The shift from credit terms to instant payments in B2B: what it means for businesses

The landscape of B2B payments is undergoing a profound transformation. Traditionally, businesses have relied on credit terms such as 30, 60, or even 90 days to settle invoices. However, with the rise of instant payment solutions, companies are gradually shifting away from these extended payment terms. This shift is driven by a combination of technological advancements, changing financial risks, and the growing demand for efficiency in supply chain financing. This article explores why businesses are adopting instant payments, how these solutions reduce credit risks, and the role of real-time payments (RTP) in accelerating B2B transactions.

Why businesses are moving away from 30/60/90-day payment terms

1. Liquidity management and cash flow optimization Extended credit terms often create liquidity constraints for suppliers, especially small and medium enterprises (SMEs). According to a report by the European Payment Report (2023), 50% of SMEs face cash flow issues due to delayed payments. By transitioning to instant payments, businesses can enhance cash flow predictability, reduce working capital dependencies, and maintain financial stability.
2. Regulatory and compliance pressures Governments and financial regulators are increasingly emphasizing prompt payments to ensure economic stability. For instance, the European Late Payment Directive encourages timely settlements to prevent undue financial burdens on suppliers. Similarly, the UK’s Prompt Payment Code mandates fair payment practices, pushing corporations toward faster payment cycles.
3. Technological advancements and digital transformation The adoption of cloud-based Enterprise Resource Planning (ERP) systems, artificial intelligence (AI), and blockchain technology has enabled businesses to automate invoicing and payments, making traditional credit terms obsolete. FinTech solutions such as Stripe, Adyen, and PayPal offer real-time payment capabilities that reduce processing delays.
4. Changing business expectations and competitive advantage Modern businesses prioritize speed and efficiency. Companies that adopt instant payments can strengthen supplier relationships, improve operational agility, and gain a competitive edge in the market. A study by McKinsey & Company (2022) found that 72% of B2B buyers prefer suppliers that offer instant payment options.

How instant payment solutions reduce credit risks

1. Elimination of bad debt and default risks One of the major risks associated with traditional credit terms is the potential for bad debts. Late payments or defaults can significantly impact financial health. Instant payments eliminate these risks by ensuring that transactions are settled immediately upon invoicing.
2. Improved creditworthiness and financial stability With real-time payments, businesses no longer need to rely on extensive credit evaluations, as payments are received instantly. This reduces the burden on credit risk management teams and enhances overall financial stability.
3. Enhanced fraud prevention and security measures Modern instant payment systems are integrated with robust security measures such as biometric authentication, AI-driven fraud detection, and blockchain verification. These features significantly reduce the likelihood of fraudulent transactions compared to traditional credit-based payments.
4. Stronger supplier-buyer relationships Timely payments foster trust between buyers and suppliers. Suppliers can reinvest funds more effectively, leading to better pricing, discounts, and improved collaboration. A Harvard Business Review study (2021) highlighted that businesses that transition to faster payments see a 40% improvement in supplier relationships.

the role of real-time payments (RTP) in accelerating B2B transactions

1. Speed and efficiency in transaction processing Real-time payments enable businesses to process transactions instantly, reducing reconciliation times and operational bottlenecks. The Clearing House’s RTP network in the U.S. and SEPA Instant Credit Transfer in Europe are prime examples of infrastructures designed to support instant B2B transactions.
2. Integration with digital payment platforms Many businesses now integrate RTP systems with their ERP and accounting software, automating the end-to-end payment process. This integration reduces human errors, accelerates processing times, and enhances financial transparency.
3. 24/7 payment availability and global reach Unlike traditional banking systems that operate on limited hours, RTP solutions function 24/7, allowing businesses to make and receive payments across different time zones seamlessly. This is particularly beneficial for multinational corporations engaging in cross-border trade.
4. Cost reduction and operational efficiency Real-time payments eliminate intermediary banking fees and reduce administrative costs associated with invoicing, credit assessment, and collections. According to a report by Capgemini (2023), businesses leveraging RTP solutions have reduced payment processing costs by 30% on average.

The shift from traditional credit terms to instant payments represents a significant evolution in B2B transactions. Businesses are increasingly recognizing the advantages of real-time payments in terms of liquidity management, risk reduction, and operational efficiency. As technological innovations continue to reshape financial ecosystems, instant payments are set to become the new standard, offering a seamless and secure way to manage business transactions. Companies that embrace this change early will not only optimize their financial health but also gain a strategic edge in the competitive marketplace.