For corporate treasurers, the accounts receivable cycle has long been plagued by manual inefficiency. B2B firms continually struggle with the binary choice of corporate credit cards (high-cost convenience) or manual bank transfers (administrative burden).
Account-to-account technology has changed this, allowing a much more invisible way to collect. It’s rooted in the seemingly simple payment link. Using an API integration, the link can slash Days Sales Outstanding and free up working capital.
The economics of legacy settlement methods
It’s easy to underestimate the friction of the status quo. Corporate credit cards are great for instant authorization, but impose a tax on B2B margins through interchange fees and processing spreads that can range from 1.5% to 3.5% (in some cases, B2B-specific rates can be over 4%).
This is a substantial leak, especially when some merchant wholesalers have incredibly low margins to begin with. Sometimes the processor/acquirer markup is a fixed fee on top of this, which necessitates a higher average order value, limiting the profitability of smaller, high-frequency enterprise transactions.
Plus the risk of chargebacks and the 48-to-72-hour settlement delay create a liquidity lag that complicates cash flow.
The other end of the spectrum is manual bank transfers. The direct cost is lower, certainly, but they have a data decay. When a debtor manually executes a transfer, the decoupling of the payment from the invoice metadata leads to a reconciliation issue.
Discrepancies in reference numbers, accidental overpayments, or the omission of tax identifiers mean that manual intervention is constant and must be included as a cost, even though it’s indirect.
Solving reconciliation with API-driven links
A payment by bank transfer with payment link is the closest thing we have to an answer of achieving both, at once. It has all the speed of digital commerce but the security of the banking rail.
Best of both worlds, and unlike a static instruction on an invoice, a dynamic payment link acts as a secure gateway that interacts directly with Open Banking APIs.
Experience is super important when paying, as it’s often what clients remember. When the client clicks a payment link, they are entered into a pre-populated, authenticated environment – no manual bank details needing to be typed in.
And because the link is tied to a specific transaction ID, the payment amount and recipient details are now immutable. It eliminates the fat-finger errors, and more importantly, allows for instant reconciliation via webhooks.
Status updates mean that you’re not in the dark. The webhooks convert the accounts receivable function from a historical reporting task into a treasury management tool – all in real time.
Once the transaction is authorized through the payer’s banking app (which will ask them for a fingerprint or PIN), the merchant’s ERP system is now notified. There and then. It’s a single source of truth that makes sure the ledger is updated without any human intervention.
Improving B2B professionalism
B2B is all about perception, trust and psychology when it comes to the collection process. Requesting payment with a manual transfer feels low-tech.
It shows you’re a little outdated in your approach, giving the client an extra thing to worry about by inputting sensitive data. Am I on public Wi-Fi? Have I typed in the IBAN correctly?
A professional payment link is a white-label, streamlined experience. It reflects a company’s maturity and seriousness. It makes it convenient and helps avoid late-payment habits that are difficult to correct later on.
When it comes to security, these links simply use existing infrastructure of financial institutions – the most regulated industry in the corporate world.
This is more important than ever before, with 79% of organizations being targets of payment fraud in 2024. Cybercrime is at record levels.
By using Strong Customer Authentication protocols, the transaction remains within the “walled garden” of the bank’s security perimeter.
For the B2B buyer, this reduces the surface area for phishing and invoice fraud, as they are never required to share card details or manually enter a supplier’s banking coordinates into a potentially compromised interface.
Working capital and DSO
For CFOs, there has been an acceleration of the cash conversion cycle – a welcome KPI. Given the higher interest rates today than a decade ago, the cost of capital makes every day of outstanding credit all the more expensive. With rising oil prices, inflation concerns mean that this could continue to be the case – or worsen.
Payment links shorten the time between invoice sent and funds settled, in part because of said convenience for the client.
In many jurisdictions, this infrastructure actually allows for instant settlement rails. This grants the seller immediate access to liquidity rather than waiting for the multi-day clearing cycles that plague legacy ACH or card systems.
With friction-free payment links, there is a noticeable reduction in administrative churn. The collection process is finally as digital and dynamic as the services it supports.
