Credit and finance for MSMEs: Switching to a new business-to-business (B2B) payment system and its reconciliation practices in domestic payments can be a challenge for businesses particularly small and medium enterprises (SMEs), said market research firm Juniper Research in a whitepaper on automation in B2B payments on Monday. Improving efficiency in payments processes gains significance as average domestic payments made by a business will grow to more than 1,400 per year globally in 2027 while the global transaction value of the B2B payments market will exceed $111 trillion in 2027, up 26 per cent from just over $88 trillion in 2022, the report said.
“The diversity between payment methods in B2B payments and therefore, their reconciliation practices, can be challenging for businesses in domestic markets and can lead to interlinked problems, which directly impact businesses’ cashflow such as fraud, other deviations and discrepancies, and late payments,” the market research firm said in the global study.
Although there are numerous reconciliation solutions in the market, migration to new systems could present operational issues, especially for SMEs and (hence) is often postponed or abandoned due to cost considerations, it added. However, instant payments, and the additional remittance data, which the ISO 20022 standard provides, can help seamlessly organise and reconcile payments by enabling automated reconciliation.
Instant payment programmes are instrumental in leveraging domestic payment rails and other associated technological infrastructures to achieve higher speed and lower-cost payments. However, most of these programmes such as Faster Payments in the UK and FAST in Singapore are currently domestic, the whitepaper said.
These programmes are similar to India’s Unified Payment Interface (UPI) which has been a roaring success in India for making instant payments. The system developed by the National Payments Corporation of India (NPCI) enables various bank accounts into a single mobile app of any bank, merging different banking features, and providing seamless fund routing and merchant payments. UPI went global with Nepal becoming the first country to adopt it followed by other countries including Bhutan, Malaysia, UAE, the UK, and Oman so far.
Meanwhile, according to data platform Statista, the total transaction value in the digital payments segment in India is projected to grow at 13.66 per cent CAGR from an estimated $133.40 billion in 2022 to $253 billion by 2027.