3 Strategies to Cut B2B Payment Processing Costs and Boost Efficiency

Are credit card fees as high as 3.5% slowly eating away at your margins? By reevaluating your payments strategy, you can significantly reduce your B2B payment processing costs and drive more revenue to your bottom line. In this blog, we’ll dive into practical ways to optimize your payment setup and explore how you can save up to 40% on processing fees.

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What are the challenges to address?

Credit cards are expensive

Credit card processing fees, typically ranging from 2.5% to 3%, can take a significant bite out of your margins. Every basis point matters, and these costs can add up quickly. While credit cards are crucial for ecommerce, especially because B2C customers rely on them, merchants have an opportunity to explore other options that cut B2B payment processing costs and protect profitability.

Alternative payment methods are unattractive to buyers

However, implementing alternative payment options comes with its own set of challenges. These alternatives can often be unattractive or complex for buyers, making them hesitant to switch. They may even conflict with your customers’ preferred behaviors, like sticking to credit card payments. While options like trade accounts and paying by invoice are available, setting up these systems online can be a complicated and time-consuming process.

So, how can you overcome these hurdles? Here are three key strategies to reduce your payment processing costs:

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3 key strategies for optimizing B2B payment processing costs

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#1 Reduce credit card fees

The first strategy is to reduce costly credit card fees. The key recommendation here is to ensure you're using an interchange-plus (IC+) model. This pricing model is more transparent and often more cost-effective than the flat rate or blended rate model.

But that’s not enough on its own—you also need to optimize it. Leveraging the data you already have can help secure the lowest possible rates, ensuring you're not overpaying on fees and protecting your margins.

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The credit card payment process

If you're new to payment processing, here’s a simple breakdown: When a buyer swipes a card, you take the payment. A gateway and processor communicate with the card networks—Visa, Mastercard, Amex—which talk to the issuing bank for approval. The response goes back through the card networks, back to the processor, and finally to you, letting you know if the transaction is approved or declined.

Most of the fees you pay come from the issuing bank, called interchange fees. These also include network fees from the card networks, which make up the bulk of the costs. You don't negotiate these fees—they're set by the banks and networks, and the card processor adds its markup, usually around 10% of the total fee.

The only area you can influence is reducing costs by sending more data and using Level 2 and Level 3 processing, which we’ll discuss in a bit.

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What is the IC+ model?

With an interchange-plus model, transparency is key. It separates what you can control from what you can't. The fees from the issuing bank and card networks are passed directly to you as the merchant.

The “plus” in IC+ represents the processor’s markup, making it a cost-effective and clear model. You can see exactly what each party in the payment chain is earning, while still having the opportunity to optimize the interchange rate on your end.

You may be familiar with blended rates, such as 2.9% + $0.30 per transaction. In that case, the processor is betting that their costs (interchange + markup) are lower than the blended rate, so they pocket the difference. The downside? You lose visibility into the actual costs and may end up paying more, especially in the B2B space where transactions are larger and more complex.

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What is L2/L3 processing?

Level 2 and Level 3 payment processing helps reduce fees by passing more data—like invoice or tax information—to the card networks and issuing banks. This extra data confirms that it's a B2B transaction, which qualifies you for a discounted interchange rate.

The more data you send, the better the rates you can get. And with an IC+ model, these savings are passed directly to you, with no additional cost to the processor. It’s in everyone’s best interest to leverage this data to secure lower transaction fees.

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Challenges in L2/L3 processing

While Level 2 and Level 3 processing can save you money, it's not a simple switch. It requires sending more data in a specific format, meeting stricter requirements. If done incorrectly, you could face penalties that may not be obvious right away, potentially costing you more in the long run.

To ensure success, you'll need to work with someone who understands how to properly integrate with card networks. Additionally, your eligibility depends on factors like the types of cards used and your business's Merchant Category Code (MCC).

Before jumping into L2 and L3 processing, ensure it's the right fit for your industry and buyer mix. But if eligible, it can lead to significant cost savings on card transactions.

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#3 Promote bank payments

Another strategy to lower B2B payment processing costs is to encourage your buyers to shift from costly credit cards to alternative payment methods like bank payments. Credit card fees typically range from 2.5% to 3%, but bank transactions—such as ACH, wire transfers, or other bank-related methods—are significantly cheaper.

For example, wire fees may range from $5 to $15 per transaction, while ACH might be 1% to 2%, far below credit card costs. By promoting these alternatives, you can reduce B2B payment processing costs and improve your bottom line.

Of course, there are trade-offs and challenges when implementing alternative payment methods, but the potential savings make it worth exploring.

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Challenges in moving buyers from credit cards to bank payments

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Cards are really easy to work with

Credit cards are quick and familiar. Anyone with access to a company credit card can make a payment without hassle. However, shifting to bank payments like ACH or wire transfers involves extra steps, making it less straightforward and adding friction for buyers.

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Cards can have benefits

Small business owners often see their purchases as a way to earn vacations or other perks, believing these benefits come at no cost to them. But here's the reality: while they enjoy the rewards, you’re the one funding those trips. The interchange fees you pay for accepting credit cards are what cover those points and miles, ultimately eating into your margins.

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Cards are the only form of credit they have

With tight cash flow, more businesses are turning to credit cards for purchases, making it harder for merchants to reduce B2B payment processing costs as credit usage rises.

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Actionable tips to promote bank payments

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Make it simple and frictionless for buyers to connect their bank account

To encourage bank payments, make connecting accounts easy. This could be as simple as entering an account and routing numbers or logging in with a username and password. With Balance, you can offer flexible options, from instant connections to those that take a day or two. The goal is to offer enough flexibility so that no matter your buyers’ preferences or available information, they can easily connect with their bank. Once linked, account details are securely saved for future use, helping reduce B2B payment processing costs.

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Offer payment terms at checkout

Offering net terms at checkout is a strategic way to optimize costs, especially when paired with less expensive payment methods like ACH and bank wire. Business buyers often prefer net terms that allow them to manage cash more effectively, giving them more time to pay after placing an order. This flexibility helps buyers place larger orders and encourage repeat purchases.

Now, many businesses hesitate to offer net terms due to concerns about credit risk and the complex management of invoicing and collections. With Balance, you can seamlessly extend net terms to buyers without the headaches usually involved. Balance automates everything from buyer onboarding, credit risk management, and invoicing to payments and cash application—so you can focus on scaling your business, not managing payments. And with Balance assuming the credit risk, you’re protected from potential bad debt, with payments guaranteed either upfront or by the due date.

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#3 Dynamically adjust the payment methods that your customers are using

How can you encourage buyers to choose the most cost-effective payment method? This is where personalization comes in. By offering direct or dynamic incentives, you can guide buyers toward bank payments. Tailored incentives can shift their focus from credit card rewards to the savings that bank payments bring, benefiting their bottom line—and yours.

Here’s how to do that:

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Understand your buyers’ payment patterns

Why do buyers choose certain payment methods over others? To manage costs, you need to guide buyers toward more cost-effective options based on their behaviors. 

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Build different policies for different types of buyers

Buyer segments have different payment preferences and contract terms with your business. To optimize payments, map out your customers, identify key segments, and offer payment options that suit both their needs and your goals.

For example, steer one type of buyer toward bank debit and another toward trade credit. By personalizing the checkout experience to their needs, while guiding them toward the most cost-effective methods for you, you create a win-win situation. This approach helps you maximize cost savings while enhancing the customer experience, tailored to each segment’s specific behaviors and preferences.

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Implement each policy per buyer at scale

You need a dynamic solution to handle buyer segments at scale. Instead of manually setting up payment options, you can segment buyers and set policies to offer personalized experiences. For instance, adding a 3% surcharge on credit card transactions shifts the processing costs to the customer, while offering a 1% discount for bank debit payments incentivizes them to choose the cheaper option. By automating this process, you ensure that the right payment choices are encouraged without creating extra work for you.

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Optimizing B2B payment processing costs: See your potential savings

How much can you save by applying all the strategies discussed above? Let’s say your company generates about $70 million in annual revenue, with 90% of sales made via credit cards and 10% through bank transfers like wires or ACH.

With a credit card processing cost of around 3.1%, your total processing fees add up to nearly $2 million per year. When you compare that to your net margin of around 8%, you’re losing 25% or more of your profit to payment processing fees—cutting deeply into your bottom line.

When you factor in both credit card fees and bank transaction costs, you end up with an overall rate of around 2.8%. There's a huge opportunity here to optimize payments and recover a significant portion of that lost margin.

Now, combining optimized credit card processing with increased bank payment usage—you can bring your overall cost down from 2.8% to 1.42%. That’s cutting your B2B payment processing costs in half, which is an impressive improvement for your bottom line.

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Payments strategy: A key to reducing costs and increasing profit

In summary, payments are a key part of your strategy and should be reviewed regularly. Optimizing credit card fees is the easiest win, but adding methods like bank payments or net terms and personalized incentives adds value and improves your margins. 

As B2B evolves towards a more B2C-like experience, the focus should be on making it easy for customers to buy online. Whether it’s credit cards, bank transfers, or net terms, giving customers flexibility at checkout is crucial. This transformation, which can happen in a few months, can have a huge impact on your business, especially in low-margin industries. By creating a solid payment strategy, you can significantly reduce costs and boost profitability.

With Balance’s B2B payments solution, you can lower payment processing costs, streamline cash flow, and grow sales by accepting multiple payment methods, extending trade credit, and automating your processes. Balance combines net terms financing, AI-powered credit risk management, billing and AR automation to help you deliver best-in-class, B2C-like payment experiences that your buyers are looking for.