Although there are additional considerations depending on the industry, such as if the merchant is in a high-risk industry, there are three key differences between how B2B and B2C payments are structured: payment size, payment frequency, and payment terms. These characteristics will give you a solid understanding of the distinctions between B2B and B2C payments without diving too deeply into the industry nuances and fringe cases. It’s still worth noting that B2B market conditions and B2C market conditions can affect the relationship between the two models. However, these changes are usually subtle, and the general characteristics of each will in most cases hold true.
Payment size refers to the average price of each transaction. Generally, B2B payments are much larger than B2C payments due to scale and price. A B2C merchant that operates a local coffee shop will see a comparatively low average transaction size because their customers will only buy a cup of coffee and a pastry, as an example. On the other hand, a B2B coffee bean distributor that sells directly to local coffee shops across the city can sell a month’s worth of coffee beans in one transaction. This will result in a much larger transaction than the B2C merchant because of the volume of items on the invoice.
In addition to scale, the average price of the goods and/or services in a B2B transaction is higher, too. A business law firm will charge much more for its services than its customer-facing equivalent. A higher average price paired with large volume gives B2B payments an edge over B2C payments in regards to transaction size.
The quantity of transactions is typically higher among B2B businesses compared to B2C businesses, although there are exceptions depending on the industry and goods and/or services in question. If a B2C merchant sells fast-moving consumer goods like gas stations or grocery stores, then it’s possible for B2C payments to outpace B2B payments in frequency. B2B companies operate at a much larger scale than B2C companies because businesses consume at a faster pace than consumers. An organization of 100 or more employees will need to reorder goods more frequently than a family of four.
Additionally, most consumers are only purchasing for themselves or their families, while businesses will make purchases that contribute to their supply chain, such as raw goods or components that are required for production. This results in businesses consuming (and purchasing) at a rate that consumers aren’t capable of matching.
B2B and B2C payments differ in the terms and structure of how the transaction is made. For a business law firm, the relationship between the lawyer and the business owner is an important dynamic that the business owner will take into account while choosing their legal partner. Oftentimes, businesses will work with their leadership team before making any decisions or purchasing a service/product, and deliberation between decision-makers can take a long time, especially if it’s a big purchase.
On the other hand, buying a coffee in the morning or a scone on the weekends is not an in-depth decision worthy of multiple players. Instead, it’s a simple decision with fewer steps and a faster turnaround time. Additionally, consumers will often pay for their goods or service before receiving them. Businesses generally receive the goods or services and then receive an invoice. This is more manageable for businesses that make recurring purchases for elements that are important to their business model.