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Where B2B, E-Commerce And Payments Intersect

While B2B and B2C e-commerce buying may share a common shopping and check-out experience, the under-the-hood fundamentals are not the same — the ways that a company might implement the right features in each situation, while generating the highest return on investment (ROI) possible, depends, in many ways, upon those internal functions. And the prospect of making the right B2B decision still stumps many companies.

We’ve discussed many times on these pages the complexities that manufacturers face when trying to implement an e-commerce solution — even for manufacturers uninterested in selling directly to consumers, the influence of business-to-consumer (B2C) e-commerce are rapidly pressuring even those that do only business-to-business (B2B) interactions to set up e-commerce sites. And, like it or not, these B2B e-commerce initiatives are being judged by the standards set by Amazon and other retailers.

While B2B and B2C e-commerce buying may share a common shopping and check-out experience, the under-the-hood fundamentals are not the same — the ways that a company might implement the right features in each situation, while generating the highest return on investment (ROI) possible, depends, in many ways, upon those internal functions. And the prospect of making the right B2B decision still stumps many companies.

One of the central components of e-commerce is payment processing — a complicated issue that is one of the critical functions in the back-end of any system. It’s a complicated issue, but, fortunately, there are solutions available to help manufacturers develop best practices and implement systems that not only better serve their customer, but also lower costs and increase productivity.

But before we delve into the nuances of payment processing, it’s critical to outline the differences in the business and consumer payments themselves.  

B2B vs. B2C cards

At the core of the B2B vs. B2C debate are the different types of cards buyers use. Consumers are issued consumer debit, credit and reward cards, while businesses give employees commercial card products like small business, corporate and purchasing cards (also known as P-Cards) to keep business expenses separate from personal ones.

Commercial credit cards are becoming increasingly important to the way many companies acquire the goods they require. Research suggests that P-Card use is expected to balloon to $290 billion by 2016, with more than 84 percent of organizations adopting some form of a P-Card policy. One driving factor is e-commerce itself — the simplicity of ordering online is creating higher demand for card-based purchases, even as invoicing and billing are moving from paper to electronic processes.

For buyers, P-Cards can make a big difference on the bottom line — a survey of 1,300 purchase card program administrators found a $53 administrative cost reduction when using P-Cards over processing paper invoices. Manufacturers and distributors doing the selling are finding e-commerce payments equally compelling. There are a multitude of benefits, such as funding time being reduced from days to months, dramatically reducing the amount spent on collections and spending less to finance trade credit until payments are received.

So, any company doing B2B transactions can expect P-Cards to quickly become the standard, if they haven’t already. Yet when accepting commercial card payments, these transactions require more details about what’s being sold than a consumer card purchase in order to qualify for the lowest possible Interchange rates as set by MasterCard and Visa.

What is Interchange?

Ty Hardison, the vice president of strategy and development at Vantage Card Services, Inc., explains it this way: “Simply put, Interchange fees are paid by merchant-acquiring banks to cardholder-issuing banks to convert a charge on a cardholder's card to a cash deposit in a merchant's business checking account.”

Interchange rates and fees are the largest component of the cost to process card payments. Interchange varies depending on the seller’s industry category, the method by which they accept the card, the type of card accepted, the transaction size and the level of data provided with the transaction. All of this means that each purchase can carry a different Interchange expense, dependent on how that transaction is submitted for funding.

Because of these varying fees, Hardison says that managing Interchange can provide significant ROI. B2B and B2G card sales benefit greatly from qualifying for the lowest Interchange rates available, especially when order frequency and transaction size is multiplied by a percentage of each sale in savings. The lowest possible rate, often referred to as Level 3 Interchange — requires a certain set of features that a B2C payment gateway simply cannot handle.

Qualifying for Level 3 Interchange

With the right payment gateway in place, businesses can collect and pass more data about the transaction, including address verification, an invoice number and tax amounts in addition to line-item detail fields, such as product codes, descriptions, quantities, units of measure and more — all of which must be submitted with the standard sales information to qualify for Level 3 Interchange. In addition to this extra data, specific Level 3 Interchange compliance requirements must be met, including having the authorization and clearing amounts match, and submitting in a timely fashion.

Level 3 Interchange qualification can mean big savings when it comes to processing costs — Hardison estimates that manufacturers can shave processing expenses by 20 percent or more. In certain industries, where margins can be notoriously slim, this could mean the difference between losing money and eking out a margin on selling a given product. In addition, Hardison says the ability to accept P-Cards and passing Level 3 data could increase competitiveness in winning new contracts. In the future, your customers might even require it.

That’s already happened in the business-to-government (B2G) space. The GSA SmartPay program, which was initiated in 1989, will soon require Level 3 data. Government organizations are already being encouraged to seek out vendors who can offer this information, so if your company sells directly to a government entity, these changes will be critical to your business going forward.

B2B payment policies and security

Unlike B2C purchases, many B2B purchases are typically made on a regular basis, and at a higher frequency. In many cases, a distributor might take multiple orders from different departments within a single company, all using different card numbers from the same bank. While this would set off fraud alerts in the consumer space, and for good reason, a B2B payment gateway needs to account for these types of orders and know how to deal with them.

Order size is another difference between B2C and B2B e-commerce — as order size increases, it becomes increasingly important to manage risk with know-your-customer (KYC) policies. In a B2B situation, the nature of the relationship between both sides may also impact pricing, shipping and return policies as well. Accounting for these differences in your e-commerce strategy will be important. For companies going B2B2C, understanding and setting policies to account for these differences is crucial to success.

In light of the massive data breaches at the nation’s top retailers, and renewed FBI warnings, data security is top of mind when it comes to e-commerce initiatives. Businesses should insist on a tokenization solution. Tokenization, at its most basic level, removes sensitive payment customer data from coming in contact with your system, which protects it from targeted attacks, much like the one that affected Target stores recently. In addition to reducing risk, tokenization will reduce your overall PCI scope and ongoing compliance and validation.

Not only does tokenization provide data security, it enhances the functionality of your e-commerce system by providing for the safe and secure storage of payment data, so that your customers can one-click order, improving your customer’s buying experience and satisfaction.  

Bringing it all together

The B2B payment landscape is even more complex than outlined here — each acronym, from PCI to GSA, can be expanded out into various deeper levels of intricacy. One example of this is developing and implementing even more custom solutions, which can be accomplished using APIs (application program interface) that can interact with other enterprise-level systems, allowing manufacturers to build secure Level 3 payment modules into almost any system, be it ERP, CRM and more. Basically, secure payment acceptance can be wherever customer interactions occur, and not just e-commerce.

What, then, should a manufacturer look for in a payment gateway that deals more specifically with B2B transactions? The answer is multifaceted, but understanding the payment types your customers are using and managing your procedures and policies to securely accept and process payments at the lowest costs are the keys to help you select a B2B e-commerce platform that will support Level 3 and tokenization payment processing.

While B2B and B2C e-commerce systems may be made to look the same on the customer-facing front end, Hardison says it’s the back-end that matters to your bottom line and total cost of ownership. Just keep in mind that B2B payments are a special case, and that not every solution, particularly those originally designed for the B2C space, are well-suited or even capable of handling them.

Whether it is customer demand or management demands for lower risk and reduced fees — avoiding the consequences of implementing the wrong payment solution and selecting an experienced B2B payment processing partner will be an important part of your ROI and overall e-commerce success.

Joel Hans is the managing editor of He can be contacted at [email protected] or followed on Twitter @Mnet_JoelHans.

Ty Hardison is the vice president of strategy and development at Vantage Card Services, Inc. The company specializes in offering industrial companies — from suppliers, distributors and manufacturers — business-to-business (B2B) and business-to-government (B2G) payment solutions. These programs include Level 3 purchasing card and GSA payment processing, API integrations to e-commerce and tokenization data security solutions. To learn more, visit

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