Business-to-business relationships thrive on trust, but distrust can be costly. Late payments, human or machine error, and fraud (intentional or not) can all damage that trust.
Blockchain, an algorithm that drives a distributed data structure that manages electronic cash movements, offers a potential solution. Read on to learn how it can transform B2B payment processes.
Security
Blockchain is the technology that supports cryptocurrency, but it has also been helpful in B2B payments. As a platform that creates permanent records of transactions that cannot be changed, Blockchain offers the security needed to improve B2B payment processes.
For example, Blockchain can create a single source of truth for confidential transactions and supply chain data, making it easier to verify data. Moreover, it can provide an audit trail that can be used to reduce fraud and other risks. In addition, it is a much more secure way to store customer information than traditional centralized databases.
A blockchain-based solution can also improve the security of B2B e-commerce transactions by providing more transparency and trust. It can also reduce costs by eliminating paper-based transactions and manual processes. Moreover, it confidently aids enterprises in efficiently and reliably handling their supply chains.
It can also make it easier to transfer money between financial institutions. For instance, B2B payments on the Blockchain could replace the cumbersome bills of lading in trade finance, allowing for faster and safer exchanges worldwide.
It can also make it easier to verify the authenticity of B2B goods. For example, if a company sells furniture, it can use Blockchain to prove whether the product was manufactured by the seller or bought from a supplier. It can help businesses avoid scams and build trust with their buyers.
Transparency
In the same way that artificial intelligence has permeated so many areas of society, blockchain technology is now taking a grip on B2B payments. The backbone for crypto payments, Blockchain provides a more secure, faster, and less costly payment solution than traditional bank transfers.
As the underlying technology for cryptocurrency, Blockchain eliminates third-party verification from the payment process and cuts processing times down to minutes versus days for traditional bank transfers. It also offers a more secure payment environment because it doesn’t use personal information like names and addresses to verify transactions. Instead, transactions are recorded and demonstrated across an extensive network of computers connected by a shared ledger. Reduces the opportunity for fraud and enables better monitoring.
Beyond payment, Blockchain is transforming supply chains and other business processes. For example, Blockchain can facilitate traceability of goods by storing a digital map that reveals the path and status of goods throughout the chain. It can reduce the need for AP and AR departments to phone or email suppliers for status updates, which saves time and money.
Blockchain enables transferring ownership of securities and other assets directly from one party to another without a go-between. It can cut costs by eliminating the need for clearing and settlement systems, typically charged as a percentage of the transaction value.
Automation
Using blockchain technology for B2B payments eliminates many go-betweens, which can cut down on transaction costs. Additionally, it makes payment processing quicker and more efficient, as all parties can access the distributed ledger to validate payment data. It also streamlines account management verification processes and reduces the need for external third-party agencies.
For example, a seller would only need to send a message to the beneficiary bank, and the payment will automatically be credited to their account once specific conditions are met. Smart contracts, a form of blockchain-based code that automates tasks and transactions, can be set up to implement these automated transactions.
The transparency and automation features of Blockchain can help build trust between businesses, resulting in more business opportunities. For instance, a buyer or supplier can quickly check and verify a transaction on a public network, eliminating many fraudulent payment attempts. Additionally, the immutability of blockchain records makes it much harder for fraudsters to manipulate data.
Another way that Blockchain can improve B2B business is by removing fees associated with credit card transactions. By eliminating the requirement for third-party apps, blockchain technology can effectively minimize transaction costs and mitigate the possibility of chargebacks. It can also reduce the time between receiving and shipping an order, positively impacting customer satisfaction.
Trust
Blockchains create trust through a shared record of truth. They can increase efficiency, transparency, and confidence across various business processes. These systems are powered by a computer network that constantly updates and validates transactions. It creates a real-time ledger independent of a single source of authority or validation. This system can even automate payments, cutting out the need for go-betweens and reducing costs.
It can be instrumental in the retail industry, where complex transactions require multiple parties. For example, a company that sells a product worldwide may need to deal with international exchange rates, value-added taxes in each country, and interfaces with multiple clearing and settlement networks. Blockchain technology can help streamline these complexities and increase the speed of B2B payments.
Supply chain management can be efficiently executed with the implementation of blockchain technology. It enables a food company to seamlessly track a product’s journey, from the manufacturer to the buyer, with utmost accuracy and transparency. It would give them more knowledge about the safety of their products, enabling them to identify problems faster and potentially save lives. It is significant for global companies that operate in countries with less-than-fully stable political climates. In addition, the Blockchain can transfer currencies, eliminating the need for a central clearing house or bank. The crypto-currency Bitcoin is already being used this way.
