What Are B2B And B2C Payments?

b2b vs b2c payments differences

There are some important differences when it comes to B2B and B2C payments. Businesses must grasp these differences in order to provide a better and much more satisfactory client or customer experience during the payment process. 

B2B Payments Defined 

B2B stands for Business to Business payments and it refers to transactions that take place between merchants. It takes place when one business sells to another business and not directly to the consumer. 

B2C Payments Defined 

B2C stands for Business to Consumer payments and it reflects a transaction that takes place between a business and a consumer. This means that the business is selling its products or services directly to the consumer and not to another business. 

Why Are These Models Different? 

Their basic difference lies in the way how the payment processing operates for either one of those instances. There are four principal differences that separate B2B from B2C payments and they are: 

1. The Size Of The Payment 

Payment size refers to the average price of each transaction. In general terms, B2B transactions tend to be much more substantial than B2C transactions. This is because it is much easier to pay a bill for, let’s say, $100 than one that involves thousands of dollars. 

2. The Payment Methods 

In B2C transactions, it is not uncommon to use electronic methods that are received immediately. This means that the authorization is also received right away. Thus, the funds are immediately debited and transferred to the vendor’s account. 

B2B purchases are larger and, in most cases, instant payments are not an option nor a possibility. Direct debits, bank transfers, or paper checks are still common payment methods, and none of them require authorization. Still, they may represent a higher risk such as cases when a check bounces or a payment does not go through. These types of payments can also result in delays which can end up compromising a business’ cash flow. 

3. The Frequency Of The Payment 

Frequency refers to the fact that there are many more B2C than B2B transactions. This means that a business that sells to consumers will have plenty of transactions every day, while a business that sells to another business may only bill them occasionally. 

Also, online commerce has allowed businesses to reach previously unreachable customers, expanding their sales. On the other hand, B2B customers are more likely to make repeat purchases since they need frequent restocking of supplies for their businesses to keep running as they should. 

4. The Payment Terms 

The terms and decisions behind each sale also play a role. This means that the process of conducting business between two companies is much more elaborate and often takes much longer than a transaction between a business and its customer. 

Why Are These Differences Important? 

Because when working with a merchant processing company, it is important for businesses to understand in which way these differences will impact their payment processes so that the business can operate in the most effective way. How? By saving money through the elimination of unnecessary fees, streamlining certain information for speedier processes, and more. 

If you are in the process of choosing between different B2B or B2C payment companies, Interchange Pros recommends you always go for one that offers both reliability and compliance while giving you a cost-effective solution that fits your needs.

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