When a business pays another business, the process is different from when a consumer pays a business. Business-to-business (B2B) payments often involve higher transaction volumes, net terms, tighter underwriting, slow approval cycles, invoices, and multiple stakeholders. Because of this, B2B payment gateways must be set up to work in different ways.
By making a few key changes, your business can ensure an easier approval process and avoid some of the risks associated with high-value transactions. To learn more about B2B payments, read on.
TL;DR
- B2B payment gateways must handle invoices, recurring payments, large transactions, accounting workflows, and international currencies.
- B2B gateways must have more complex features because B2B transactions often involve net payment terms, ACH transfers, and purchase orders.
- Fraud prevention and risk management tools are an essential part of any gateway because B2B transactions are a frequent target for fraud and chargebacks.
- To get approved for an account, B2B organizations must undergo stricter underwriting processes.
- Merchants can negotiate rolling reserves and account terms by using their processing history, policies, and security measures to demonstrate a lower risk level.
What Is a B2B Payment Gateway?
B2B payments are any payments that occur between two businesses. These companies could be startups, fintechs, brick-and-mortar companies, or e-commerce businesses. Because of the special requirements involved, B2B transactions and gateways tend to be more complex than standard transactions.
How a B2B Payment Is Different From a B2C Payment
A B2B transaction differs from a business-to-consumer (B2C) transaction because of the parties involved. While a B2B merchant sells to another business, B2C transactions involve payments from consumers. Due to the different structural requirements, B2B payment gateways must provide unique features.
- Invoice-Based Payment Cycles: Many businesses are paid through invoices, so B2B gateways must be set up to support invoice creation, partial payments, payment links, and automated collection workflows.
- Higher Average Transaction Values: B2B transactions frequently have a high value, which can lead to additional fraud reviews, stricter underwriting, and approval checks. As a merchant, the goal is to find a gateway that delivers frictionless payments for low-risk transactions and additional security measures for high-risk payments.
- Net Payment Terms: Businesses often pay invoices using Net 60 or Net 90 payment terms. A good gateway should support recurring billing and flexible billing schedules.
- ACH Payments: Businesses often use ACH transfers as a primary payment type because of the low cost, so they need a gateway that is set up to use ACH for subscription payments, invoices, and other transactions.
- Reconciliation Against Purchase Orders: Unlike consumers, businesses often need to reconcile their payments against existing purchase orders. To match invoices, payments, and purchase orders, businesses require gateways that are integrated with ERP and accounting software.
Why B2B Differences Matter for Gateway Selection
As a B2B merchant, you can’t simply adopt a B2C payment gateway and hope it works out. Many standard B2C-focused gateways are not optimized for high-value transactions. If you try to use these gateways for a high-value transaction, it will be flagged for review. Additionally, some payment gateways don’t have the functionality to support API integrations, B2B workflows, or ACH transfers. From recurring billing to flexible payment methods, you need a gateway that is intended for your company’s unique needs.
Key Features a B2B Payment Gateway Needs
Whether you’re looking for complex accounting support or need to process recurring contracts, your gateway provider should provide a range of B2B-specific features. By using our basic checklist, you can compare different providers to find the right one.
Important Features You Should Look For
As a B2B merchant, you aren’t just swiping a credit card when customers show up. High-value transactions, complex invoices, and other factors mean your payment gateway must be equipped with specialized features.
- ACH and Card Support: To run your payment operations, you must be able to accept different business payment methods.
- Invoice Handling: The right setup should include invoice payment links and portals.
- Recurring Contract Capabilities: For your contract-based clients, you need recurring contract capabilities.
- Accounting Workflows and Software: QuickBooks, NetSuite, Xero, and similar integrations are essential for reducing your administrative burden and preventing manual-entry errors.
- High Transaction Limits Without Automatic Holds: Because you’ll likely need to process high-value transactions, you should find a B2B payment gateway that can handle these transactions without automatically flagging and holding the transaction.
- Level 2 and Level 3 Data: While basic payment processing uses Level 1 data, Level 2 and Level 3 data can help qualify businesses for lower interchange rates. These data levels involve more detailed information, such as customer codes and the quantity purchased.
- Multi-Currency for International Sales: If your company sells internationally, you’ll need a payment gateway that is set up for multi-currency transactions and cross-border settlement.
B2B Payment Gateway Feature Checklist
If you’re comparing different B2B payment solutions, use the following checklist to determine which payment gateway setup offers the options and functionality you need.
Payment Acceptance
- Accepts credit and debit cards.
- Enables multi-invoice payments.
- Supports ACH and bank transfers.
- Allows virtual cards.
- Features customer payment portals.
Fraud Prevention and Risk Management
- Features geolocation monitoring.
- Uses device fingerprinting.
- Ensures PCI DSS compliance.
- Includes chargeback management tools.
- Sends fraud alerts.
- Offers AVS and CVV verification.
Approval Rates Optimization
- Includes real-time authorization monitoring.
- Uses smart routing.
- Handles soft declines with automatic retry logic.
- Utilizes account updater services.
International Support
- Offers foreign currency exchange capabilities.
- Accepts multiple currencies.
- Provides cross-border settlement options.
- Supports local payment methods.
Accounts Receivable Tools
- Sends out automated payment reminders.
- Offers ERP integrations.
- Features automated invoice generation.
- Provides real-time payment reconciliation.
- Contains advanced reporting features.
- Creates downloadable audit logs.
Developer Tools
- Offers a sandbox testing environment.
- Provides API access
- Supports mobile payments
- Includes accounting integrations
Operational Concerns
- Delivers a high level of uptime.
- Ensures flexible underwriting.
- Provides dedicated customer support.
- Offers support for high transaction volumes.
How B2B Merchant Account Approval Works
With B2B companies, there is more scrutiny involved. High-value transactions, industry-related chargeback exposure, and longer payment cycles mean underwriters are diligent during the account approval process. Before you get your account approved, the underwriter will review your refund policy, average transaction size, business type, industry, chargeback history, monthly processing volume, and time spent in the business.
Depending on your unique situation and the payment gateway solutions you use, your approval timeline can range from almost instantaneous to between 1 and 5 business days. Certain industries tend to face more barriers and longer approval timelines. If you work in wholesale, SaaS, subscription-based, consulting, or professional services businesses, you’ll have to deal with more scrutiny before your account can be approved.
Managing Risk on High-Value B2B Transactions
Because of the increased risks of chargebacks and fraud, choosing the right payment gateway is essential for B2B merchants.
Fraud Prevention Tools for B2B Transactions
The best B2B payment gateways use AVS verification, CVV checks, and IP matching to verify that the party processing the payment is the account holder. Meanwhile, velocity rules monitor the speed and frequency of transactions. If there’s a sudden spike in transactions or an unusually high dollar amount charged, the transactions are automatically flagged and blocked.
Fraudsters often target business transactions because of the high-dollar amount involved. Because of this, good B2B gateways may manually review unusually large or suspicious transactions.
B2B-Specific Chargeback Risks
B2B merchants face more chargeback risks, which is why rolling reserves may be required for some high-risk or high-ticket merchants. Chargebacks often occur due to a few common reasons.
- Disputes over service delivery
- Unauthorized transactions made by company cardholders
- Contract disagreements
In all of these cases, having proof of delivery, signed contracts, and other documentation will be your best defense if a chargeback occurs.
Rolling Reserve Requirements for Merchant Accounts
To counterbalance the increased risk involved, many B2B gateways will require rolling reserves for high-ticket merchants. A rolling reserve is when the processor holds back a percentage of the merchant’s daily sales for a set amount of time. This reserve amount is held so that funds are available if a chargeback occurs.
When you set up your merchant account, you can negotiate a lower reserve requirement. For example, you can use your past chargeback history to demonstrate a lower risk level. Implementing chargeback-related security tools, demonstrating a consistent sales volume, and showing your refund policy can also help you improve your negotiating standpoint.
Even if you are unable to get rid of the reserve requirement entirely, you may be able to negotiate a lower reserve rate or a shorter retention rate. Alternatively, you could ask for a reserve cap so that there will be a limit to the amount of reserves that can be held.
Card vs. ACH vs. Invoice Payments
The best B2B payment processing platforms will generally help you accept card, ACH, and invoice payments. As a merchant, there are benefits and drawbacks to using each of these payment methods.
| Feature | Card Payments | ACH Transfers | Invoices |
| Processing Timeline | Instant authorization | 1 to 3 business days | 15 to 90 days based on the agreed-upon terms, such as Net 30 or Net 90 |
| Approval Rates | Card declines are possible. | ACH payments generally have high acceptance rates when account information is valid and sufficient funds are available. | Payment success can vary based on the company’s credit worthiness. |
| Convenience Level for the Buyer | High | Medium | High for enterprise-level buyers |
| Processing Costs | High fees because of interchange and network costs | Lower fees than cards | Costs are predominantly focused on the merchant’s administrative costs. |
| Chargeback and Fraud Exposure | Higher chargeback risks | Lower fraud and chargeback exposure, but ACH returns can occur | Potential credit and collections risk |
| Best Uses | SaaS, recurring billing, and immediate purchases | Large transactions and payments to vendors | Enterprise-level purchases |
| Reconciliation Complexity | Medium | Low | High |
| International Support | Strong | Limited | Can be strong with the right trade workflows |
How PayCompass Can Help With Your B2B Payment Strategy
Choosing the right B2B setup can be challenging. Organizations need support for recurring transactions, flexible payment methods, and scalable gateway infrastructure. By partnering with PayCompass, you can get help designing a payment strategy that matches your needs.
At PayCompass, we can review your current setup to understand your existing workflows and integration requirements. Then, we can design flexible B2B payment solutions and infrastructure that scale with your business. From cross-border payments to API integration, our team can help you maximize your operational efficiency and long-term growth.
Final Thoughts
B2B organizations need to process invoices, set up recurring payments, reconcile payments with purchase orders, deal with large transactions, and accept ACH transfers. A B2C gateway simply doesn’t offer all of the features and support that a B2B merchant needs. By getting approved with a B2B payment gateway, you can get industry-specific support and comprehensive integration options.
When evaluating B2B payment processing options, it’s important to review the payment methods they support, transaction limits, and pricing transparency. Because of the risk of fraud and chargebacks, it’s also essential to understand the processor’s risk tolerance and rolling reserve requirements before you set up a merchant account.
If reviewing payment gateway solutions is daunting, we can help. Reach out to PayCompass today to learn more about the right B2B gateways for your needs.
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