B2B check usage is declining as businesses accelerate the transition toward faster, more efficient electronic payment methods. Although checks have remained a fixture of North American accounts payable despite the availability of digital alternatives, the pandemic has increased pressure on organizations to reconsider manual, paper-based payment processes.
New data from the Association for Financial Professionals suggests that shift is gaining momentum. With businesses focused on payment speed, working capital management, and financial operations modernization, electronic payments are becoming increasingly important to B2B payment strategies.
The use of checks in B2B payables has been a mainstay in North America through the decades, despite the existence of multiple electronic payment types as alternatives. There are multiple reasons for this, but we suspect that most frequently inertia has been the culprit.
There has been a somewhat slow but steady decline in check usage over time and most readers have consistently heard that this decline should have accelerated during the pandemic—given the risk, lack of speed, and general inefficiencies associated with check processing.
Based on a recently released survey by the Association of Financial Professionals (AFP), this acceleration is indeed occurring.
The survey finds that B2B check usage is now down to 33% of NA respondents, an all-time low since the early 2004 survey version. More than half (54%) of respondents also cited speed as the number one factor for adopting digital payments. This makes sense given the lingering global supply chain issues and the need for tighter working capital management by businesses of all sizes. What’s more, 75% of respondents reported that faster payments have impacted their organizations in a positive way.
The financial operations modernization effort continues, and although it may still seem a bit slower than what one might expect, it is at least moving steadily towards the tipping point, which has essentially already happened in consumer payments.
The decline in B2B check usage represents another step toward broader modernization of corporate financial operations. Checks are unlikely to disappear immediately, but their disadvantages have become increasingly difficult to overlook as businesses prioritize speed, efficiency, and better control over working capital.
With faster payments delivering positive results for many organizations, the incentives to move away from paper-based processes continue to grow. The transition may be gradual, but the latest AFP findings suggest that B2B payments are moving steadily toward a more digital future.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.