The Future of B2B Payments WILL INCLUDE Paper Checks
- Checks are seen as a "speed bump" for advancement and innovation
- Why paper checks are still used
- FIs need to focus on integration, rather than replacement
As we kick off 2025, we see another article selling checks short as a major payment channel.
PYMNTS.com notes that paper checks are a "speed bump" slowing the pace of advancement and innovation. Seamus Smith, executive vice president and group president at FIS, summarizes the state of checks: There is a relative high usage of the legacy payment channel, even with the risk of fraud and inherent inefficiencies.
The article continues to tout new technologies like open banking and real-time payments, noting their advantages and portraying businesses still utilizing checks in a negative light.
Smith goes on to note:
“Incorporating data into the money flow will provide significant improvements for businesses seeking to reduce their dependence on checks."
With all this in mind, the article seems to we're in for an easy switch -- not fully understanding why businesses continue to use checks.
Why Checks are Still a Major Payment Channel
Recently, we posted an article worth revisiting, wherein we reviewed a recent podcast featuring a conversation between Kiah Lau Haslett, Banking & Fintech Editor, and Shai Stern, CEO of CheckAlt, discussing check usage and why individuals and business use checks.
Mr. Stern notes several reasons that checks continue to "stick," including:
- Nostalgia
- Certain vendors not accepting electronic payments
- Electronic payments converted to check
- And -- maybe most important -- behavior
Indeed, behavior is a major reason why, despite their high costs and inefficiencies, checks remains the preferred payment method for a portion of individuals and 75% of organizations. Asking individuals and businesses to change their behavior -- how they pay for goods and services -- is extremely difficult. And, even if electronic payments may provide more benefits like cost and time savings, this is the process many individuals and businesses have using for decades and they are unlikely to change.
The Check Fraud Problem
As many are aware, there's been a major increase in check fraud over the past three years. Fortunately, the evolution of fraud detection will include artificial intelligence and real-time detection. Smith notes a recent acquisition made by VISA as a prime example:
Fraud detection is another domain poised for innovation. Smith predicted a “mega-merger” of datasets, driven by AI, to create comprehensive fraud profiles. This approach will enable businesses to anticipate and preempt fraudulent activities. Highlighting Visa’s December acquisition of Featurespace, Smith said major players are investing in advanced tools to stay ahead in the “war on fraud.”
Featurespace is a player in check fraud detection as well -- as OrboGraph announced its partnership with Featurespace in 2024. The leadership at Featurespace understands that financial institutions and their corporate clients continue to utilize checks. Instead of forcing them into new technologies, they choose to integrate the latest innovations in check fraud detection, merging their world-class data analytics with image forensic AI.
The Future of B2B Payments
The article goes on to point out that finance leaders are changing their mindset, transitioning to forward-thinking strategies.
“The trajectory is moving from hindsight to foresight,” Smith said, adding that technology is reshaping the traditional path to the CFO chair. Increasingly, CFOs are coming from diverse backgrounds in technology and strategy, reflecting the growing importance of innovation in financial leadership.
Smith goes on to note the importance of data, APIs, and automation. Interestingly, the article fails to mention that paper checks have already achieved full automation with the assistance of AI -- eliminating the need for manual processing and intervention of checks. Many financial institutions are utilizing the data created from checks to feed to their downstream business intelligence systems.
Instead of pushing the nearly 40-year old narrative that "checks are dead" and should be eliminated, FIs need to focus on providing payment channels their customers are comfortable utilizing, while incorporating new technologies to seamlessly integrate checks.