Business-to-business payments (also known as B2B payments) can take several forms, including checks, ACH transactions, real-time payments, wire transfers, credit cards, push-to-card and cash. But not all B2B payment methods can be automated. Unlike business-to-consumer (B2C) payments where transactions are typically settled at the point of sale and are generally one-time payments, B2B payments typically involve multiple internal stakeholders during the buying process and come with higher volumes and frequency. Choosing an account-to-account payment method is critical when considering how to automate B2B payments for your end users and employees.
The best account-to-account payment platforms offer an element of programmability. Whether it’s a recurring monthly transaction or a one-time refund, account-to-account payment platforms enable businesses to automate B2B payments at a fraction of the cost of card payments, cash or check transactions.
Gone are the days of tracking transactions in a spreadsheet and manually making updates.
This blog will explore the payment options available for B2B payments and attempt to correct some common misconceptions associated with card payments when compared to A2A. We will define commonly used terms in the payments industry and explain how account-to-account payments fit in the B2B payments landscape.
Use this article to answer a few questions:
- What payment options are available for my business?
- What’s the difference between a payment gateway and payment processor?
- Alternatives to processors and gateways.
- What’s a payment service provider?
- Can Dwolla automate B2B payments?
What payment options are available for my business?
One thing many business stakeholders struggle with is knowing the differences between payment gateways, payment processors, payment service providers and credit card processors.
The lines are often blurry, but there are significant differences. Without this understanding, it’s almost impossible to choose the option best suited for your business.
Businesses must also factor in the different payment types available to customers, such as cash, credit and debit. Because larger organizations and institutions are more deliberate when adopting new payment methods, an opportunity exists for smaller and more agile organizations to implement innovative solutions that are becoming increasingly popular with consumers.
Digital wallets and other innovative payment methods are emerging to offer more choices for B2B and B2C payments outside of relying on card rails.
What’s the difference between a payment processor and payment gateway?
There are several players in a card transaction: the customer, merchant, issuing (customer’s) bank, acquiring bank (merchant’s bank), and payment processor. Additional parties, such as payment gateway, point-of-sale and fraud management providers may also be involved. Alternatively, a merchant can work with a third-party payment gateway, who in turn works with an acquirer or processor.
Payment Gateway
Payment gateways are often used for online payment acceptance that don’t involve physical transactions, although some gateways can support in-person transactions. A payment gateway will submit a transaction for authorization.
Transactions by payment gateways are also commonly referred to as card-not-present. Virtually every time you buy something online, a payment gateway is used to accept card and other payment data.
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Payment Processor
Payment processors are companies that own and run the technology for card processing. Acquiring banks will typically partner with payment processors. Some of the largest payment processors include FIserv, FIS and Elavon.
Payment processors will hold data about the merchant and are often the party involved with the transfer of funds.
When a customer makes a purchase at a merchant’s location and swipes a credit card for payment, the payment information is usually not directly sent to the merchant or acquiring bank. The payment information travels through the acquirer or processor’s system (via the card networks) to the card issuer.
The issuing bank (consumer’s bank) will authorize or decline the transaction. This entire communication takes place in seconds.
At the end of the day, the merchant working with the processor will batch the transactions and submit them for settlement using these same channels.
Each month, the merchant will pay the processor for the transaction fees. Those fees are then collected and allocated to the other parties, which is why they’re known as “pass-through fees.”
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Alternatives to Processors and Gateways
What is a payment service provider?
This is Dwolla!
A payment service provider is a company offering payments technology to another business for collecting, disbursing or facilitating payments. A payment service provider will offer a payment API to facilitate B2B, B2C or C2C transactions from point A to point B safely and securely.
Dwolla is a payment service provider whose mission is to empower innovators with a modern payments platform that is flexible, reliable and easy to use. The Dwolla Platform offers several account-to-account payment types like ACH, Same Day ACH, Real-Time Payments and Push-to-Debit.
The Dwolla Platform is an end-to-end payment solution with multiple payment flows all from a single API integration.
Account-to-account transactions are one part of the overall B2B payment landscape. These transactions are typically less expensive than cards and can be automated for a more scalable, flexible and reliable workflow.
A business could add account-to-account capabilities as the primary payment method or as an alternative to credit cards, cash, checks and wires.
The Dwolla Platform includes features such as dedicated support, mass payments, real-time webhooks, addenda records, digital wallet functionality and more.
What does Dwolla do?
Dwolla helps automate B2B payments!
We’ve found the best way to explain what Dwolla does is by sharing stories of how other companies are using the technology.
Take Haul, a platform connecting trucking companies to truck drivers that launched its InstantPay feature with Dwolla’s payment technology.
The instantaneous functionality of Real-Time Payments and Push-to-Debit allows innovative companies in the cargo industry to pay truck drivers in real time so drivers get their money when they need it—not when the banks open.
Once the company approves a driver’s hours, a transaction can be initiated for a real-time or push-to-debit to the driver’s bank account, giving workers earlier access to their money and businesses greater control over the disbursement timing.
But it’s not just the gig economy that benefits from account-to-account payments.
Real estate platforms use ACH to facilitate real estate transactions quickly, reliably, safely—and at a low cost.
While speed is crucial to real estate transactions, account-to-account payments also provide greater control over transaction timing and risk mitigation.
Other benefits of automating B2B payments with a payment API include:
- Build a payment experience with the ability to maintain company branding.
- Access real-time notifications on payment statuses via webhooks.
- Ability for robust reconciliation with detailed addenda records.
- Ability to verify bank accounts using micro-deposits or a third-party tokenized solution.
- Streamline the client experience.
If you’re working at a business that needs to automate its B2B payments, reach out to our team and let’s talk about your use case. With near instant payment methods and multiple funds flow options, the Dwolla API can be configured in a variety of ways.
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