Consumers are hard-pressed to find a restaurant that accepts cash, and largely, shoppers don’t want to handle physical money anymore.
The pandemic created a surge in contactless payment capabilities that local cafes and eateries were quick to embrace in order to stay afloat.
Yet when it comes to these businesses’ B2B payment workflows, the check — and even cash — has stuck around.
For restaurants and retailers procuring alcoholic beverages, the procure-to-pay process hasn’t enjoyed the kind of modernization push seen with their patrons. Yet that’s not necessarily the result of a lack of desire to embrace electronic payments.
Rather, said Provi Vice President of Product Ashley Phillips, it can often be traced back to the challenges stemming from a complex maze of regulatory requirements that, if not followed properly, can result in hefty fines and business closures.
Speaking with PYMNTS, Phillips unpacked the nuanced hurdles of electronic B2B payments in the alcoholic beverage sector, which not only affect the digitization of a transaction, but the timing of it, too.
The Regulatory Roadblock
The alcoholic beverage industry is regulated at the state level, with rules governing both the consumer and B2B side of sales operations.
In the procurement workflow, for businesses that procure alcohol, like restaurants, one of the most impactful regulations is on the timing of when the transaction takes place.
“It’s different in every market, truly,” said Phillips. “Some states are cash-on-delivery states, some states are term states. In some states, it’s a mix.”
Indeed, in some jurisdictions, one kind of beverage, like beer, might have cash-on-delivery (COD) requirements, in which a retailer or restaurant pays for the order when it arrives at the buyer’s location. Whereas other products, like wine, might require payment terms, in which a buyer has 15 days or 30 days to settle an invoice.
When maintaining compliance with these rules can be the difference between preserving a massive source of revenue and losing a liquor license, it’s no surprise that many restaurants have chosen to stick with what works to meet these varying payment needs. For many, that’s been the paper check, and while it’s not perfect, it’s negated the need to figure out how to enable contactless mobile payments at the point of delivery or facilitate direct ACH payments to settle an invoice.
The pandemic has changed this support for the status quo, however.
“We really see this incredible appetite on both sides, for the buyer and the seller, for contactless electronic payments,” noted Phillips, pointing to several factors driven by the pandemic that facilitated this mindset shift.
In addition to the migration away from cash is the fact that for many enterprises in the food and beverage industry, staff cuts created the pressure for efficiency.
“A lot of owners were thinking about how to make everything about their business operation as efficient as possible,” she added.
Establishing Trust, Mitigating Risk
For the alcoholic beverage industry — and indeed, for all industries — successful B2B payments are largely about trust. Sellers need to trust that they will receive payment, while buyers must trust that a payment technology will facilitate a timely transaction.
The perseverance of the paper check has also come down to its reliability, a strength that has certainly waned in recent years and months. U.S. Postal Service slowdowns, for example, mean businesses can no longer guarantee that the check will reach the vendor in time.
As a result, adoption of electronic payments solutions has not just become a matter of modernization, but a matter of preserving trust in B2B relationships.
“It’s about risk aversion,” Phillips explained. “You don’t want to do anything wrong, you don’t want to risk your liquor license, you don’t want to risk damaging the relationship with a good distributor… A huge part about building a successful payment product in this space, and truly any space, is really about building trust.”
From that standpoint Provi developed ProviPay to facilitate ACH transfers and, where compliant, card transactions on invoices (the company is currently working on technology that can support COD transactions as well).
With ePayments adoption on the rise, more businesses are able to embrace auto-pay features and save much-needed time on their supplier payment workflows.
But there is still plenty of friction that can limit how much progress the alcoholic beverages arena makes in its B2B payments modernization push. While other B2B industries are embracing subscription and usage-based business and billing models, Phillips said such strategies would be difficult for this sector that can struggle with ensuring buyers receive exactly what they paid for. While restaurants are wont to order the same products on a recurring basis, broken bottles on the truck or fulfillment mishaps aren’t uncommon, and they can quickly create a disconnect between what was ordered and what was paid for.
Still, the sector is making headway as a result of broader B2B payments innovation efforts.
“There is so much happening, and part of that lends itself to an environment where you see a really beautiful, consumer-level quality experience built for B2B audiences,” said Phillips.