B2B payments hold the largest total addressable market within payments, but most businesses still cut paper checks. Square and PayPal are looking to get into the space through partnerships, acquisitions, and add-on services.
B2B payments are largely hidden from the consumer eye.
Even so, B2B payments hold the biggest total addressable market within payments. According to CB Insights market sizing estimates, B2B payments will be a $20T+ market by 2020. In contrast, P2P transfers and remittances was a $1T market in 2017.
B2B payments are often analog, involving paper invoices and long payment cycles. Even as more businesses continue to drop paper checks in favor of electronic payment methods, digital payments remain only a small percentage of total B2B volume.
Aware of the market opportunity, Square and PayPal are looking to expand into B2B payments.
Much of their early efforts have been in ancillary B2B services like lending, invoicing, and cross-border payments. However, PayPal and Square are partnering with and acquiring companies with more direct involvement in B2B payments, and the future acquisition of an accounting software provider might allow them to enter the space more directly.
Below, we take a look at how PayPal and Square are getting into B2B payments and what strategies they may use moving forward.