Understanding B2B payments: the fast-growing $137 trillion opportunity 💸
FinTech is Eating the World, 17 October
Hey Everyone,
Happy Tuesday! Today’s issue is slightly different as we’re taking a really deep dive into B2B payments, the last major bastion of paper-based payments and processes. We’re going to look at the massive market opportunity, current challenges, what key players in the space are doing, and much more! So let’s jump straight into the interesting stuff 🌶
The Opportunity
The business-to-business (B2B) payments market represents one of the largest remaining opportunities for digitization and disruption in FinTech globally.
Valued at over $100 trillion per year, the B2B payments market absolutely dwarfs the scale of the business-to-consumer (B2C) payments market, which sits at around $20 trillion annually.
The Challenge
Yet despite the immense size and clear need for innovation, B2B payments remain dominated by frustratingly manual, inefficient, and antiquated processes.
The crazy part? Nearly 40% of B2B payments are still made by paper checks in the US, which leads to slow settlement times measured in days and error-prone, time-consuming manual reconciliation.
But that’s not the only issue. Here’s an example of a typical B2B transaction process:
One word - complicated.
The Solution
Hence, it's clear that digitizing B2B payments involves much more than just the payment itself. It requires streamlining the entire workflow from purchase order to invoice to settlement to accounting.
This end-to-end lifecycle obviously introduces far more complexity to B2B payments innovation compared to B2C payments, yet the potential payoff is correspondingly larger as well. B2B transactions also tend to be large, infrequent, and involve complex supplier relationships and contract terms.
All of these complexities make B2B payments digitization considerably more challenging than B2C, but the total addressable market is so vast that even capturing a small fraction represents a massive opportunity.
Let’s take a closer look at the current status quo in B2B payments, key market players, what they are doing and where should everyone focus on next.