Many of the articles we see in the genre of business payments are related to the costs of accepting or receiving payments, especially cards. One of the most vexing issues for commercial card issuers is the hurdle-jumping required to get suppliers/merchants to accept cards in the first place. The primary supplier objection is the expected acceptance costs, which are prima facie more costly based on the merchant discount rate applied ad valorem to the transaction value. The commercial card industry has done a reasonably good job over time of overcoming these challenges, through many different tactics.
In this particular brief piece however, appearing in Finextra, the overall point is more related to the high cost of checks to the ‘payer’ versus using some form of e-payment instead.
‘Cheques cost more than you think. Processing costs, payment fraud, time delays, delayed funding, and high cheque-cashing costs can turn your financial situation into a nightmare.’
The piece goes on to mention (again, very summary and high-level) the actual costs areas associated with processing checks. Some are these are quantifiable (done through surveys based on internal company studies) and other types of estimates. The author mentions a wide range of check ‘processing’ costs, including one from Payments Canada that indicates between $15-25 for each payment. So the message is to start using e-payments.
‘By migrating a portion or all of your cheques to electronic payments, you can reduce or eliminate your cheque printing and mailing costs. Migrating to electronic payment options could save Canadian Businesses approximately 41% in B2B transactions.’
Other costs mentioned include things like check fraud (a higher number of incidences than e-payments), working capital, late payment fees, and even one on check cashing (which is moving into the consumer space with unbanked and fees associated with getting a check cashed). We are big advocates of converting to everything digital, and certainly could not agree more with the sentiment. We cover the topic from both sides, buyer and seller, around many different angles in numerous research releases, most recently Fighting Payments Fraud: No Rest for the Weary.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group