Why Choose a PSP for B2B Payments

by | Apr 30, 2020 | Blog

With the expansion of online businesses and international networks, the need for fast and fluid cross-border payments has become a priority. While advances in FinTech have made payments systems easier, national policies and regulations have made working within that systems complex for the novice.

As businesses expand beyond their national borders, there naturally comes the increased demand for Foreign Exchange (FX) services. Getting the best rates of exchange is a priority for most businesses as keeping costs low can improve returns long-term. However, many SMEs are not aware of alternatives at the traditional banking system which can support their business. In addition, larger companies can often be left frustrated by legacy banking systems which can be updated using FinTech services.

Here, we present you with 4 reasons why a payment services provider (PSP) makes an ideal B2B payments partner:

1. FX rates & fees

Studies show that small businesses in the UK are paying about €4 billion a year in built-in costs when they transfer money overseas using Britain’s high street banks. The margin or ‘spread’ that the banks add to the exchange rate generates a high proportion of income to the bank on a foreign exchange deal. Add to that the ‘fixed fees’ charged as standard and businesses with regular payments could end up executing inflated transactions which significantly erode profitability.

The importance of an efficient FX strategy cannot be overstated. Businesses still engage with their bank to transfer funds but many are unaware of alternative payment providers that offer a more efficient payments solution, and cost less. Many PSPs provide upfront exchange rate and fee information giving clients total transparency on payment costs before transactions are made. This guarantees that there are no hidden costs or fees that threaten your bottom line.

2. Customised payment solutions

Supplier payments only account for a small percentage of bank revenue and so financial institutions are often selective about investments. Core competencies including deposits, investments and loans which provide a higher margin are often prioritised by the banks.

The legacy client-server technology used by financial institutions can be very restrictive, and with the accounting needs of business varying widely, the lack of customisation can hinder the international payment process.

PSPs tend to invest in innovative technology to solve payments challenges, producing systems that are both agile and user friendly. They are often scalable and can be negotiated to work for your business interests.

3. No Multiple workflows

Payment solutions offered by financial institutions, outside profitable card channels, may not align with the specific needs of a business. Businesses then need to work with a number of transactional files to cater to their multiple payment requirements, becoming complicated.

Single file solutions provided by FinTechs simplify varied and numerous payment types, eliminating the reliance on multiple platforms and workflows. For example, file integration allows clients to upload a payment file (containing multiple payment types, currencies and destinations) directly from their ERP system to their chosen provider platform. This offers greater flexibility than standard bank file integration with superior validation and automated reconciliation back to their ERP.

4. Customer support

B2B payment solutions offered by traditional banks involve funnels with which to move various payment types with little in the way of front or back end support. Businesses, especially busy Accounts Payable functions, need to be assured that payment queries are answered promptly and any errors are rectified, preferably before payments are entered into the international banking system. Reputable PSPs offer clients a dedicated account manager who will advise on the timing of payments as well as securing a better FX rate. For payment queries, a readily available customer support team to advise on bank detail formatting or routing payments to international accounts is fundamental to the smooth transfer of funds.

PSPs have integrated themselves as a necessary part of the profitability of your online business. Lower rates on exchanges, improved management and enhanced customisation make working with PSPs a preferred option for B2B businesses wanting to improve their ROI and manage international expansion.