B2B Payments Still Largely Driven by Paper Cheques
In a perfect digital world, any transaction involving paper cheques would seem out of place. Electronic payments would always be the number-one option. Forget about cash, cheques and all the troubles they come with.
But of course, the reality is far from perfection. And every business owner has a distinct definition of what the perfect payment system is for his or her business. For many, cheques are still the way to go.
The use of cheques can be seen across a variety of organization types. It has been that way for decades, and the trend doesn’t appear to be going anywhere anytime soon. This might sound surprising, considering the rise of alternative financial service providers. Other than noting the amazing resiliency of cheques, it’s worth looking into how much businesses refuse to adopt new technologies.
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What Is It That Makes Non-Digital Payments so Attractive?
B2B (that is, business-to-business) payments almost always involve a cheque, with 50% of businesses issuing or receiving one in the past month. At a time when payments are expected to be nearly instantaneous, what explains this widespread reliance on paper cheques?
It’s difficult to wrap your head around this matter when you take the perspective of the recipient. But things get clearer when you look at it from the side of the payer. Cheques do not clear in an instant. It takes at least a couple of days for banks to process them, which gives the payer extra time to sort out their cash flow situation.
Cheques also give a sense of control to payers. For one, it’s easier to reconcile payments, since remittance information is already included. In some cases, a cheque payment also proves cheaper, especially when other options such as credit cards come with fees.
Business Owners Are Wary of New Technologies
From the buyer’s side, it’s easy to see the many benefits of using cheques, regardless of whether the recipient will accept it with a smile or a frown. This is why countless organizations continue to order business cheques, despite the proliferation of financial service providers seeking to convince business owners to switch to digital B2B payments.
It may still be difficult to imagine that since their peak during the 1990s, cheques have remained relevant amidst all the innovations in financial technology. Interestingly, though, some business owners cite these very innovations as the reason why they haven’t made the jump as of yet. New technology scares many business owners, especially those who think that going digital means abandoning their long-standing relationship with their financial institution.
There’s also the problem with financial service providers that seem to limit their digital billing and payment services to their largest clients. Small business owners may not get the full benefit of digital B2B payments, causing them to fall back on something that has always worked for them—cheques.
Consumers Lobby for Change, Though
Consumers who are also advocates of digital payment options, however, can expect banks to use image-based processing. They do this with the help of a special mobile application. Clients simply snap a photo of the cheque and send it to the bank for processing. Perhaps that’s as far as we can take cheques into the digital world for now.