, easily explained and secure supplier enrollment, and multi-factor authentication bolted onto every account and banking change to ensure you, and your valued vendors are protected.
   
• Intelligent vendor enrollment. Traditional enrollment efforts are cumbersome and time-consuming, as they usually involve paper letters, plenty of phone calls, and can involve errors. Networks that staff their own enrollment teams can encourage self-enrollment through secure portals, handle the outbound communication themselves, and message the benefits to vendors rather than badger them to join.
   
• Vendor benefits to encourage adoption. Networks can offer sweeteners to get vendors to join and accept electronic payments like ACH and card that carry small fees. Those perks can include invoice submission software, improved remittance data, and even accounts receivable automation tools.
   
• Clear efficiency gains. One of the best ways to understand how much time, money, and trouble a network can save is by having a potential provider outline the process steps. Ideally, comprehensive payments automation will be part and parcel of adopting a B2B payments network, but simply swapping out traditional check, ACH, and card payments for the ACH and card payments made possible by these networks lead to significant efficiency gains.
   
• Rebate potential. It’s not a top-of-mind concern for many AP teams, but being able to offset any costs associated with a network and potentially other automation software via rebates can make a significant difference in your budget.

It’s highly recommended that you shop for networks the same way you would shop for a major purchase in your personal life, by consulting a company’s website, checking out reviews and testimonials where available, and going into sales conversations with a checklist of priorities to address. A business payments network is a significant investment in your business’s future ability to meet both today’s and tomorrow’s finance challenges, so getting the right one matters a great deal.

Learn more about B2B Payments Networks with Bottomline