US Payments Industry Looks to Advance the B2B Cause

The B2B Directory aims to accelerate electronic payments by addressing one of the key barriers to electronic adoption – the difficulty that companies face in obtaining financial information. The directory is intended to provide a secure way for businesses to acquire that information.

“Since obtaining financial information from trading partners is often quoted the main barrier for moving to electronic payments, the B2B Directory could really be a game changer for AFP members as they seek to draw the benefits of moving away from paper cheques,” said Magnus Carlsson, manager, treasury and payments for the Association for Financial Professionals (AFP), parent of gtnews.

The US payments industry has attempted to phase out check usage in B2B payments for some time, with little success. Taking a new approach, the Remittance Coalition brought together corporates, banks and payment service providers to identify opportunities for the payments industry to come together around a ubiquitous B2B Directory.

Research by AFP and other organisations has shown that cheque usage is declining, while electronic payments are growing. However, the Remittance Coalition has recently observed that transition slowing down, noted BC Krishna, chief executive (CEO) of payments automation group MineralTree, who is heading up the directory project. In particular, small and medium-sized businesses have resisted using any method other than paper cheques.

“The goal of the B2B Directory is to address one of the issues businesses face in moving away from paper-based cheque payments to electronic payments, which is to identify who to pay,” said Krishna. “It’s a really simple idea, but it’s an important one. If you’re going to pay somebody electronically, you need to know their payment identity.”

Payment Identity

Simply obtaining that payment identity and account information can be very difficult, noted Brian Mantel, vice president (VP), customer relations and support for the Federal Reserve Bank of Chicago, who is also heavily involved in the project. Additionally, “even when you can find it, it’s often not as populated with as much information as possible – in part because small businesses have a hard time making that information available,” he said.

However the B2B Directory seeks to change all that. Krishna describes it as an “open, universal industry utility” that supports all payment types and enables small and large businesses to easily look up the payment identity of any organisations that they are trying to pay.

The directory also helps market participants obtain quality remittance data. “The directory does not legislate a particular form of remittance but what it really does is encourage the use of standards in remittance so that when a payment is sent from payer to payee, it satisfies the remittance requirements of the payee,” said Krishna.

Additionally, the directory helps to level the playing field. One of the key reasons that US small and medium-sized enterprises (SMEs) are lagging behind on electronic payments adoption is that they lack the technology resources that their corporate counterparts have, said Mantel. “It’s one thing for larger corporations to wrestle with this, but it’s completely different for SMEs and trading partners of large corporates,” he said. “This tool would better allow small companies to participate at a level where their peers and some larger corporations are today.”

Mantel and Krishna stressed that the B2B Directory is not a payments mechanism. Organisations would continue to use whatever payment method makes the most sense for them. “If I wanted to pay you, I’d find your identity, but I’d send the payment using the preferred payment rail,” said Krishna. “The directory is not a payments system; it’s an information utility that allows me to find out how to pay somebody.”

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