Digital payments are rapidly sweeping through the consumer world. Everyday, I see news breaking that Zelle is setting new usage records, that Airbnb is piloting a new instant payment offering, or that WeChat, the “ewallet” in China used by 600 million users every month, released a new feature.
Given the rapid expansion of digital payments options for people across the globe, it is shocking to see data that U.S. businesses still stubbornly cling to paper checks. In fact, a recent study conducted by Bill.com and Barlow Research Associates, Inc. found that 86 percent of SMB owners still choose paper checks as one of their primary payment methods.
The reason SMB business owners continue to use this outdated method could be because many of those using paper are unaware of the many advantages digital payment methods provide. Key benefits include:
- Gain more control of the payment process with automated approval workflows;
- Manage cash flow more precisely and set the exact date payments are made;
- Maintain a digital footprint of all transactions, so audits are not such a headache;
- Sync payments with accounting software so businesses’ information is always up-to-date.
The list of benefits goes on, but it seems if SMBs knew of this time-saving and stress-reducing method, they would jump on it. Inertia may be a key reason why some companies don’t change. Owners get settled into long adopted processes and have a hard time doing things differently. That’s when an incentive may be necessary.
In the Bill.com survey, when asked about the top three pain points for making payments, 40 percent of respondents cited the time spent on bill payments and 26 percent cited the tracking and storing of payment information for tax purposes. All of these issues are addressed through digital payments.
To help move the needle in a digital transformation, the Federal Reserve has initiated an active program to increase the proportion of B2B electronic payments. This effort is centered around collaboration and education, but it may not be enough. The government may need to make stronger policies or even sponsor incentives to make an impact.
The infrastructure cost, government overhead and environmental impact of paper checks is substantial. The Wall Street Journal reported a 2003 law allowing banks to accept electronic checks saved $1.16 billion in 2010, according to research by the Federal Reserve Bank of Philadelphia. And for an even greater ripple effect, the Sierra Club reported that the earth is losing 12,500 square miles of forest every year to deforestation, which continues to be propagated by the prolific use of paper checks and billing materials.
Digital payments for businesses are making inroads as a modern alternative to traditional bill pay, and businesses are adopting them without hesitation. These businesses are enjoying all the benefits of using paperless payments and are helping to save our environment. On the other hand, other companies may not be aware of the possibilities available or stubborn business owners rooted in inertia may need government proding to change.