Making Sense of How APIs Bring Interoperability and Automation to B2B Payments

From digital wallets to buy-now-pay-later (BNPL) services, FinTech solutions have embedded themselves seamlessly into everyday life.

The everyday life of consumers, that is. The multitrillion dollar business-to-business (B2B) sector remains a challenging — if attractive — frontier for FinTech players, marked by complex workflows, entrenched legacy systems and high regulatory demands.

While the rewards of success can be significant, so too are the barriers to entry and scalability.

B2B payments differ markedly from consumer transactions in scale, complexity and expectations. Unlike simple point-of-sale purchases, B2B transactions often involve invoicing, extended payment terms, cross-border considerations and compliance with intricate regulatory frameworks. Traditional systems struggle to manage these demands efficiently, leading to friction points that can stifle business growth.

Manual processes, including invoicing, reconciliation and data entry, are not only labor-intensive but also prone to errors. A missed invoice or a misallocated payment can lead to strained business relationships and financial discrepancies. Moreover, legacy systems often lack the flexibility needed to integrate with new tools and platforms, causing further inefficiencies.

But one of the most promising solutions to these challenges lies in application programming interfaces (APIs).

Read more: Growing Digital B2B Payments With Open Banking and APIs

The Role of APIs in Streamlining Complex B2B Payments

By connecting disparate payment systems with enterprise software, banks and third-party services, APIs have become the connective tissue of modern finance. They offer the potential to automate and streamline payment processes, reduce manual intervention and significantly enhance operational efficiency.

For example, an API can facilitate the automatic generation and payment of invoices within an ERP system, eliminating the need for manual data entry.

“Whereas before we had to generate reports and mail them out, there’s a lot more we can be doing now to enable the business to self-serve in that respect,” Brandon Nussey, CFO at Coveo, told PYMNTS during a discussion for the executive series “A Day in the Life of a CFO,” adding businesses need to understand how digital investments translate into revenue opportunities, not just cost savings.

APIs can also streamline cross-border payments by connecting with banking systems and third-party foreign exchange services to provide real-time currency conversion and compliance checks. This reduces the risk of errors and speeds up transaction times.

Unlike consumer FinTech, where transaction fees and lending models dominate, B2B offers opportunities to generate income through value-added services enabled by APIs.

For example, businesses can leverage APIs to offer embedded financial services directly to their clients. A software-as-a-service (SaaS) provider might integrate payment capabilities into its platform, charging fees or earning a percentage of each transaction. Similarly, APIs can facilitate dynamic invoicing, credit underwriting and cash flow management services that can be offered as premium products.

Another promising avenue is in data monetization. With the consent of participants, payment APIs can aggregate transaction data to provide insights into supply chain efficiency, payment behaviors and market trends.

Read more: What Earnings Season Reveals About the B2B Payments Opportunity

Capturing the White Space B2B Opportunity

The B2B space is ripe for innovation, particularly when it comes to helping smaller businesses manage their payment processes more efficiently. While large corporations often have access to bespoke payment solutions, small to medium-sized businesses (SMBs) are frequently underserved by traditional banks and FinTechs alike. APIs can democratize access to sophisticated payment tools that were previously only available to large enterprises.

“If you are building something out, and you are not specialized, or a FinTech … having to develop something from scratch takes significant time, costs and resources,” Justin Downey, vice president of product at Maverick Payments, told PYMNTS. “It can take years to fully develop a system. And then additionally, beyond the initial build, you need to continually invest in ongoing development, support, regulatory compliance infrastructure and costs to maintain it.”

Partnering with FinTech providers with an API-based integration that complies with system and organization controls (SOC) and payment card industry (PCI) security guidelines ensures the security of data transfers and other critical payment-related information, he added.

As FinTech continues to proliferate, the B2B sector offers fertile ground for innovation. APIs, with their ability to connect, automate, and monetize payment processes, are poised to play a pivotal role in transforming enterprise finance. By addressing inefficiencies and opening up new business models, APIs could help businesses of all sizes thrive in an increasingly digital and interconnected global economy.

For businesses looking to navigate this landscape, the key will be to partner with FinTech providers that offer flexible, secure and scalable API solutions. Those that do will not only streamline their own operations but could also find new revenue opportunities through the monetization of payment flows.

For all PYMNTS B2B coverage, subscribe to the daily B2B Newsletter.

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