Making the business case for digital payments

What’s driving the greater electronic payment adoption? Customers are becoming more tech-savvy, to start. As more and more people become comfortable using digital payments in their personal lives (the rise of PayPal, Venmo and Zelle), they want more digital solutions for their B2B payments as well.

“Very often we’re seeing customers expecting very similar types of capabilities, offerings and availability of technology in their business lives as what they’re seeing on the consumer side,” says Christine Barry, Head of Banking and Payments Insights and Advisory for Aite-Novarica Group.

During Barry’s presentation at the 2022 Deluxe Exchange, “Making the Business Case for Digital Payments,” she highlighted key research to support why midsize and large businesses are moving to digital solutions, and even more importantly, why your company should consider the business case for your own B2B payments.

“Business payments are critical. There is definitely a shift toward electronic payments that started long before the pandemic, but the pandemic has certainly increased the level of urgency and has made this topic so much more important for us to discuss,” says Barry.

In a payments study conducted by Aite Group in the spring of 2021, over 200 U.S.-based midsize and large businesses, Barry says more than 50 percent of those surveyed reported a decline in traditional check volumes over the last few years.

Watch the replay of Barry’s discussion of the growing digital payment trend below:

Digital payments offer more value to businesses

“We're also finding that digital payments have a very strong value proposition to businesses,” Barry explains. Many of the capabilities that are important, or what businesses look for when determining the type of payment method, are very relevant when it comes to electronic payments.

What's important to midsize and large businesses? Fraud prevention and the ability to improve customer experience. A positive customer experience can be achieved whether it's from greater payment transparency and being able to resolve customer questions faster because there is a digital tracking of it. Or it may even be the ability to deliver payments in the way that customers prefer.

Barry notes that some customers may prefer to receive an online payment, as opposed to a paper check. “Digital payments are also a lot more efficient and predictable. You're not waiting on the US Postal Service to deliver. You can determine exactly when a payment is going to be received,” adds Barry. “The larger the business gets, the more important speed and customer experience are.”

Payment methods pose different challenges

Barry also outlines several different payment types, such as ACH, paper checks and real-time payments to show how some payment methods are more challenging for payers than others.

• Paper checks still play a critical role in a lot of businesses’ payment strategies, while their volume is declining, they are not going away.
• Manual components and slower payment speed are the biggest pain points with paper checks.
• Same-day ACH benefits include more predictability and more speed
• For some businesses, same-day ACH or wire may be too expensive at this time
• The biggest challenge for real-time payments (RTP) is that not all suppliers accept RTP yet

Growing use cases for digital payments

“We’re actually seeing more and more use cases for digital and especially real-time payments,” Barry continues, “Eighty-three percent of midsize and large size companies actually believe that their company has very clear use cases that are better served by digital payments today.”

When communicating the value of electronic payments to those in your company who can implement them, this statistic is a really big factor in demonstrating the value. Companies of all sizes want to stand out and give their customers a positive experience and meet the demand of digital. Aite-Novarica Group’s research also shows that the market is increasingly understanding the benefits of digital payments, making it even easier to build that use case.

In fact, only 19% of middle market and large businesses report that they see new payment options and technologies as a low priority for their business. “For the majority of businesses, they’re looking at these payments as being critical,” says Barry. “In many cases, for almost half of them, it’s a point of competitive differentiation. The leading businesses are going to be the ones that are moving toward more digital going forward.”

The importance of offering multiple payment options

Barry explains that in the research we’re seeing customer preferences continue to lead toward digital solutions. It’s very important for businesses to offer multiple payment options to their customers to help build customer loyalty.

“Customers are looking for their business partners to stay with the trends, to offer them options, to make sure that they're offering them payment options that are most convenient for them,” says Barry. “I already mentioned the opportunities for differentiation. Some recipients actually have restrictions on payments. So it's important to you also offer a broad range of payment types.”

Barry wants to be clear: Change is not easy. But the changes that midsize and large businesses make definitely promise long-term benefits.

How to approach your digital payment strategy

As your company implements a digital payment strategy, you need to look at the big picture. Barry explains that while streamlining your payables is a direct benefit of digital payments, it’s important not to work in a vacuum. Ultimately, understanding your cash position and effectively forecasting your cash flow is the bottom line.

• Focus not only on streamlining payables but also receivables processes
• Invest in tools (i.e. electronic invoicing) to help collect money owed to your company more efficiently and effectively
• Gain insight into the benefits of streamlining both sides of the payment lifecycle (such as effective money management and more accurate forecasting)

eChecks provide a digital payment solution

While it’s no surprise that check usage is on the decline, it’s also clear that traditional check payments will continue to last for many years. But how can businesses incorporate existing check processes and digital payments? The answer could be eChecks. Barry explains further in this highlight reel from her session. Consider electronic checks for the following benefits:

• Ease of use as only a recipient’s email address is needed
• Reduce manual processes
• Lower cost as the need to purchase stamps and envelopes is eliminated
• Ability to include remittance information with each payment
• Integrates seamlessly with current accounts payable processes

Final Thoughts: Building the case for digital payments 

For a summary of the business case for digital payments, watch the replay of Barry’s final thoughts below:

• While checks are not going away in the near term, the shift toward digital payments continues to build momentum.
• External factors and key benefits are driving this digital shift.
• Digital payments address what matters most to businesses such as fraud prevention, customer experience, efficiency, predictability and speed.
• A clear business case for digital payments exists. Those businesses moving fastest will quickly reap the benefits.