Back before man walked on the moon, or the Beatles ever took to a stage, a revolution in payments took place that would have a major impact on the future of finance and business. Some might say too major.
In 1959, the creation of a new standard for machine-readable characters on paper checks paved the way for automated sorting machines, and the popularity of the trusty check soared – with billions of them processed each year in the late ‘80s and early ‘90s.
Today, of course, you’re much more likely to whip out your credit card – or even your iPhone – when the time comes to pay up at a cash register. And that’s if you even make the trip to the shops instead of just clicking “buy now” and waiting for your order to arrive.
So, amid all the brave new payment technologies of 2016, we can safely say R.I.P. paper checks, right? Um, no.
Despite the advances in payment automation that have transformed our personal lives in recent years, a massive 37% of Business to Business (B2B) payments today are still made using paper checks according to a recent report from Ardent Partners.
The report, which reviews the ePayments landscape in 2015 and anticipates likely trends for this year, says the exchange of paper checks between businesses persists because the method is familiar, simple to understand, and ensures companies don’t have to spend time or money implementing alternatives.
If you’re thinking none of those reasons sound particularly convincing, you’re not alone. The overwhelming message of Ardent Partners’ 48-page study is that continued dependence on paper checks by businesses today is a solution marked primarily by problems.
Chunks of the report focus on the fact that new automated payment platforms offer valuable data to Accounts Payable (AP) – data that allows for “more nuanced supplier payment strategies” and ensures the payment process is an integral part of company planning rather than a tacked-on process carried out by those “walled off” folks in AP. Not to mention the fact automated payments are cheaper, less time-consuming, and more secure than manual methods.
Ardent Partners spoke to 200 leaders from AP and finance for their study, with AP professionals identifying a “lack of visibility into payment data” as the number one problem they faced. This dovetailed perfectly with the response of those surveyed to the question of what the top priority should be in B2B payments in 2016. The answer – improved reporting and analytics around AP.
It’s not all doom and gloom though. Despite outlining the struggles AP professionals have persuading their organizations to invest in advanced ePayment solutions, and a climate in which many supplier organizations need convinced of the benefits, the report does acknowledge progress in recent times.
A majority of suppliers (52%) are now willing to accept payment electronically, which Ardent Partners says is the highest percentage they have ever seen. They also say the drive towards cost-saving throughout enterprises in the past decade has forced them to rethink the notion that addressing the known inefficiencies of the payment process would have little overall impact on their business. With these things in mind – and in conjunction with the fact B2B payment solutions are now reaching “sophistication and maturity” – Ardent Partners predicts that ePayments will “become the default payment method in the near future.”
That being said, a lot can happen between now and the near future for companies that don’t capitalize on the benefits of payment automation, and Ardent Partners spell out the pitfalls in plain language:
“In a business environment where an increasing number of decisions are based on quantifiable numbers, lacking visibility into any form of data is a huge roadblock to success. Consider also that in most industries, AP is responsible for one of the biggest sources of cash outflow for the entire enterprise via supplier payments. As such, and lack of visibility into these payments and their surrounding data creates a massive ‘black hole’ within the critical financial operations process of cash management and should rise to the level of the CFO as a key risk and concern.”
Businesses in the 37% take note (there should be some paper close at hand).