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Written by Cyndie Martini
on December 28, 2022

Why do only 48% of B2B payments occur on credit cards and 19% on debit cards? According to a report called Innovating B2B Retail Payments Playbook, which was created in a collaboration between PYMNTS and TreviPay (formerly MSTS).

Most B2B payments are still handled by paper checks (81% of firms) and ACH (64% of firms). The interchange fees on these payments are very low and often below 1%. Contrast that with credit card fees, between 2-3% plus a flat transaction fee.

B2C retailers are used to accepting credit and debit cards as their main form of payment. But why doesn't this work for B2B? B2C and B2B transactions are very different. Consumers usually purchase many smaller ticket items at once. The overall ticket size is not large. Delivery of items occurs at the time of checkout. This is not the case with B2B transactions.

B2B transaction tickets can be several $10,000s. A 2.5% transaction fee on a $25,000 purchase is $625. Compare that to the same fee rate on a $150 consumer purchase, and it's only $3.75. Additionally, B2B transactions are more complex. There are usually contracts, negotiations, and coordination of delivery that occur. Unlike B2C transactions, B2B transactions do not occur immediately. They can be drawn out over several days or even weeks if final delivery and payment are factored in.

As well, B2B payments are often integrated into a company's accounts receivable (AR). An invoice is generated, terms provided, and payments tracked in these systems. Some firms may even use their AR to finance growth (i.e., invoice factoring). Others use their AR in monthly and quarterly projections. Switching to a credit card-driven payment process can be a significant change for many firms.

Of course, this doesn't mean B2B firms shouldn't accept credit and debit card payments. If that is the only way a company can pay, the fee is likely worth the cost since the alternative is turning the customer away and collecting zero.

 

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