With so many B2B online payment options out there, choosing the best one can be overwhelming. Following these tips can make the task less daunting.

There are three types of payment systems readily available to B2B players. First, there are the systems that replace the traditional role of the bank or finance company. Second, there are systems that work with these institutions to provide a service that they can offer to their own customers. Finally, there are payment systems that sidestep these institutions altogether and use Automated Clearing House (ACH) technology to process payments. The goal of each type is to expedite transactions conducted over exchanges between existing trading partners. Regardless of the type of payment system your company chooses, you should look for the following criteria to be met:

• The payment system should provide a buyer’s credit assessment to the seller.

• The payment system should provide a guarantee to the buyer that goods are of a specified quality and insure their delivery.

• The payment system should allow companies to transact business with unknown partners without fear of repudiation or fraud.

• The payment system should expedite the collection of funds.

• The payment system should minimize the expense, security risks and red tape associated with paper transactions.

• The payment system should report the delivery of goods, approval, invoicing, payment and collections.

Going a long way toward realizing these goals, online payment systems are offering various features such as non-repudiation. Non-repudiation technology verifies that the person using a purchasing/credit card is in fact the authorized buyer. If concrete verification is not obtained, U.S. law allows the other party to contest the transaction at a later point. Online companies have to prove beyond a shadow of a doubt that the other party intended to transact business with them. The non-repudiation feature places a secure cookie on the partner’s browser, so that after the transaction is completed, a concrete record remains of the computers involved, assisting in fraud prevention.

An ideal payment system should also have a merchant-friendly resolution procedure in place. Many micro-payment solutions for digital content allow partners to set parameters so that purchases up to a certain amount can be cancelled by the buyer after they’ve taken place without any intervention required by the seller. When choosing a payment system, one should consider picking one that does not require setting up individualized merchant accounts to do business. This can be prohibitive to small businesses that do not want to saddle themselves with the hassle of the setup and yet another monthly fee. A good payment system will permit partners to bypass this potentially frustrating process.

Another factor to keep in mind when choosing the ideal payment system is the estimated time of set up. Since payment system providers are, in essence, Application Service Providers (ASPs) who process payment for you, these systems should take about just one week to implement. Any changes to your company’s web site should be minor.

A decent payment system should also ensure that payment from the electronic transaction is available within a couple of days after the deal occurs. Of course, a company may have to accept a higher discount rate to see the money any sooner. But, all in all, they should not have to wait up to thirty days to receive cash from a transaction.

Payment systems can generally be grouped into five types. First, there are same-as-cash stored value accounts. These accounts are ideal for companies whose target audience typically pays with cash. User companies should make sure, however, that the same-as-cash cards have a wide distribution network. Second, there are self-recharging accounts. These rely on buyers associating either a checking account or a credit card number with the vendor. The vendor debits the associated account when the customer purchases from them. Third, there are hardware-based stored-value accounts. These types of accounts are having some difficulty getting off the ground, due mostly to the fact that special hardware is required on the part of the buyer. On the bright side, however, the fact that the buyer is linked by hardware eliminates any question of payment repudiation. Fourth, there are micropayments. These are ideal for companies that deliver digital content at high volumes and which typically charge a small amount for each transaction. The fifth and final type is to bill a customer’s purchase to the phone bill. The drawback here is that funds take a longer time to circulate.

By understanding the different types of payment systems and keeping a clear criteria by which to judge them in mind, companies have a starting point by which to see which payment system currently available best suits their own, and their partner’s, needs.

Source: An Overview of B2B Payment Systems
Alexis D. Gutzman
E-Commerce Guide, June 25, 2001
http://ecommerce.internet.com/news/insights/ebiz/article/0,3371,10379_790991,00.html