Faster B2B Payments: Don’t Overestimate the Challenge

Image via PYMNTS

While I was at Money20/20, there was a session called “B2B Payments: Investment is Heating Up & Paper Checks are Under Fire!” The session included 5 industry payment experts who were primarily taking pro-check positions. One of the startling observations which I heard was that they had little empirical evidence substantiating a significant business case to replace checks.

Outside of the typical “eliminate paper” storyline, was that large companies with treasury groups have the ability to use Electronic Data Interchanges, but they experience major invoice handling and reconciliation complexities. Smaller businesses who lack the capacity and resources to integrate EDI also have trouble gaining remittance data and other vital information when they receive a payment and ACH. The result: another session about how paper is bad for business.

But is it really bad?  “There are well-documented instances of how much reliance organizations still have on checks, even though this has been something that has been trying to be addressed for 10 to 15 years,” Transcard CEO Greg Bloh recently told PYMNTS.

“It’s also about what businesses are comfortable with and willing to give,” Bloh went on to say. “There are a lot of small businesses that would prefer not to give bank account credentials to one of their suppliers. They’re worried about it for fraud reasons, and they’re worried about having their credentials out there.”

The assumption that a payment itself is going to drive some kind of innovation or major cost reduction is usually overstated. Think about it — if the business case were that great, we’d already be down another path. Granted, check printing and mailing is not nearly efficient as an electronic payment, but one could argue that the settlement and clearing process is. Many large banks are clearing 80% of their transit checks same day, while, worst case, community banks are exchanging via the FED for next day.

From our perspective, there are a number of benefits from OrboAnywhere technology — providing  a strong incremental value proposition around security, efficiency, and fraud reduction — which are easy for banks and treasury departments to implement.

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