E-Payments in B2B to Grow

According to a soon-to-be-released study from Business Communications Co. Inc. (Norwalk, Conn.), the purchase of goods and services over the Internet is expected to increase from a relatively low base of $325B in 2001 to nearly $3.5T by 2006. Hence, e-payments are expected to grow at an average annual rate (AAGR) of 60.4% during this five-year forecast period. The B2B (business-to-business) market sector in particular will see significant payment alternatives utilized for on-line purchases of goods and services.

The B2B market sector has been much publicized because of the anticipated economies resulting from the use of on-line procurement systems (e-procurement), replacing paper-driven procurement and accounts payable systems. Much of the on-line procurement will relate to supply chain/reverse auction procurement alternatives.

Prior to 2001, however, B2B payment alternatives were not as clearly defined as those in the B2C (business-to-consumer) market sector. Much of the delay in the definition process was caused by the comparatively low transactional volume being generated. During 2001, as B2B volume began to increase, the interest level of the major banks rose appreciably and they became active players in the on-line transacting of business between businesses. The major payment alternative relative to B2B activities appears to be the back end of Electronic Bill Presentment and Payment (EBPP) applications. Within these applications, invoice, review, approval and payment authorization and instructions take place via the Internet. Settlement is then accomplished in Automated Clearing House (ACH)-initiated payments that will total $2.75T in 2006 compared with $180B in corporate procurement cards and $320B for all other payment alternatives. Percentagewise, ACH will represent 85% of e-payments in 2006 compared with 5% for corporate procurement cards and 10% for all others.