Surhat

Healthy and General

Discounts Aren’t Effective B2B Incentive

3 min read

Faced with mounting economic pressure, small-to-midsized businesses (SMBs) are showing more and more interest in getting paid more predictably, according to the “Money Mobility Tracker,” a PYMNTS and Ingo Money collaboration. 

Get the report: Money Mobility Tracker 

While SMBs often offer discounts and incentives to encourage business partners to make one-time payments on time, that strategy doesn’t work. More than one-third of these ad hoc vendor payments for which discounts are available still arrive late, and another one-third are paid just on time — not earlier. 

The problem is particularly pronounced for commissions and business-to-business (B2B) marketplace payments, many of which are received even later than other ad hoc payments. 

A significant part of the problem could be that SMBs lack leverage in persuading buyers to pay according to terms or by payments other than checks, which adds friction to both sides of the transaction. 

Offering More Payment Options 

Improved payment systems and more payment options could help solve the problem. 

The share of disbursements received via instant payment rails has tripled since 2020, approaching event that of the most common method, same-day automated clearing house (ACH), which commands 22% of disbursements received. In 2021, 17% of all disbursements received were through instant payment channels. 

The number of disbursements received by consumers and the method of receiving them were impacted by the pandemic — and as instant payments became ubiquitous, businesses began to demand them too. 

The effort to infuse the economy with funds through stimulus payments following the pandemic’s onset significantly contributed to the number of disbursements consumers received. 

As economic pressures increased the urgency of receiving funds, consumers grew more interested in instant payments. Given multiple disbursement options, consumers favor instant payments when available. 

That desire for faster payments also extends to how consumers connect their accounts. More than half of consumers have linked their bank accounts to at least one other platform or service, such as Venmo or Apple Pay. 

There is no doubt that digital has become integral to most consumers’ financial lives. Comfort with digital channels has prompted many consumers to consider using digital-first entities as their primary financial institution. 

Partnering to Meet Customers’ Needs 

FinTechs and neobanks seeking to offer customers the payment options they want when moving money into different accounts will face a daunting task. While it may be tempting for tech-savvy organizations to try to achieve it all in-house, it may be too large a job for any entity to take on alone. 

The operational costs of managing multiple rails can quickly become overwhelming, and risk mitigation is always more challenging when working alone. 

“The choice component … giving consumers the ability to receive money anywhere they choose or initiate inbound funds from any account … that means you’re talking about more than one connection, so you take the complexity associated with a given money mobility rail, then multiply it across enabling various payment choices and payment channels,” Ingo Money executive vice president and chief product officer Lisa McFarland told PYMNTS in a recent interview. 

Read more: Complex Money Mobility Made Easier With Smart Partners and Strong Platforms 

Partnerships can give businesses a way to meet those needs without bogging themselves down in costs and details that can detract from a FinTech’s core mission. 

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NEW PYMNTS DATA: THE TAILORED SHOPPING EXPERIENCE STUDY – MAY 2022

About: PYMNTS’ survey of 2,094 consumers for The Tailored Shopping Experience report, a collaboration with Elastic Path, shows where merchants are getting it right and where they need to up their game to deliver a customized shopping experience.