Business-to-Business Payment Systems: Does Reality Byte?

February 13, 2002


San Francisco, CA, USA February 13, 2002


Whatever happened to the rosy picture of paperless payment systems that large corporations and financial institutions began to paint with the advent of financial electronic data interchange, automated clearing houses (ACH), and wire transfers? 

In a new report,“Business-to-Business Payment Systems:Does Reality Byte?” Alenka Grealish, analyst at Celent Communications, examines the status and future of electronic payments in business-to-business transactions, on- and off-line.   Despite the success of paperless payments in Europe, the check continues  to be the payment vehicle of choice in the U.S.Of the nine billion of B2B payments made in 2001, 82% were made by check, while of the US$31  trillion in B2B payments, 65% was accounted for by checks.ACH payments  were a distant second with 13% and 34%, respectively. “The greatest impediment to the adoption of electronic payment vehicles is not the settlement system (e.g., ACH) but lies further upstream.For any electronic  payment solution to succeed, it must be integrated into the broader  financial supply chain,” comments Grealish.Consequently, solutions involve  not only banks but also software vendors, which are automating the financial  supply chain.Ultimately, the future of electronic payments resides with the  businesses themselves and depends upon their willingness to restructure the  payment processes and systems around an electronic solution.  

"The migration of B2B payments to electronic channels in the U.S. will be  an evolutionary process," says Grealish. "There are no revolutions in the  wings. Gradually propelled by both bank and non-bank initiatives to automate the financial supply chain, electronic payments will overtake the check in terms  of total value of transactions by 2008. In terms of volume, the check will  continue to reign through the end of this decade.”

Amongst the electronic payment catalysts covered by Grealish are:enhanced purchasing cards (e.g., MasterCard SmartLink), the coupling of ACH payments  with rich remittance information (e.g., Clareon and Xign), “electronic” bank  addresses (New York Clearing House Association’s UPIC), the opportunity to  outsource payment processing (e.g., SurePay), and the enabling of straight-through processing (e.g., Identrus’ Project Eleanor and Clarus Settlement).

A Table of Contents is available online.

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Michele Pace
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Table of Contents


San Francisco, CA, USA  February 13, 2002


Return to report Abstract


  The Persistent Reign of Checks in the U.S. 6
  A Primer on Payment Vehicles 8
  ACH: The Natural Choice 11
  Purchasing Card: UNMET Promises 13
  Wire Transfer: Moving Down-Market 15
  The Financial Supply Chain's Long and Winding Road 18
  Moving to an Autobahn: Multiple Player Solutions 20
  Players Paving the Electronic Road 24
  Purchasing Card: Redemption 24
  ACH Linchpin: Clareon and Xign 26
  NYCH: B2B Enhancements 29
  SurePay: Outsource It 30
  A Note on WebEDI 31
  Background of Identrus 33
  Project Eleanor: Bark and Byte 35
  Clarus Settlement: Steps Towards STP 38



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