Page 300 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

1 What are B2B payments?

Steve is a shopkeeper in central Nairobi who operates largely in cash. Most of Steve’s payments look the same:
two people pass Kenyan shillings to each other. Though many of these transactions appear the same, Steve
is actually making different types of payments all the time. When he buys goods for his shop, Steve is making
B2B payments. When his customers buy those goods, they make customer-to-business (C2B) payments. If he
sends some of the money he has earned to his family, he makes a person-to-person (P2P) payment.
The introduction of digital payment tools and services allow Steve (and others like him) to use payment
technologies specifically designed for each of these use cases. The purpose of this report is to explore whether
digital B2B payment tools and services can benefit the poor.
All businesses buy from other businesses, which means that all businesses make B2B payments. This is true
for small bodegas in rural, sub-Saharan Africa, and large multinationals operating across the globe. Some
businesses sell to other businesses (many sell only to consumers). That is why this report will focus on both
sending and receiving B2B payments.

We hypothesize that widespread digital B2B payments could have second-order benefits that could strengthen
the overall DFSs ecosystem. This report explores potential ecosystem-level benefits and concludes with
suggestions for how policymakers can take advantage of the opportunities presented by new digital B2B
payment tools and services.

In any B2B payment, there are two parties: a buyer, and a supplier. The buyer receives a good or service from
the supplier in exchange for payment. The buyer may immediately use a good as an ingredient or part in goods
it manufactures, or stock that good and resell it to a consumer or business customer.

The types of bulk payments relevant to this report include:

• supplier payments (payments from a business buyer to a business supplier);
• bill payments (payments from a business to a utility or other service provider on a regular cadence);

• salaries/payroll (payments to consumers as employees or subcontract labour).
The report will not focus on government payments (taxes, fees, fines), financial market transactions (investments,
mergers, and acquisitions), or intra-company transactions (between subsidiaries and headquarters). Agricultural
sector payments are also not addressed in this analysis, due to the fact that it is the focus of a different analysis
for the ITU . Also, e-commerce transactions are not a part of this report, as we are focused on poor people
1
and the underbanked who are less likely to be purchasing online, either as consumers or businesses.

2 B2B payment requirements

Business transactions are fundamentally different than consumer transactions.
Consumer transactions are often anonymous, particularly at the retail point of sale – whereas businesses tend
to have ongoing relationships with their suppliers and know them well.
Consumers usually pay immediately, whereas suppliers typically extend credit – in the form of payment terms
– to their buyers (this is closely tied to the fact that they know them and do business with them on a regular
basis). For example, a business buyer may have thirty days to pay for goods and services.
Formal businesses typically get an invoice, whereas consumers may or may not receive a bill (when they do
it is typically from a utility or other recurring service provider). Consumers pay one bill at a time, whereas
businesses often aggregate payment for multiple invoices together in one transaction. As consumers we pay

1 Refer to ITU Focus Group Digital Financial Services Report on “Impact of Agricultural Value Chains on Digital Liquidity.”

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