The world is moving fast. From same-day e-commerce delivery to instant streaming services, technological advancements have improved digitalization across multiple industries. This is also true for payments.
The increasing adoption of instant payments and Same Day ACH is an impetus for change, ushering the payments industry toward streamlined, electronic payments. Instant payments also represent an opportunity for businesses to gain better control of their cash flows. However, the pace of business-to-business (B2B) instant payment adoption will depend on how interoperability and connectivity issues are addressed.
Historically, B2B payments are costly and overloaded with manual processes, making them inefficient. This is due to complex invoice and remittance data requirements, as well as interoperability and connectivity issues with business partners, which slows down a business’ ability to effectively manage cash flows.
The Federal Reserve System is committed to supporting the industry in addressing this challenge and modernizing the U.S. payment system, specifically electronic B2B payments. A key initiative in support of this modernization is the development and implementation of an exchange framework, which is an electronic delivery network based on a set of technical standards and policies that allows businesses to securely share supply chain documents with one another.
Together, instant payments and an exchange framework present a significant opportunity for businesses to increase the speed and efficiency of electronic B2B payments.
Instant Payments and E-invoicing
For simple B2B e-invoicing that does not require line items for approval and processing, such as office rent payments or utility payments, an instant payment request for pay will work well by itself.
However, for B2B transactions that require more detailed invoice data, such as line item or purchase order details from a wholesale supplier, an exchange framework complements an instant payment to electronically deliver these additional details, resulting in faster payment processing.
The exchange framework was developed by the Business Payments Coalition’s E-invoice Exchange Market Pilot to solve the difficulties businesses face when exchanging invoices or remittance information electronically between different platforms and systems. In 2023, participants of the pilot launched a market-ready exchange framework and formed the Digital Business Networks Alliance (DBNAlliance) (Off-site) as the entity to oversee it. Adoption of the DBNAlliance’s exchange framework will advance implementation of electronic B2B payments.
Together, the exchange framework and instant payment capabilities offer a complete solution for these more advanced B2B e-invoicing challenges.
Instant Payments and E-remittance Information
A key step in the B2B payment process is the retrieval and reconciliation of the remittance information, or the details that describe what is being paid, along with the payment and the order status in the accounts receivable system. Today, this is a largely manual and time-consuming process, involving emails or portals.
This e-remittance information can be delivered in two ways: with or separate from a payment. Whether the e-remittance information travels separate from or with the payment depends on information requirements or system limitations across business partners.
For simple B2B core remittance information — for example, one invoice per payment — the remittance information can flow within the instant payment via an ISO® 20022 payment message and be processed automatically without manual intervention. In this case, a business using an instant payment service would be able to include the remittance information with the payment.
However, not all e-remittance information can travel with the payment. If extended remittance data is required or there are limitations across business systems, the e-remittance information may need to travel separately from the payment. In this instance, the exchange framework complements the instant payment service to offer businesses a comprehensive and flexible solution to deliver e-remittance information regardless of limitations, leading to more efficient B2B payments.
A brighter future for instant B2B payments is here. To achieve a modern, digitalized B2B payment process, businesses can use instant payment capabilities and the exchange framework for faster, less manual B2B payments. To connect with the DBNAlliance’s exchange framework, visit their website (Off-site).
Stay up to date on efforts to modernize B2B payments by joining the FedPayments Improvement Community (select “E-invoicing” and “Electronic Payments and Remittance” under the interest preferences). Follow FedPayments Improvement on LinkedIn (Off-site) and Twitter (Off-site).
“ISO” is a registered trademark of the International Organization for Standardization.