The referenced article appears in Digital Transactions and is a partial summary of findings in the latest AFP electronic payments survey, one of the reference points for trends in B2B payments in the U.S. The piece focuses on two of the key topics from the survey: faster payments and check usage.
Mercator just released a member Viewpoint on the B2B faster payment space titled Business-to-Business Faster Payments: Market Review and Forecast, 2018-2023. The article (and broader survey) has several of the same points we covered:
‘Some 60% of respondents surveyed in the AFP’s newly released 2019 payments study said business-to-business transactions will benefit the most from faster and real-time payment systems, with consumer-to-business transactions far behind at 14%, business-to-consumer transactions at 13%, and person-to-person transactions at 9%.’
Generally speaking, treasurers see the value in various forms of faster payments, but given that solutions have only been available for about three years, the execution in the U.S. has been a bit tepid. Adoption requires ramp up time as systems and network adaptation is certainly not an overnight effort.
Our estimates are that Same Day ACH B2B adoption has been fairly strong, with real-time payments (RTP from TCH) trailing, since it has only been available since late 2017. However, 2019 has seen a bit of a surge, and with other ‘push to card’ systems now also available, we forecast fairly big growth over the next several years. Of course there is some concern about fraud spikes, which we have also covered in recent research.
‘While more than 60% of respondents believe faster payments “will have a positive impact on their organizations,” according to the survey report, 44% said there could be more instances of fraud resulting from faster payments. That’s not surprising given the compressed time for risk assessments and the fact that real-time transactions typically are irrevocable.’
Another point in the article is that the new survey indicates a drop in the use of checks to about 42%, or nine percentage points lower than the previous survey in 2016.
In the last AFP survey, there had been a flattening out of B2B check decline, which surprised many. However, in various research reports during the past couple of years, we have been suggesting that substantial B2B check decline is already underway and finally accelerating, which is now proving true based on these results.
‘In other findings, the sweeping study reported that only 42% of organizations are making their B2B payments by check in 2019, down by nearly half from 81% in 2004. The decline could have been even greater, but checks payments remain integrated into many organizations’ internal processes and for many companies they still provide more payment details and associated data than electronic systems, according to Carlsson….“Everyone is familiar with checks and they know how they work,” he says. “Many stop at that and think that that’s good. If you want to replace it, you have to replace the whole process.” ‘
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
