Posted 11.03.2022
As a B2B ecommerce merchant, you likely have some very specific goals. You want to deliver outstanding service to the customer. You want to build value in your brand. You’re aiming to expand your online business into new territories and markets, and are investing in a growth infrastructure. You’re focused on being agile and adjusting your strategy in real-time as market forces change and buyer behaviours change. But the truth is that you can’t do any of this unless you’re getting paid.
While it’s necessary to consider your goals outside of making money, it also behoves merchants to consider the mechanisms by which they get paid in the digital realm. As online transactions become more ubiquitous, and cash transactions dwindle in popularity (especially in B2B transactions), new technologies have arisen to make online payment methods simpler, more convenient and more secure.
In this guide to payment methods in ecommerce, we’ll look at the importance of offering a broad range of payment options to your B2B customers. We’ll also look at the wealth of options available to merchants, and how to choose the best payment methods for your business needs.
The B2B ecommerce space is fiercely competitive. And that competition is only going to get fiercer in this growth market throughout the coming years. In 2020, the global B2B ecommerce market was valued at £4.8 trillion. What’s more, it is expected to experience a compound annual growth rate (CAGR) of 18.7% by 2028.
In this growth market, B2B buyers know that they have the luxury of choice when it comes to their online purchases.
This means that you don’t just need to have a quality product. You need to offer value and convenience to your customers. And if you’re unable to do this, they’ll happily find another merchant who can.
One of the ways in which you can add value to your brand is to ensure that you accept a broad range of payment methods.
Different B2B buyers have different payment preferences. These can be influenced by all kinds of things from cash flow to relationships with payment service providers, or simple personal preference. When buyers can use their preferred payment method, it not only associates your brand with convenience, it can also help them to improve their operating cash flow. And because different buyers have different payment preferences, it’s good practice to accept as many as you are able to. Otherwise, you could miss out on a potential sale.
It’s hard to believe that there was once a time when cash and cheques dominated the B2B transaction landscape. The digital revolution has not only allowed B2B ecommerce to flourish, it has also provided a host of new ways to facilitate payments.
Let’s take a look at some commonly used online payment methods that buyers like to use to make payments.
Credit cards are very popular for B2B buyers, especially for SMEs that face an ongoing struggle to maintain a healthy cash flow. A credit card payment is taken out of the business bank account at the end of the billing period rather than when the actual purchase is made. Business credit cards typically offer much better terms than personal credit cards. Interest rates are lower, credit limits are higher, and businesses can earn rewards for early repayment. Using a credit card can also help nascent SMEs to improve their credit ratings. They are also secure and offer purchase protection.
Over 24% of B2B ecommerce purchases around the world are made with a business credit card. This means that you should not only be accepting business credit card payments, but also accepting payments from a range of credit card companies (including lesser-used names like American Express). Particularly if you’re dealing with international buyers.
Unlike credit card payments, debit card payments are taken from the business bank account at the point of purchase. Because they’re tied to a business bank account, business buyers can only make a purchase if they have the money available in their account. This makes them an appealing choice for thrifty businesses that don’t want to over-borrow. There are no interest charges associated with using debit cards, unless a purchase causes the buyer to use an overdraft facility.
Debit card payments account for 10.6% of global B2B ecommerce payments, and 18.2% for payments in the EMEA region.
There are many business owners for whom cash is still king. Smaller businesses in particular benefit from the stability and tangibility that come with using cash. You cannot spend cash unless you physically have it. So there’s no chance of overspending and creating cash flow issues when you use it. What’s more, there are many international markets where cash on delivery is the preferred payment method. Cash on delivery still accounts for 4.5% of all global ecommerce payments. While this payment method can create risk and complications for merchants, there are some prospective customers who may feel alienated if you do not offer it.
Electronic wallets or e-wallets have exponentially risen to prominence in recent years. Because they make it so quick and easy to make secure payments online and in-store (including mobile payments) they’ve become the dominant payment method in the world.
Today, over 40% of B2B ecommerce payments are made using e-wallets like Apple Pay, Samsung Pay, AliPay, Google Pay etc. E-wallets can be linked to a business credit or debit card, facilitating quick and easy payment via password or biometrics like fingerprint or face recognition. They are quick and easy to use, storing payment data securely so that it does not need to be input time after time with every purchase.
If you are a SaaS provider, or a B2B ecommerce merchant that uses the subscription model, direct debits are an appealing choice for both you and your customers. Direct debits put the customer in control, enabling them to choose the day of the month on which recurring payments are taken. This can help them to maintain their own cash flow while giving you a predictable revenue stream to help facilitate yours.
Direct debits are also backed by the Direct Debit Guarantee. So you and your customers can rest assured that payments will not be disrupted on their way from their account to yours.
Cryptocurrency is a controversial topic. Nonetheless, Bitcoin, Ethereum and other cryptocurrencies have their staunch advocates. And the rise of Bitcoin ATMs around the world serves as a reminder that cryptocurrencies aren’t going anywhere any time soon. Some of the biggest brands in the world have taken to accepting payment in cryptocurrency such as McDonald’s, KFC, Subway, Lush, Etsy, Shopify and Amazon.
Because cryptocurrency payments do not require third-party verification and customer data is not stored on a centralised hub that’s vulnerable to breaches, some consider them more secure than credit or debit card payments.
Recent years have seen a significant uptick in the adoption of Buy-Now-Pay-Later (BNPL) solutions like Klarna and Clearpay in the B2C sector. It’s easy to see why. In the wake of the pandemic, many consumers are still struggling with their household cash flows. The ability to defer and spread payments without the interest or charges associated with overdrafts or credit cards is understandably appealing. What’s more, businesses get to benefit from making sales that might otherwise be untenable for customers.
By comparison, BNPL solutions have much less of a foothold in the B2B market. Which is a shame, because business buyers can benefit from BNPL payments in the same way as consumers. However, B2B transactions typically have a much higher value than B2B transactions. This means that BNPL solutions may pose a greater degree of risk and cost that could make merchants uncomfortable.
That may be on the verge of changing, however, as new BNPL solutions are being developed to address the needs of B2B vendors. These can use machine learning to identify potentially problematic transactions and assess the probability of recovering overpayments.
Payment gateways are an integral component of online payment, rather than a payment method. They act as an intermediary between merchants, customers and both parties’ banks. Some ecommerce platforms either have their own payment gateway systems or provide plugins to enable third-party payment gateways to be used. These ecommerce payment gateways are provided by Payment Service Providers (PSPs).
A payment gateway works in much the same way as a POS system in a physical store. It collects and securely validates customer payment information to ensure that the customer has sufficient funds for you to get paid. Payment gateways can often be fully customised to create a seamless transition from your website to the payment gateway page, even though the latter is not usually part of your website. Unless, that is, you opt for a non-hosted payment gateway (more on that later).
The payment gateway process comes in three stages:
Without a payment gateway, merchants have no way of accepting online payments of any kind. Furthermore, they make the payment process fast and easy while providing the encryption that makes the transaction secure. However, not all payment gateways perform to the same standards, and fees can vary a great deal.
When choosing a payment gateway, whether native to your ecommerce platform or provided by a third party, take some time to consider the following:
With so many payment methods at your disposal, you may wonder which is the best for you. When choosing payment methods for your ecommerce business, you need to walk a fine line between accommodating your customers’ needs and preferences and keeping your overhead costs manageable.
When choosing a payment method or gateway, you should always ask yourself the following questions:
If you’re unsure, try measuring a payment method’s features against your buyer personas. Or, better yet, carry out some market research to see if there are any payment methods your customers would like to see you accommodate.
B2B buyers are often busy, time-poor and averse to anything that’s going to make their day-to-day more difficult. The more ease and convenience you can offer them, the more appeal your brand will hold for them.
When choosing the right online payment solution, you also need to factor in the capabilities of your ecommerce platform. Otherwise, you may experience friction when trying to integrate new payment methods. Our customer order portal is flexible, secure and infinitely customisable. It’s also designed to fit seamlessly into your digital infrastructure with a range of customisable integrations.
We make it easy to accept a wide range of payment methods, so you needn’t miss out on potential sales.
