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We’ve all been there – using our trusty credit cards for business expenses, supplier payments, and more. It’s convenient, sure, but is it really the best way to handle B2B transactions? The convenience they offer is undeniable, allowing us to manage our financial affairs with relative ease. But, as with any longstanding practice, it’s important to periodically pause and reflect on whether we’re still on the right track. In this blog, we’ll take a look at the prevalence of B2B credit card payments, the reasons why you might want to think twice, and how this affects small businesses. 

Why You Should Stop Using Credit Cards for B2B Payments

High Processing Fees 

One significant drawback of using credit cards for B2B payments is the high processing fees. Credit card companies charge businesses a percentage of the transaction amount as a fee, which can quickly add up, especially for large payments. On average, businesses are charged a processing fee of 2.24% for credit card transactions.  

Let’s break it down with an example. Imagine a business that often uses credit cards for its B2B payments, totalling $10,000 each month. Those pesky processing fees would eat up $224 each month, which might not look like a big deal initially. However, over a year, these seemingly small fees would pile up to $2,688. 

For smaller businesses or start-ups, this could be a real hit to their earnings, making it harder for them to invest in growing their business or making their products and services better. It’s like an annoying leak in your money bucket that adds up over time and can really impact your ability to do more and get ahead. 

Challenges with Reconciliation 

Reconciliation is a critical aspect of financial management in any business. When a bunch of business transactions happen with credit cards, it’s hard to keep things neat. You have to make sure what you spend matches up with what you paid and what you owe. If this doesn’t add up right, it can cause problems and make it tough to manage your finances well. Keeping your accounting records in order is super important for making smart financial decisions and running your business smoothly. 

Long Processing Times 

Credit card payments might look really quick, but there’s more to it than meets the eye. When you make a payment, the first step happens instantly – it checks if you have enough funds on your card. But the second step, where the money actually moves from your bank to the seller, can take 1 to 3 workdays. This delay can be a problem for both parties. It can mess up your plans because you don’t know for sure when the money will be ready to use. To avoid these issues, it’s important to understand how credit card payments work and consider other ways to pay that are faster. 

While credit cards are handy, they aren't fool proof. They can be targeted by cybercriminals looking to make unauthorized charges.

Fraud and Security Risks 

While credit cards are handy, they aren’t foolproof. They can be targeted by cybercriminals looking to make unauthorized charges. Dealing with these fraudulent charges can be a lengthy and expensive process, taking your focus away from your core business. Moreover, falling victim to credit card fraud can harm your business’s good name and shake the trust of your customers and partners. 

Some recent numbers make this clearer: 

  • In 2020, credit card fraud cost businesses and people around the world a staggering $27.85 billion. 
  • In the United States, losses due to credit card fraud in 2020 reached $11.9 billion, a big jump from the year before. 
  • In a recent study of 2023, it was found that 65% of individuals who own credit and credit cards have fallen victim to fraud at some point in their lives, marking an increase from 58% in the previous year. This translates to approximately 151 million Americans affected by fraudulent activities. 

These numbers really drive home the fact that credit card fraud is not just a minor issue. It’s a big deal, and it can cost you and your business a lot. It’s not just about protecting your bottom line; it’s about safeguarding your reputation and the trust your customers have in you. Trust is everything, and keeping your customers and partners feeling safe and secure is key. That’s why it’s so important to take steps to protect your business and the people who rely on it. 

In 2020, credit card fraud cost businesses and people around the world a staggering $27.85 billion.

What Are Alternatives to B2B Credit Card Payments? 

Instant Payments 

Instant payments offer a swift and secure way to make Business payments. Thanks to the FedNow® Service and RTP® Network, instant payments in the United States have shifted into high gear. These payment methods offer a swift and secure way to conduct B2B transactions, often taking a mere 60 seconds from start to finish; even after-hours or on weekends.  

Right now, about 37% of American businesses are using real-time payment systems to pay their bills. But here’s the exciting part: by 2028, these speedy payment methods could replace a whopping $18.9 trillion worth of ACH and check payments for businesses in the United States. It means a big change is on the horizon, and lots of money is going to move faster and more efficiently. So, in the near future, we might say goodbye to the slow ways of paying bills and welcome a much quicker and smarter approach. 

Same-Day ACH Payments 

Automated Clearing House (ACH) payments are a reliable and cost-effective alternative to credit cards. They allow businesses to initiate same-day payments, ensuring that funds reach the recipient’s account promptly. It’s essential to know that “same-day” ACH doesn’t mean instant ACH transfer because it relies on the bank’s working hours. ACH payments are known for their security and ease of reconciliation, making them a practical choice for B2B transactions. While the transaction fees may fluctuate between different platforms or banks, modern payment solutions like Forwardly offer free same-day ACH transfers, adding an extra layer of cost-effectiveness to the mix. 

Future of B2B payments 

Looking ahead to the future of business payments, there are some exciting changes in store that make financial transactions more friendly and efficient. According to recent statistics, the adoption of instant payments is on the rise, it’s expected to expand at a compound annual growth rate (CAGR) of 33.0% from 2021 to 2028. They’re quick, safe, and often cheaper than the old way of using credit cards. The best part is they help your business avoid those frustrating delays in getting the job done on time. 

Now, let’s talk about keeping your money safe. With all the online risks these days, businesses are looking for ways to protect their money and data. That’s why using your biometric authentication, trusted payment processors, or platforms to make sure your payments are safe is crucial. These new ways to pay not only keep your business safe but also make your partners and customers trust you more. 

What does this mean for small businesses? Well, they often have tight budgets, and those high fees for credit card payments can be a real pain. But with these new payment methods, they can save money. With modern payment solutions, businesses can save up to 80% on processing fees. Plus, getting their money faster with options like instant payments and same-day payments means they don’t have to worry about unexpected delays. Small businesses can use these new ways of paying to build a strong financial foundation and focus on growing and succeeding. In the end, even though B2B payments are becoming more high-tech, they’re also becoming more about making life easier for businesses of all sizes, so they can do their work with confidence and ease. 

Experience the power of Forwardly for small businesses 

Looking to make the switch from B2B credit card payments to more efficient alternatives? Consider using Forwardly, a platform designed to empower small businesses. With Forwardly, you can say goodbye to credit card limitations and enjoy affordable instant payments, along with free same-day ACH transfers. By making the switch, you can save up to 80% on processing fees, secure and simplify your payments, and manage your cash flow more effectively.  

Join Forwardly today for a smarter way to do business. 

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