B2B Digital Payments: Towards a New Regulatory Framework

The management of corporate cash flows is constantly evolving: digital payments are rapidly becoming a cornerstone of financial transactions, while the regulatory framework of the sector remains intricate and complex. International regulators are making significant efforts to streamline and enhance payment processes, both within the European Union and on a global scale.

This article delves into the topic of B2B digital payments, starting with current trends and their benefits for businesses, before examining reform initiatives aimed at reducing costs and improving execution times. These include the PSD3 Directive and the PSR Regulation, which seek to harmonise the regulatory landscape, and the G20 strategy to facilitate cross-border transactions on a global scale.

B2B DIGITAL PAYMENTS: A GROWING TREND

The adoption of digital payments by businesses, regardless of size or industry, is steadily increasing. This trend is driven by the growing digitalization of business processes and the need for safer and more efficient tools to manage and monitor financial transactions. B2B payments are undergoing significant evolution, propelled by the increasing digital transformation of companies and the necessity to embrace innovation in daily operations.

According to Capgemini’s World Payment Report, the volume of B2B digital transactions grew by approximately 10.8% from 2023 to 2024 and is expected to achieve a compound annual growth rate (CAGR) of 11.4% between 2023 and 2028. Leading the way is the Asia-Pacific (APAC) region, with an anticipated year-on-year growth of 14% in 2024, while Europe maintains its leadership in total transaction volume with a forecasted growth of 11.6%, followed by North America at 7%.

External factors are also playing a crucial role in reshaping the sector and driving companies toward the adoption of digital payment tools. Among these, the impact of fintech, which provides digital payment solutions to businesses, and the rapid growth of B2B marketplaces are noteworthy. The proliferation of these marketplaces is pushing companies to invest in innovation to remain competitive in the expanding online commerce market. In 2023, there were 750 marketplaces globally, with projections for 2025 surpassing 1,000. Additionally, it is estimated that by 2030, the gross merchandise value (GMV) of global B2B marketplaces could reach $26 trillion—figures that underline the direct impact of the need to offer simple, fast, and cost-effective payment tools to commercial partners.

WHAT ARE THE BENEFITS OF DIGITAL PAYMENTS FOR BUSINESSES?
 

Digital payments offer numerous advantages that not only simplify daily operations but also help reduce operational risks associated with manual errors and fraud.

• Simplification of daily financial operations: Eliminating manual payments and cash management reduces time and operational costs, making business processes faster and more efficient.
• Enhanced security: Digital payments are protected by advanced authentication and authorisation technologies, reducing the risk of fraud and errors compared to traditional methods, and ensuring greater financial security.
• Traceability and transparency: Companies can monitor financial flows in real-time and generate detailed reports for accounting and control purposes, improving liquidity management and planning.
• Financial clarity: Real-time insights into cash flows enable businesses to identify spending patterns and make data-driven decisions, enhancing financial management.
• Payment speed: Digitalisation enables instant payment processing, replacing slower traditional methods, aligning payment terms, and simplifying accounting flow management.
• Support for international trade: Digital payments provide secure, regulated, and globally standardised methods, facilitating cross-border transactions and making international trade simpler and faster.

In summary, the adoption of digital payments allows businesses to improve operational efficiency, reduce risks, gain greater transaction visibility, and expand international opportunities, ensuring more robust and competitive financial management.

THE EVOLUTION OF INTERNATIONAL PAYMENT SYSTEMS
 

The evolution of international payment systems is a critical area in today’s global business landscape. The international regulatory framework is fragmented and unharmonised, while the current geopolitical context requires payment market participants to implement stringent risk mitigation controls and tools.

In this complex landscape, heavily influenced by differences between countries, there is a need to act at the international level to harmonise the regulatory framework and simplify the management of digital payments between businesses in different countries.

A key development in this sector is the Cross Border Payments and Reporting (CBPR+) initiative promoted by SWIFT (Society for Worldwide Interbank Financial Telecommunication), which aims to improve the efficiency, transparency, and traceability of international payments, enabling businesses to make faster and more secure transfers through greater process standardisation.

Additionally, there is increasing recognition of the importance of international standards in digital payments. One such standard is ISO 20022, which defines a common framework for exchanging financial information across different payment systems. Widespread adoption of standards like this fosters greater interoperability among payment platforms and simplifies international payment processes for businesses.

These initiatives are particularly relevant for simplifying both domestic and cross-border digital payments, making them faster, cheaper, and more transparent. This convergence of factors is driving the growth of B2B digital payments, creating a more efficient financial ecosystem for businesses of all sizes.

EUROPEAN REFORMS ON DIGITAL PAYMENTS

European institutions are working diligently to promote reforms in digital payments that aim to transform the sector as a whole, improving the security, efficiency, and interoperability of transactions.

The PSD3 Directive (Payment Services Directive 3) and the PSR Regulation (Payment Services Regulation) are significant measures in this direction, focusing on strengthening business protection, promoting competition, and harmonising payment practices. Similarly, the Instant Payments Regulation (IPR) addresses the growing demand for instant payments. The IPR seeks to significantly reduce transaction times and costs by mandating that instant payments be made available at prices comparable to regular payments, enhancing the efficiency of international trade. Together, these regulations provide businesses with a safer and more competitive framework, facilitating access to digital payments on a global scale.

THE PSD3 DIRECTIVE AND PSR REGULATION

Introduced by the European Commission in June 2023 as an update to PSD2, PSD3 aims to strengthen competition in the financial sector, improve the security of business transactions, and foster innovation by introducing stricter measures for transaction authentication and secure access to payment systems.

In combination with the PSR, PSD3 seeks to modernise and harmonise the payment system within the European Union, creating a uniform regulatory framework that ensures security and efficiency in business transactions. These measures address the challenges of digitalisation, fostering a more competitive, secure, and transparent financial environment for businesses. Furthermore, these regulations promote full interoperability of digital payments among EU member states, simplifying cross-border operations and enhancing capital flow management in international transactions.

The European Union's goal is to create a single digital payments market that allows businesses to easily access modern, secure, and cost-competitive financial solutions. The adoption of common regulations and the standardisation of payment systems will foster innovation, enhancing the competitiveness of businesses in an increasingly digitalised and globalised context.

THE INSTANT PAYMENTS REGULATION (IPR)

In the same direction, the Instant Payments Regulation (IPR), adopted by the European Parliament and Council on March 13, 2024, aims to accelerate the rollout of instant payments in Europe and amends the SEPA regulation, in force since 2017.

According to the European Payments Council, the share of instant transfers within total transfers in the SEPA area increased from 12% in June 2022 to approximately 19% in June 2024. Despite harmonisation efforts, the European payments landscape remains fragmented, with around 30 active payment systems in the euro area still employing different approaches and maintaining local specificities. For example, in Germany and the Netherlands, companies prefer bank transfers, while in France, local card systems are more commonly used.

The regulation's Phase I mandates that all payment service providers (PSPs) in the eurozone must be capable of receiving instant payments by January 9, 2025. Phase II requires all PSPs to also offer the ability to send instant payments by October 9, 2025. For non-eurozone markets, compliance deadlines are later: January 9, 2027, for receiving payments, and July 9, 2027, for sending instant payments.

Additionally, the regulation introduces advanced security measures and transparency requirements, including:

• A mandate for PSPs to apply fees and commissions equivalent to those of traditional payments.
• The introduction of a free beneficiary verification service for users.
• Simplified sanctions screening to ensure compliance with international regulations.

THE G20 STRATEGY FOR CROSS-BORDER PAYMENTS

On a global scale, the most notable effort to standardize digital payment regulations is the G20 strategy for cross-border payments, which was adopted in October 2020. This global initiative focuses on tackling challenges related to the efficiency and security of global payments. Its goals include addressing issues like high transaction costs, slow payment processing times, limited access to payment services, and a lack of transparency.

According to the Roadmap for Enhancing Cross-Border Payments published by the Financial Stability Board (FSB), the G20 strategy focuses on four main areas to improve these aspects and make cross-border payments more efficient, secure, and inclusive:

1. Cost Reduction
   The costs associated with international payments have historically been high, comprising various components such as banking fees, currency conversion charges, and taxes applied along the payment chain. The G20 strategy aims to significantly lower these costs, targeting a global average transaction cost of 1%, with particular emphasis on reducing remittance costs, which are often disproportionately high. To achieve this, the strategy promotes the standardization of payment processes and collaboration among financial institutions and payment platforms to ensure competitive rates and greater accessibility to financial services.
   
   
2. Increased Transaction Speed
   Currently, many international transactions take days to complete due to complex clearing and settlement processes. The G20 strategy seeks to drastically reduce execution times by encouraging the adoption of instant payment systems, which will enable businesses to transfer money between countries in real-time. This speed improvement is particularly crucial for globally operating companies that require rapid and reliable cash flows to maintain competitiveness.
   
   
3. Access to Payment Services
   The G20 strategy recognises that many businesses, especially those in emerging markets, have limited access to cross-border payment services. This restricts their ability to expand internationally and fully participate in the global economy. To address this issue, the strategy promotes financial inclusion by facilitating access to digital technologies and platforms that simplify international payments. Additionally, it aims to ensure that small and medium-sized enterprises (SMEs), which represent a significant share of the global economy, benefit from reduced transaction costs and more accessible services.
   
   
4. Payment Transparency
   A lack of transparency regarding costs, processing times, and transaction status is another significant challenge for companies making international payments. The G20 strategy aims to improve transparency in cross-border transactions by clearly outlining costs and execution timelines before initiating payment and providing real-time updates on transaction status. This increased transparency helps businesses make more informed decisions, reducing risks and uncertainties associated with international payments.

A key aspect of the G20 strategy is the promotion of international cooperation among regulatory authorities and financial sector operators. The G20 encourages dialogue and the exchange of best practices among member countries to develop common standards for cross-border payments and ensure the security of data and transactions. Notably, the strategy includes the development of shared security protocols to protect sensitive information during the transfer of funds between countries.

In conclusion, the evolution of digital payments is a global phenomenon with significant implications for businesses of all sizes and sectors. In this context, banks can play a crucial role in supporting companies through this transformation by offering a range of innovative services and solutions to facilitate the adoption of digital payments and ensure transaction security. Investing in payment digitalisation is essential for staying competitive in the modern economy and fully leveraging the opportunities offered by globalisation and technological innovation.

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