2023-01-13

B2B payments predictions for 2023

B2B payments predictions for 2023

As we enter 2023, we want to look at four B2B trends to shape the payments industry over the next year.

Whilst the financial services landscape has become increasingly digitised following the COVID-19 pandemic, the B2B space has been slower to adapt than B2C payment solutions. However, B2B payments trends such as the anticipated rise of embedded payments, cross-border transactions, the transition to instant payments and Buy-Now, Pay-Later products are all emerging at the forefront of business financial services. Business expectations have fundamentally shifted, with B2B payment systems now being consistent, affordable, and lightning-fast, setting a new benchmark for the sector.  

Undeniably, macroeconomic uncertainty and global trends such as higher interest rates, inflationary pressures and supply chain disruption significantly impact payment economics. Now, more than ever, businesses want a sense of security and certainty regarding the financial services in their operations, investing time and money in digital products and solutions that can make a difference. 

Growth of embedded B2B payments

In 2023, we expect to experience significant growth in embedded B2B payments. These are user-friendly, instant payment solutions inserted directly into software platforms. This new payment system removes the need for business owners to track their financial tools across different platforms, streamlining the experience.

Although consumers quickly moved to digital transactions for convenience, the complexity of B2B payments and a fragmented market meant delays in businesses' digital transition. Outdated payment methods such as delivering cash physically, lengthy payment reconciliations and invoices and an infinite number of steps to carry out a single transaction from credit approval to settlement are all common issues that have defined the B2B payments sector. 

Now, businesses are rethinking their transaction models to transform their cash flow and processes. A recent report from Bain and Company predicts that embedded finance will lead to $2.6 trillion worth of embedded business-to-business payments by 2026 and generate $6.7 billion in revenue. Businesses are beginning to increasingly recognise the need to consolidate and streamline their processes, embedded payments facilitating transactions with a click of a button, supporting increased efficiencies and driving accelerated growth.  

The rise of cross-border transactions

We expect B2B cross-border payments volume to accelerate in 2023. Recent research by McKinsey predicts that the value of cross-border payments will reach $2.5 trillion through 2025.

Businesses are going global to access new revenue potential, expand their market share and increase their customer base. However, macroeconomic factors such as a highly volatile FX environment, rising inflation and trading red tape provide significant challenges to operating successfully cross-border.  

Fluctuations in exchange rates expose all areas of businesses, including the ability to transact effectively internationally. These businesses now mitigate uncertainty by turning to B2B cross-border payment solutions with stable, transparent FX rates for security, consistency, and affordability.

Traditionally, businesses have had reduced international payment visibility, issues around varying FX calculations and expensive hidden fees to transact. B2B cross-border payment solutions are taking advantage of multiple AI-enabled solutions to provide much-needed visibility across the end-to-end payments process, offering real-time insights and analytics. These technologies will increasingly enable businesses to transact cross-border efficiently and at scale in 2023.

The transition to instant payments

We expect the transition to instant payments to accelerate businesses, allowing the instant exchange of capital. A report by Global Data estimates instant payment volumes will reach $200 billion by the end of 2024.

Historically for organisations, making payments has been a process-heavy, clunky, and expensive experience. Instant payment technologies are revolutionising financial services, enabling businesses to consolidate and streamline their payment process at lightning-fast speeds and affordable rates.

In 2023, instant payments seem set to take off even further as SMEs look to unlock new capital, boost revenues and expand globally. Instant payments give SMEs greater confidence and control over their payment process and the ability to access overseas markets at a reduced cost. The instant payments revolution is here, and we expect the number of SMEs taking advantage of these technologies to skyrocket.  

BNPL for B2B

Finally, we expect to see Buy-Now, Pay-Later (BNPL) products positively disrupting B2B payments, having already made waves in B2C financing. With short-term, interest-free credit vehicles, buyers can delay or split purchases, whilst sellers instantly receive funds in full. 

SMEs face limited options with financing and liquidity. The liquidity pool available to SMEs is far smaller than that of larger, established institutions that can lend from banks at higher rates. SMEs relying on high-interest loans to support their growth find the process expensive, with a lack of control over term changes during the lifetime of agreements.

With BNPL alternatives, SMEs have access to working capital and greater flexibility over their finances, reducing cash flow issues and enabling them to maximise opportunities more quickly. Instant access to online credit terms through BNPL makes it easier for SMEs to deal with overseas suppliers and allows business buyers to access the payment terms they need, enabling a more seamless purchasing experience. Overall, BNPL solutions bring greater transparency and flexibility to B2B payments, placing the control back in the hands of small businesses that have previously dealt with large financial institutions such as lending banks.

It is an exciting time for the B2B payments industry, with a stream of innovations coming to the fore and unlocking growth opportunities for SMEs. The B2B space is recognising the efficiencies that digitalisation enables in optimising financial operations. Ahead of a year characterised by global uncertainty and shifting market dynamics, these new payment innovations and digital solutions will be fundamental to the success of SME growth worldwide.

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