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How a New Public Utility Can Transform B2B Payments

  • By B.C. Krishna and Patti Ritter, CTP, CPA
  • Published: 3/5/2015
In an era where so many processes have migrated to new, more efficient digitally driven alternatives, checks remain an analog anachronism. But now a new solution is emerging—the B2B Payments Directory from the Remittance Coalition.

First, consider the problem. Why are B2B payments still primarily check-based? Why are larger and smaller businesses still sticking with checks? The answer is simple. Checks are well-known and ubiquitous across the business world. And sending payments by check is easy, requiring only the payee’s mailing address.

More than 20 million U.S. businesses are looking for a better way to make and receive electronic payments, according to the Fed. They’re frustrated with checks but continue to rely on them because the electronic payments just aren’t simple, secure, or widely used enough to be a viable alternative.

A new vision for B2B payments

The Remittance Coalition, a broad-based, 400-member industry group, is working to drive the growth of electronic business-to-business (B2B) payments, and seeking to eliminate the many hurdles that hamper this growth and cause businesses to default to check-based payments.

One proposed electronic payment accelerator is The B2B Payments Directory. Think of the directory as a phone book for electronic payment information. It eliminates one barrier to seamless e-payments by making payment information readily available, secure and easily updated. It’s not a payment system; it’s a database of payees. The directory will serve as an open, universal industry utility used to store, manage and access payment account information, making it easier for corporations to pay their business payees electronically.

What requirements does the directory need to meet to make this happen? There are five critical elements:

1. Accurate payment identity
Electronic payments require specialized information, and each payment method (such as ACH, Fed Wire or PayPal) needs a unique payment address. We propose creation of a new standard—an Electronic Payee Identification (EPI), which includes all the information necessary for e-payment. Examples include address, contact information, payment account details, and a requested remittance specification. The EPI will serve as a unique identifier for payees. This directory listing will vary depending on the type of payee. But in all cases, it will be complete, accurate, and easily updated.

2. Trust—for payees and payers
The directory must have rock-solid integrity right from the start, so all users will trust the solution. New directory participants will go through a standard certification process to protect this integrity. The directory will make it easy for payees to make near real-time updates to ensure the accuracy of the information. And on the payer side, the directory will provide quick access to the correct payee, including related payees, such as subsidiaries and DBAs.

Neutrality is a big part of engendering trust. We envision that the B2B Payments Directory will be created and operated by a non-profit Directory Association sponsored and supported by known and trusted industry players. This group will set the rules for operations and usage and ensure proper governance.

3. Strong security
Clearly, security is a big concern in any discussion of payments. In the context of the B2B Payments Directory, sensitive information must be protected—and only accessed with permission. The directory must be secure from all types of fraud, all the time. After all, wariness about revealing bank information (account and routing number) is one of the barriers to e-payments. The directory will provide a secure environment so business partners can look them up—quickly and easily.

4. Remittance information
The directory must help participants obtain quality remittance data, including the format of the remittance instruction and its preferred delivery method. The directory doesn’t require or mandate a specific form of remittance. But it does encourage the use of standards in remittance. Why? So when a payment is sent from payer to payee, it satisfies the remittance requirements of the payee. In short, the directory must meet the needs of payers and payees.

5. Scalability
The directory must be extremely scalable to accommodate the millions of businesses in the U.S., from small to large. There are small-scale B2B directories in the marketplace already. However, most are closed networks that require that both payer and payee join as members. The largest current directory includes only about 100,000 entries. The B2B Payments Directory must be able to scale to include many more, since there are about 20 million U.S. businesses, when including small businesses.

By meeting these five criteria, the B2B Payments Directory can address one of the significant challenges now impeding broader use of electronic payments. All with a solution that’s easy-to-use, secure, readily available, and widely accepted.

Join the Remittance Coalition here.

B.C. Krishna is CEO and president of MineralTree Inc. Patti Ritter, CTP, CPA, is senior treasury operations manager at Republic Services.

A longer version of this article appears in the January/February edition of AFP Exchange.

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