Business-to-business (B2B) payments refer to transactions between two businesses, rather than between a business and a consumer. B2B payments are a critical aspect of the global economy, and in India, they play a significant role in the country’s economic growth and development. It’s important for a business to choose a service that is easy to use, secure, cost-effective & removes the hassles of making & collecting payments for businesses. Vaultpay is a payments app that is made specifically to serve small businesses in India.
In this article, we’ll take a closer look at B2B payments in India, how they work and what are the challenges.
Topics
-
Common B2B payments methods used
-
Different businesses have different requirements
-
What problems different businesses face in payments
-
What can be done to solve this
Common B2B payments methods used
In B2B, the most common ways of making payments are –
-
Non digital: Cash, cheque
-
Digital: NEFT, RTGS, UPI etc.
You see, credit, debit cards are not widely used for B2B payments as they have a higher cost for businesses (1-2%). Since B2B payments are of very high value, most businesses dont prefer this.
You also see cheques being used in B2B to a great extent as cheques have post dated payment feature, which helps in credit collection.
Different businesses have different requirements
One of the main challenges of B2B payments in India is the lack of standardization. Unlike in other countries where there are established payment systems and infrastructure, India has a diverse and fragmented market. This can make it difficult for businesses to securely and efficiently make and receive payments. Add to that different businesses have different payment terms.
For example, some businesses give credit period to their customers while some do not. Even the credit period varies from business to business, and different industries. Some may give a 14 day credit period, and collect via post dated cheques. Some may give a 60-90 day credit period, and ask their customers to transfer funds via NEFT/IMPS after the credit period.
What problems different businesses face in payments?
Most businesses operate on credit. And they face a lot of hassle during collection. They have to keep chasing their customers.
The second problem is reconciliation. Since B2B payments do not happen over a payment gateway, reconciliation doesn’t happen automatically. People generally send screenshots of bank transfers & then reconciliation is done manually.
Then another problem is digital payment adoption, which is relatively low in B2B payments. The reasons are:
-
Many businesses prefer cash for tax purposes
-
Businesses prefer cheques as it has post dated feature which help in collections, which none of the digital modes of payments have
-
Some of the business owners are not that tech savvy
Even UPI which has been very successful is not used much for business transactions due to
-
Business account – current & cc accounts can’t be linked to UPI
-
Low limit
-
Fraud risks
-
Difficulty in reconciliation
What can be done to solve this?
Not all problems can be solved immediately. But there are a few areas which can be solved – reconciliation, digital payment adoption & to some extent credit collection.
Reconciliation can be solved by having a common platform for both the buyer & the seller for billing (like Bharat Bill Pay System, which is used mainly for B2C purposes). Where the seller & raise the invoice & buyer can check his order and pay. This will help not only for reconciliation but also for tracking payments & collections.
Digital payments adoption can be increased by designing simple UPI like app but specifically for B2B payments – which has a higher limit, post dated payment feature, auto reconciliation features.
There are a few companies like RazorpayX & Open which try to solve for different parts of it.
VaultPay has designed a payment application just for businesses aimed at solving the above problems.
VaultPay offers the specific features which are designed specifically for businesses. With VaultPay businesses can
-
Make & collect post dated eCheques when they buy & sell on credit respectively
-
Raise invoice to their customers through VaultPay and set deadlines for payments, discounts for early payments
-
Businesses can improve their credit scores, which will help them in getting loans at higher interest rates
The best part is VaultPay is completely free to use and you can link your existing bank account & get started. This makes VaultPay one of the best payments app for businesses in India in 2023.
Install VaultPay – The payments app made only for businesses like you.
Leave a Reply