B2B payments remain tied to legacy systems, but emerging solutions are setting the stage for a more agile and responsive payment ecosystem.
As businesses navigate an uncertain economic environment marked by fluctuating interest rates and persistent inflation, the timing of B2B payments modernization is just right.
Chris Jameson, head of product management for Global Payments Solutions (GPS) EMEA at Bank of America, told PYMNTS that hybrid solutions like Bank of America’s new Virtual Payables Direct are proving that innovation can have a true business impact when it bridges the gap between buyer and supplier needs.
A persistent challenge in B2B payments is buyers want to optimize their working capital by holding onto cash for as long as possible, while suppliers prefer quick, reliable settlements, he said. Traditional virtual cards address both of their objectives but rely on supplier acceptance and enablement.
Solutions like Virtual Payables Direct are emerging to address this need and remove the dependency on enablement by combining the advantages of traditional virtual card payments with the flexibility of bank transfers, promising a shift in how businesses manage cash flow and streamline payment cycles, Jameson said.
However, as businesses look to phase out legacy methods, finding solutions that offer clear advantages over traditional payment vehicles like paper checks and providing those advantages to buyers and suppliers will be fundamental to the advancement of these innovations.
For buyers, working capital is the holy grail, and maintaining liquidity is essential for finance heads.
Against that backdrop, virtual cards have served as a valuable financial tool, allowing buyers to defer payments, retain cash on hand and manage expenses more flexibly. However, despite these advantages for buyers, cards have not always been the preferred method of acceptance in B2B payments — largely because suppliers have often been hesitant to accept card payments, wary of the fees, settlement times and complexities associated with card transactions.
The new hybrid solution from Bank of America addresses both sides of the equation, Jameson said. Buyers can still use virtual cards to manage cash flow and defer payments, but suppliers receive money directly in their bank accounts without additional setup or card acceptance requirements.
This frictionless approach could open opportunities for businesses to integrate more of their accounts payable into the virtual payment system, thus enhancing their working capital and allowing for a more streamlined payment cycle.
“Many clients want the flexibility to delay payments without hampering their suppliers’ cash flow,” Jameson said.
This structure aligns with the broader push toward digitalization in B2B payments, as businesses look to phase out antiquated and labor-intensive methods. A system that automates direct transfers can also streamline reconciliation and reduce payment disputes, making life easier for accounting teams on both sides of a transaction.
Integrating new payment solutions with legacy financial systems can often be a daunting process.
“A lot of clients are challenged by integration with legacy systems, and digital adoption isn’t always [consistent] across various geographies where companies operate,” Jameson said.
Bank of America recognizes this challenge and has partnered with major industry players, including Mastercard, to facilitate smoother integration. The bank also draws upon its integration experience with robust internal platforms such as CashPro, where it has, for example, established connectivity with major enterprise resource planning (ERP) systems, including SAP’s multi-bank connectivity module.
Additionally, suppliers receive payments directly into their bank accounts without the need for any additional setup or enablement. Buyers only need suppliers’ bank account details, easing the onboarding process.
Although initially focused on the euro and British pound, Jameson said Bank of America is looking to expand Virtual Payables Direct into other currencies and regions in 2025.
“We see benefits beyond GBP and euro and are planning to address international corridors for B2B transactions,” he said.
By broadening the currency support and regional availability, Bank of America’s solution could alleviate many pain points associated with cross-border payments, especially in a fragmented regulatory landscape.
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