Understand the unique characteristics of B2B payments to determine if Paypal for B2B Payments is the solution you need.
Paypal is well known for its B2C and P2P payments capacities, but should you use them for your B2B payments too?
Available in over 200 markets, PayPal supports international payments. PayPal allows merchants of all sizes to manage payments online with a solution that can be configured to your needs. PayPal also offers merchants features that create a secure solution for customers. The cost advantages of cloud technologies have enabled ecommerce platform providers to offer B2B solutions that level the playing field between middle-market companies and larger competitors.
However, the unique characteristics of B2B payments such as the Average Transaction Value (ATV) and the transaction and FX fees that PayPal charges can create issues for businesses that make large transactions across borders.
B2B Payments: Key Factors to Consider
B2B payments, and especially cross-border B2B payments, made between buyers and suppliers for goods or services are more complex than B2C payments. There are a number of different factors that are unique to a B2B and enterprise transaction that need to be managed, which include:
- Payment Frequency and Approval. Your B2B payment might be a one-time transaction or recurring transaction that may need to go to the accounts payable or accounts receivable department for approval. These payments may also need to be handled through enterprise back-office management systems.
- B2B Transaction Size. Whether it’s spending $10,000 on the shipping cost for a single shipping container of goods to hundreds of millions for a passenger jet, B2B transactions can be very expensive. This means that what might seem like a small 3% transaction fee can add up to 3 million dollars on a 300 million dollar purchase. Because of this, low transaction and FX fees are very important for optimizing B2B payments.
- B2B Payment Time. Customers want to receive goods before they pay, while sellers want to receive payment before they ship goods. Both parties take on a huge amount of liability from the middle of a transaction until its completion. The right B2B payments solution should give you ultra-fast, reliable payment settlements to allow your business to issue, receive, and process payments faster and improve cash flow.
What International Enterprise and B2B Payment Methods do Paypal Accept?
Global businesses have an array of payment options to choose from for international B2B transactions with Paypal. Paypal’s B2B and enterprise options include digital wallet options, cash vouchers, direct banking, bank redirects, credit and debit cards, and the ability to pay with PayPal.
However, they do not accept payments via check and do not accept Global Automated Clearing House (Global ACH) Direct Credit payments, electronic payments that are very popular for B2B transactions in the United States.
Each of these methods has different effects on the process that need to be weighed to ensure that the complexity is minimized, while security and user experience are optimized. Additionally, their hefty transaction fees, cross-border fees and foreign exchange fees (3%-4%) quickly add up, impacting profitability and potentially creating delays with consequences for your cash flow.
Pros and Cons for PayPal for B2B and Enterprise Merchants
- Fast and easy to set up and use
- Does not require a merchant account
- Customers are not required to have a PayPal account to make payments
- Ability to create and issue invoices directly from the account
- Support for recurring payments.
- Ease of integration with shopping cart systems.
- High chargeback fees
- Can’t accept many payment methods that are popular for B2B
- Account can be suspended at any time
- Small transactions can incur large fees
- Not all customers/suppliers will use PayPal
- It may take 2-3 days to receive payments
- It can be difficult to contact PayPal’s customer service department
Learn about Rapyd’s single solution to streamline your local and global B2B payments and payouts processes.
What Should You Look for in a B2B Payment System?
A B2B or enterprise payment system gives businesses the opportunity to expedite transactions on financial exchanges and between trading partners. The automation of B2B payment processes helps businesses to identify patterns in cash flow and make informed and smart decisions on how and where to spend.
Integration with existing systems and data can make managing taxes and streamlining operations easier. To take advantage of all of these benefits, you need to evaluate the features of payment systems relative to your business needs to find the best system for you.
- Ensure Security – The protection of data is a key concern for customers and businesses using personal and financial details during an online transaction. Research from Deloitte shows that 22% of middle market businesses have been victims of costly payment fraud. (Mageplaza)
- Provide Access to Data – Visibility to all transactions is essential to effectively control cash flow on an ongoing basis and you will also need to have a clear picture of revenues earned for accounting and tax purposes.
- Manage Cost – Both the cost per transaction and the cost of account maintenance need to be factored into the decision of how payments are processed. Depending on the methods used the costs will vary. Credit cards, wire transfers etc. can incur higher costs than checks, but collecting checks will require time and resources to collect.
- Support Global Expansion – B2B companies can look across borders for opportunities to expand their customer base and source materials. To benefit from additional revenue and competitive advantage, you need to be able to accept and make cross-border payouts from a single solution, using the right payment methods across different transaction types and regions and with low cross-border and foreign exchange fees.
A Low-Fee, Streamlined Solution is Best for B2B Payments
Each business needs to look at the B2B payments landscape carefully to find the solution that best suits their situation. While PayPal has a number of key B2B features, they ultimately leave businesses with high fees and unable to accept certain popular B2B payment methods. For this reason, many see PayPal as more of a compliment to a comprehensive B2B payment solution than a replacement.
For those looking for a comprehensive B2B payment provider, Rapyd’s digital payment solutions can make the process of developing both sales and supplier channels faster and easier with locally preferred payment methods. Rapyd’s B2B and Enterprise payment solutions and APIs easily integrate with websites, applications and systems to make for a more efficient and better experience for business users while also protecting transactions and streamlining operations.
Learn how Rapyd provides a single solution to gain more control of your local and international B2B payments and payouts processes.
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