What is BPSP, a new BtoB payment option? Why are managers paying attention now?

In Japanese business-to-business transactions, business practices such as Bank transfer and hanging sales have long been considered common. However, as the business environment continues to change, such as soaring raw material costs and longer accounts receivable recovery cycles, it is difficult to maintain cash flow flexibility with traditional payment method alone.

Therefore, BPSP (Business Payment Solution Provider) is now attracting attention as a new move in financial strategy. In this article, we'll take a closer look at how BPSP works to change the norm of BtoB payment, how it differs from other financial instruments, and how it can transform your business.

What is BPSP, a new BtoB payment option? Why are managers paying attention now?

BPSP is a mechanism that allows payment companies to payment with credit cards even to business partners (receiving companies) that do not originally support card payment.

Normally, in BtoB transactions, a card payment cannot be established unless both parties have introduced a card payment. However, with BPSP, the BPSP business remits the amount (bill) paid by the paying company with the card to the receiving company in Bank transfer.

Why BPSP is needed now

The background is the sophistication of corporate cash flow management. In the past, in order to realize the principle of "deposit fast, payment late", it was necessary to negotiate with business partners (such as negotiating the extension of the payment site). On the other hand, BPSP allows you to effectively extend the payment due date by utilizing the closing date and payment date of the card without significantly changing the payment terms with the business partner. In other words, it is spreading as a means to realize "the coexistence of payment digitalization and improved cash flow".

Solving cash flow issues, 3 major benefits of introducing BPSP

The introduction of BPSP is not just a change in payment instruments; There are three main benefits that can strengthen a company's financial foundation from multiple angles:

(1) Substantial extension of payment due date (securing cash flow)

By using a card payment, it is possible to push back payment until the actual direct debit date. Depending on the closing date of the credit card company, there will be a payment grace period of about 30 days to a maximum of 60 days (*). The fact that you can secure cash on hand by using existing card usage limits rather than borrowing new funds like bank loans is effective as a preparation for sudden purchases, growth investments, and unexpected expenses.

* The payment day rollback width varies depending on the card used and contract conditions.

(2) Ensuring the efficiency and transparency of accounting operations

Managing monthly transfer operations and associated fees is a huge burden for the accounting department. Consolidating card payment by BPSP not only reduces transfer work, but also makes it easier to centrally manage card statements. It will be possible to understand when, where, and how much payments have been made in a timely manner, which will lead to faster management decisions and stronger governance.

(3) Minimal impact on business partners. Go digital without changing relationships

The receiving company receives payments from BPSP providers in Bank transfer, so there is no need for the receiving company to introduce a new card payment or bear any fees. The fact that you can streamline payment flow only with your own operations without significantly changing the transaction conditions or operations is a factor that lowers the hurdles to implementation.

[Illustration] How BPSP works: Why can you pay with a card to a "non-compatible partner"

Let's sort out the relationship between the three parties to properly understand how BPSP works.

1. Paying company (buyer):Give payment instructions via credit card through BPSP's system.
2. BPSP business (e.g. GMO Payment Gateway, Inc.): After confirming the completion of the payment of the paying company, the payment will be transferred Bank transfer to the bank account of the receiving company on the specified due date.
3. Recipient (seller):Receives the payment as a payment from the paying company in Bank transfer as usual.

By becoming a hub for BPSP operators, payment processes are less affected by the payment environment of business partners.

Financial Strategy Portfolio: Different Uses from Financing and Factoring

There are multiple ways to improve cash flow. When considering BPSP, it is important to understand the characteristics of each and use them according to the situation, rather than denying the other methods.

When is BPSP best?

For example, BPSP is a strong option in the following cases:

• "I want to delay payment for one more month so that I can have room in cash."
• "Due to the sudden receipt of large-scale projects, there is a temporary shortage of material purchase costs."
• "It's not enough to go through the loan process, but I want to transfer funds flexibly."

On the other hand, there are cases where factoring is suitable for capital investment over several years, such as bank loans and accounts receivable recovery risk recommendations. Combining these measures can lead to a stronger financial position.

Precautions and success points for BPSP implementation

To ensure a successful implementation, keep the following two points in mind.

Comparison of fees and benefits

There may be a certain fee for using BPSP. Rather than viewing fees as "costs", it is important to consider them in comparison with "investment opportunities obtained by delaying payment" and "indirect cost reduction by reducing accounting man-hours".

Check available slots

BPSP uses credit card credit cards. If you are using it for expensive purchases, it is a good idea to check the available quotas in advance and consider increasing the quota if necessary.

Summary: BPSP is a financial strategy that expands management options.

BPSP is not just a means to put payment back, but a solution that you should consider using as one of your "financial strategies" to support your company's growth. Allowing cash flow to be more generous not only enhances our ability to respond to unforeseen situations, but also leads to the creation of a management system that makes it difficult to miss investment opportunities.

On the other hand, when implementing BPSP, special emphasis should be placed on the stability and reliability of the platform.

In BtoB transactions, if payment delays or system outages occur, it may not be a problem for your company alone. If the transfer is not made as scheduled, it can damage the credibility of the business partner and, in the worst case, lead to the suspension of the transaction. BPSP businesses can be said to be partners that support the trust of your company's payment operations.

GMO Payment Gateway, Inc. offers a diverse range of BtoB payment finance solutions, including BPSP, as well as payment processing company businesses, and is well-equipped to help startups and large corporations consider financial strategies tailored to their growth phases. Please use it as an option to support your company's next growth.