Several factors have shown that the future of payments is digital. In this sense, blockchain technology is emerging as the best alternative for trading between small, medium, and large companies. Let’s take a look at the advantages of blockchain technology for business-to-business (B2B) services.
An overview of the B2B market
B2B payments refer to the process by which two companies exchange goods or services. Although it’s a market that goes unnoticed by most, it moves large amounts of money annually. In the United States, for example, B2B trade figures stood at $23 trillion in 2020. This is a 40% growth over 2014, according to data from Deloitte.
Despite this, researchers believe that this market is underserved, with many unmet needs that require modernization of the payments’ infrastructure. Among these problems are payment delays, high fees, fraud risks, manual processing, limited visibility of transactions, difficulties in receiving remittances, and so on.
Blockchain and B2B global payments
The Covid-19 pandemic didn’t impact global payments this 2021 as negatively as estimated. Indeed, global payments revenues promise to continue growing in the coming years.
This was described by researchers at the consulting firm McKinsey & Company, who believe that by 2025 there will be $2.5 trillion in global payments revenue. This is due, in part, to the fact that many private companies are adopting stablecoins, and several banks are considering the creation of Central Bank Digital Currencies (CBDCs).
However, for Deloitte, certain factors can make it difficult to process international payments under the digital infrastructure that currently exists. Thus, companies may have many invoices to process (presented in various formats), and encounter data loss in the files. They can also face a lack of administrative support to process this type of payment.
That lack is especially evident in the mid-market, which stood at more than $3 billion in 2021. Medium-sized companies, which don’t receive enough attention from financial institutions, don’t have the same budget to upgrade their international payments infrastructure as large companies would have.
Blockchain payment processors for B2B
Luckily, blockchain technology and cryptocurrency payment processors are much more convenient, faster, and cheaper than traditional financial solutions in the B2B sector.
Inside these new platforms, creating an account and completing the identity verification process (if applicable) can take mere minutes. Similarly, while sending money between financial institutions in different countries can take 1–5 days, using a payment processor can make the transactions immediate.
Processing the data can also become very easy. Payment processors present a summary of the transactions with all the data necessary for the company’s accounting.
The advantages of payment processors (such as ALFAcoins) for sending remittances also benefit small businesses. International trade is no longer limited to large exporters, as small businesses can find businesses that have adopted this payment technology and want to expand their market internationally.
Transparency and fraud prevention
Currently, some companies that don’t use next-generation financial technology must verify each transaction manually. Also, they use payment methods that don’t provide adequate levels of security for their operations.
As is well known, blockchain technology is based on a digital ledger distributed inside computers around the globe. This ledger is periodically updated with each transaction. If the blockchain is public (like Bitcoin), then anyone, anywhere in the world, can consult it and verify that the data in a transaction is correct.
In the case of B2B blockchain technology for large companies, they can use a private blockchain where they process their payments. Regardless of whether they’re international payments or not, on these platforms, the transactions can be consulted only by those users who have permission to access them.
In addition, these private blockchains allow their users to make immediate transactions, without the need for strict fraud checks to verify the authenticity of the means of payment, which delays the process. The companies can make previous accords between them for this.
Payment processors also offer the security of private networks but at a lower cost. Thus, if both companies use the same processor, transaction data is usually private and protected in the database, but can be easily accessed by either party.
Non-custodial services and lower fees
Decentralization is, undoubtedly, one of the biggest advantages of blockchain technology. With this technology, large and small companies can make their transactions conveniently without using a bank as an intermediary. In this way, they can access funds immediately, reduce the costs of account maintenance fees, transfers between financial institutions, etc.
Besides, the market becomes more inclusive. More companies, regardless of their size, can interact with each other without facing the barrier of commissions and paperwork that financial entities usually require.
Another highlight of paying with cryptocurrencies is that sending B2B payments is considerably less expensive than with traditional transactions. With blockchain technology, sending payment of 10 thousand dollars, for example, has the same fee as a transaction of 15 or 10 dollars. Therefore, by paying just a one-dollar fee to move $10k, the supplier can receive the payment of a product in just minutes.
The migration from the traditional market to a new generation economy seems to be an ever-closer reality. With the regulation of stablecoins and the confidence that blockchain technology is inspiring the B2B industry, it seems that the process will happen sooner than we could imagine.
Originally published at https://blog.alfa.cash on December 10, 2021.