Digital payment adoption for B2B uses had seen a relatively slow but steady growth trend during the past decade in the U.S., with check usage declining at about 2-3 percentage points per year. In 2020 that likely accelerated, perhaps into the 5-10% range, but we won’t know that until later in 2021 after some surveys are released.
The Fed Payments Study is always lagged by a year, so that won’t show anything about 2020 until next year. However, it seems assured that a new wave of digital adoption in underway, exceeding the relatively tepid pace of the prior decade. We have covered this in a number of ways, including the 2021 Outlook.
In this indicated posting at CFO Daily News the author notes some of this and the generally accepted beliefs around how B2B payments will eventually become fully electronic. The adoption of ISO 20022 as a global messaging standard is in process, through real-time payments systems that have been getting launched across the globe as well as planned conversions by the Fed (Fedwire), TCH (CHIPS) and SWIFT. The author makes the point that interoperability is the key factor.
‘We are seeing interoperability as the answer to shifting from the paper check towards mass B2B digitization and automation….Interoperability, in this context, requires a network of networks connecting multiple parties – from settlement networks and participating banks to ERPs and integrated payables platforms – allowing for multiple payments languages to flow through a single exchange….If you’re like most consumers, you have a debit card allowing you to withdraw cash from a terminal. How does the machine know how much money you have in your bank account?…You guessed it – interoperability.
It is likely going to be a combination of factors, but the network of networks idea is being pursued by the big card networks, using the global settlement capabilities to promote account-to-account transfers, among other things. A quick piece to read for perspective.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group