RESEARCH

Covid-19 has altered the way businesses handle payments, Amex survey

Covid-19 has altered the way businesses process and handle payments. According to a global survey from American Express, there has been a significant rise in digital B2B payments over the past 12 months. Evie Rusman writes

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mex’s Global Business Spending Indicator (GBSI) looks at emerging payments trends in the B2B space. It shows that, despite a difficult year, business spending levels are set to grow in the UK.

Survey participants predict that B2B spend will grow at an average of 1.4% in the second quarter compared to the same period last year. This is the equivalent of £5bn in additional B2B spending from the UK.

Speaking on this, Dan Edelman, VP and general manager of UK merchant services at Amex, says: “While it has been a very challenging year for UK businesses, the GBSI shows signs of optimism - with increased spending across key B2B categories, including online advertising, ecommerce and technology.

“Businesses have their sights on the future and have been spending to increase their resilience and take advantage of growth opportunities ahead.”

The GBSI is designed to explore the importance of business spending in both the global and local economies based on a survey of more than 3,600 businesses of all sizes in the UK, Australia, Canada, Japan, Mexico, and the US.

UK hit the hardest 

The GBSI shows that out of the countries surveyed, the UK was hit the hardest by the pandemic’s impact on business revenues, which were down by an average of 9.3% year-over-year in Q1 2021.

However, as we progress into the year, business confidence is rising – most likely boosted by the vaccination programme.

Edelman tells EPI: “As the UK vaccine rollout continues apace, our research also found that most businesses are squarely focused on growth, increasing their productivity and operational effectiveness and as such, many are switching to automated solutions to optimise the payments process.”

This is reflected in Amex’s survey, which shows that UK businesses have been increasing their spending across all the core categories of spend.

For B2B spend specifically, the UK companies surveyed report that spending was up by an average of 2.7% from Q4 2020 to Q1 2021 and anticipate further increases in Q2 2021 at an average 0.9% growth rate relative to Q1.

Payment processing trends

The changes in spending coincide with changes in how businesses are handling payments. According to the GBSI, over a third (36%) of all B2B spending is carried out using electronic bank payment transfers.

In addition, nearly a quarter (22%) of businesses now use credit cards or charge cards to make business purchases.

Meanwhile, the use of cash and cheques is in steep decline, with around one in twelve businesses using cash, and one in nine using cheques.

However, Payment processes in general continue to be painpoints for UK businesses with 43% of businesses saying their current payment processes often impact their supplier relationships.

To avoid this, businesses and suppliers must be as flexible as possible when it comes to payments, ensuring that their platforms accept most types of payments. This will make it easier to build business relationships and make the payment process more efficient.

Edelman adds: Many businesses have been thinking differently about supply chain management - from how they select suppliers to how and what they pay in order consolidate the supply chain and keep cashflow moving. This, in turn, has helped unlock the renewed confidence we’re now seeing, as businesses look to shift their focus on investing to grow.”

Optimising technology to minimise friction

The data also reveals that the UK has the second highest share of businesses that have mostly or fully automated their processes such as receiving payments from business customers (52%), making payments to suppliers (47%), and procurement (42%).

“It is likely that these figures will continue to grow as businesses turn to technology to help minimise friction,” says Edelman.

Almost a quarter (22%) of businesses also report that payment flexibility has become more important because of the pandemic.

For instance, country lockdowns meant people were forced to stay at home and so digital payments became ever more important. Not to mention cash was widely considered as “dirty”, and so electronic payments became the preferred method.

Consumers are also becoming more and more impatient and are less likely to return to a retailer if it does not offer the payment method the customer requires. Therefore, many would argue that payment flexibility is essential for businesses to thrive in the coming years.