SMB payment issues provide blockchain opportunity

When it comes to cryptocurrency payments, much attention is paid to consumers paying merchants, but business-to-business (B2B) payments are an area where crypto has the potential to make a big impact.

Cross-border payments are a big part of this, but they are not the only consideration. There are areas where traditional financial institutions (FIs) are seeing their existing digital payment solutions fall short in their ability to effectively address the frictions faced by their B2B payment clients.

While 66% of FIs say the ability to offer customers B2B digital payment solutions is “very” or “extremely” important, according to PYMNTS’s “The New User Experience: Tracking the Consumerization of B2B Payments” report, only 30% say that the solutions they offer are “very” or “extremely” effective in overcoming these frictions.

Read the report: The new user experience: Tracking the consumption of B2B payments

One of the key areas where they fall short, the study found, is in meeting the needs of small and medium-sized enterprises (SMEs).

When it comes to mid-market businesses, 83% of FIs surveyed said digital payment solutions were “very” or “extremely” important to addressing the frictions that clients deal with in their B2B payments.

Yet only 42% of FIs surveyed said their digital payment solutions were “very” or “extremely” effective at addressing these frictions, according to The New User Experience, which launched earlier this year.

The figures were worse for small businesses, with 65% calling digital payment solutions “very” or “extremely” important. However, slightly more than a third – 23% – of FIs felt that their solutions were “very” or “extremely” effective.

In addition, a much larger 37% admitted that their digital payment solutions were only “slightly” or “not at all” effective in solving small customers’ problems. Service providers of large enterprises were much more confident, with 75% rating their digital payment solutions as the most effective.

Complacency across borders

Given the attention that has been placed on the need to improve the speed and cost of cross-border payments in particular, a surprising 80% said their digital payment solutions were “very” or “extremely” effective at solving cross-border payment issues, the New User Experience report found .

This is a problem so serious that it led the Bank for International Settlements to issue a white paper in May, the authors of which said that “cross-border payments have enough challenges that they require a ‘comprehensive approach’.”

Citing “high costs, slow speed, limited access and insufficient transparency,” the authors recommended redesigning the entire regulatory system to focus on distributed ledger technology (DLT), the technology that underpins blockchain.

See also: BIS: Cross-border crypto payments need a new regulatory framework

The European Central Bank argued that a digital euro could be the “holy grail” of cross-border payments, offering a solution that is “immediate, cheap, universal in reach, and settled in a secure settlement medium.”

Which leads to two points: First, blockchain or DLT-based CBDCs have at best four or five years off in the EU, giving plenty of time for crypto payment providers to present private solutions based on roughly the same technology .

Second, anything that needs a “holy grail” doesn’t work very well.

Learn more: ECB: CBDC could be ‘holy grail’ for cross-border payments

Solutions Welcome

The New User Experience report found that FIs believe their B2B customers’ willingness to adopt new technology to solve these problems decreases with company size, with 88% of large firms willing.

That said, the 78% of mid-market businesses and 63% of small businesses willing to consider new technologies like crypto-based B2B payment solutions is quite significant.

For all PYMNTS B2B and crypto coverage, subscribe to the daily Newsletter for B2B and Krypto.

NEW PYMNTS SURVEY FINDS 3 IN 4 CONSUMERS WITH STRONG DEMAND FOR SUPER APPS
About: The findings of PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy”, a collaboration with PayPal, analyzed the responses of 9,904 consumers in Australia, Germany, the UK and the US and showed strong demand for a single multi-functional super app instead of using dozens of individuals.