BtoB Payment Methods 2023: Advantages and Disadvantages
lucas-fontaine
•
Jul 8, 2024
The payment experience is becoming increasingly important, both in BtoC and BtoB.
And for good reason, 58% of French companies report that they would abandon their purchase if their preferred payment method was not offered.
This is revealed by a study from Gogardless on payment preferences of companies and consumers in 2023.
French people thus favor digital payments, easy to use and secure, and it is up to companies to adapt and offer a payment experience that meets the expectations of payers.
Here is a brief overview of the advantages and disadvantages of the payment methods preferred by companies:
Payment by credit card (credit card or debit card).
👉 Simple and quick, particularly convenient for small amounts.
Advantages for the payer: Simple, quick, security enhanced by 3D secure.
Disadvantages for the payer: Risk of fraud, payment cap.
Advantages for the payee: Speed and efficiency, allows reaching a wider clientele.
Disadvantages for the payee: Commission fees, especially for business cards.
Payment by bank transfer (SEPA transfer)
👉 Most commonly used payment method by companies. Secure and inexpensive (depending on banks and countries outside the EU), it is a standard or instant money transfer from a sending account to a receiving account. This type of transfer requires an IBAN (International Bank Account Number) and can be one-time or automatic.
Advantages for the payer: Free standard SEPA transfers.
Instant transfers available 24/7.
Advantages for the payee: Free receipt for both standard or instant SEPA transfers. Speed, security, and traceability.
Disadvantages for the payer: The transfer order cannot be canceled once received by the payee, and the bank is not obliged to refund the funds (principle of irrevocability).
Payment delay of one to two business days for standard transfers.
Fees may also apply in case of non-SEPA transfer and instant SEPA transfers.
Disadvantages for the payee: Tracking customer reminders is more complicated.
Fees may also apply in case of receiving a non-SEPA transfer.
Collection delays for transfers from 24 to 72 hours depending on banks and countries.
Payment by check
👉 Historical payment method but likely destined to disappear (not very practical and very "strict").
Payment by check is nonetheless still offered by many companies.
Advantages for the payer: Free and allows for effective control and recording of expenses.
Advantages for the payee: Ease of use and traceability.
Disadvantages for the payer: Risk of fraud, loss and processing delays not suitable for urgent payments.
Disadvantages for the payee: Risk of rejection (if funds are insufficient in the issuer's account) and fraud.
Payment by direct debit
👉 Direct debit (automatic) is convenient for paying regular bills but requires prior authorization from the payer with their bank (direct debit mandate) to allow the payee to carry out the said debit. It is possible to be debited either as a one-off or automatically, whether on your credit card or your account, via SEPA direct debit (This is actually the method used at Qotid or at Luko).
Advantages for the payer: Secure, requires no manual action and allows for easy planning of upcoming expenses.
Advantages for the payee: Helps avoid late payments and better plan cash flow.
Disadvantages for the payer: Risk of overdraft if accounts are not properly monitored as there is no real control over the amount debited and coordination with the payee is necessary in case of cancellation of an automatic debit.
Loss of control over WCR.
Disadvantages for the payee: Risk of rejection. Fees inherent to this payment method may be charged by banks.
Open Banking (data sharing)
👉 Process that enables companies to issue payments via API as you could do from your own banking interface. Open Banking thus allows companies, particularly fintechs, to offer high value-added services to their clients who can pay their suppliers via their preferred management tool.
Advantages for the payer: One of the most reliable payment methods (safer than a card payment), degree of access to information customizable, and issuing payments in real-time.
Advantages for the payee: Companies can receive payments in real time, aggregate multiple bank accounts on a single platform, and offer value-added services to their clients.
Disadvantages for the payer: Payment invoice by invoice via strong authentication for each payment, which can make the process cumbersome if many payments need to be made. (To my knowledge, few organizations offer "bulk payment" except SG or Qonto among others).
Disadvantages for the payee: Variable collection times.
Tracking reminders.
Payment by digital wallet (e-wallet)
👉 The e-wallet allows for secure online purchases without having to enter bank details (Like Open Banking). Requires the creation of an account with a third-party provider, like Paypal for example.
Advantages for the payer: Reliable and easy to use
Advantages for the payee: Receives payment in real time
Disadvantages for the payer: Fees may apply on certain transactions.
Disadvantages for the payee: Not really, except for potential limits on the amounts of transactions made.
And you, what is your favorite payment method? Do you think the gap is widening between the expectations of payers and the purchasing experiences offered by companies?
In summary:
The Gogardless study reveals that 58% of French companies would abandon their purchase if their preferred payment method was not offered. Digital payments, easy to use and secure, are favored. Payment methods have advantages and disadvantages for both payers and payees. The payment methods discussed are: credit card, bank transfer, check, direct debit, Open Banking, and digital wallet.
F.A.Q:
1. What is the most used payment method by companies?
Payment by bank transfer (SEPA transfer) is the most used payment method by companies. It is secure, inexpensive, and allows for standard or instant money transfer.
2. What are the disadvantages of payment by check?
The disadvantages for the payer are the risk of fraud, loss, and processing delays not suitable for urgent payments. For the payee, the disadvantages are the risk of rejection and fraud.
3. What is Open Banking and what are its advantages?
Open Banking is a process that allows companies to issue payments via API. It offers several advantages for the payer such as reliability, customizable access to information, and real-time payment issuing. For the payee, advantages include receiving payments in real-time, aggregating several bank accounts on a single platform, and the possibility to offer value-added services to their clients.
