5 big trends in the B2B Finance to watch in 2021
By Pavithra R
Annual B2B payment volumes in the US are estimated at approximately $25 tn. The high invoice volumes associated with these payments can create big operational challenges for under-staffed finance teams. Many have been slow to tackle these challenges; in fact, less than 30% of SMBs have automated processes like accounts payable, happy to stick with their existing way of doing business. How ever, COVID-19 pandemic exposed the huge inefficiencies in many firms’ paper-based financial processes.
“The challenges of managing the finance function remotely; the pure impracticality of paying bills with paper checks; the potential for new forms of fraud; the lack of control over cash flow; and all the unnecessary time and cost involved, have dramatically accelerated companies’ payment digitization efforts,” said Vijay Ramnathan, president of MineralTree.
Ramnathan and MineralTree expect businesses to build on those digitization efforts to do a lot more than replace paper checks. He believes the following 5 trends will change business’s payment processes and the finance teams that manage them in 2021.
- Cash (flow) rules: 2021 is expected to be all about cash management and financial planning for SMBs. Having visibility into cash position at any point in time and pinpoint control over when invoices get paid is a huge advantage, but getting there will require apt digital tools.
- Paper checks near retirement: At the start of 2020, more than 60% of payments made by SMBs were still made by paper check. Businesses will ditch that habit in a big way. In 2021, expect a big reduction in the share of business bills paid by check specifically in the middle market, where the inefficiencies are multiplied by the increased volume.
- Virtual payment cards get preferential treatment: Virtual Cards’ unique 16-digit card numbers, created for a single-use between a payer and a payee, are secure and are now widely accepted as other common payment forms. Besides security benefits, businesses using Virtual Cards can take advantage of valuable rebates to generate extra cash. Maybe most important, though, is the added visibility and control they give businesses over their cash flow. Considering all these reasons, Virtual Cards will go to the “top of the wallet” becoming a preferred payment method for businesses in 2021.
- Businesses choose Payments-as-a-Service over BPO: In 2021, ready access to cloud-based, Payments-as-a-Service solutions will provide businesses the ability to automate the entire process of end-to-end invoice-to-pay “out-of-the-box” with flexible and easy-to-use workflow management, e-payments tailored to supplier preferences, automated invoice/PO matching and approval routing, and easy connection to a wide variety of different financial systems through APIs or pre-built connectors. These capabilities, coupled with the fast time-to-value of these packaged services, remove many of the obstacles to AP automation.
- FinTech and FIs make it official: Almost every new FinTech talks about disrupting incumbent FI when they launch. How ever, the reality is FinTechs and FIs need one another. There has been a slow awakening in the FinTech community that they will be more successful by collaborating vs competing. Incumbents like banks, card schemes and payment processors offer scale while FinTechs offer speed and innovation. In reality, very little money moves without the involvement of the big incumbents. Together, both FinTechs and FIs have a much better shot at improving the way finance works. In 2021, expect to see a lot more collaboration, to enhance the digital services incumbents can offer to customers, and to extend the reach of FinTechs.
“Advances in easy-to-use Accounts Payable (AP) automation technologies and the enormous benefits that come with them, coupled with the impact of COVID and extended remote work requirements, will dramatically accelerate the adoption of digital technologies in the finance function and deliver tremendous value. It’s no longer a nice to do for businesses of any size. It will be core to how companies operate and compete,” added Ramnathan.
Also, read: Global FinTech Use Cases in Financial Services
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January 21, 2022
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