Government and private-sector sources indicate emerging technologies are unseating incumbent legacy payment systems. One example is paper check usage, which has steadily declined since the mid-1990s, according to a Jan. 2015, study by the Federal Reserve System. The fed's Strategies for Improving the U.S. Payment System found high costs of paper check usage and ease-of-use of various digital alternatives to be the primary reasons for declining use among consumers.
"Based on data from the latest Fed Payments Study, 85 percent of noncash general-purpose payments were made electronically in 2012," the report stated. "Yet billions of checks are still written each year across a variety of use cases. Business-to-business check writing remains entrenched, especially among smaller businesses."
However, signs indicate check usage may also be declining in the business community. A new report published Oct. 6, 2015, by The Association for Financial Professionals found 80 percent of business owners intend to replace paper checks with electronic forms of B2B payments.
"By surveying our corporate membership base, we have been able to obtain more detailed information on the related costs of each payment method," said Magnus Carlsson, Manager for Treasury & Payments at the Association for Financial Professionals. "We report cost ranges and median values, but left it open, so that let respondents share the 'best estimated' costs that they use in their own calculations."
The AFP, based in the Washington, D.C. area, is a leading global organization of finance executives. It administers the Certified Treasury Professional and Certified Corporate FP&A Professional credentials; it also publishes quarterly AFP Corporate Cash Indicators that are widely used as a key economic measurement.
The 2015 Payments Cost Benchmarking Survey aggregated responses from 534 treasury and finance professionals to provide a comparative analysis of leading payment methods, including transaction volumes and related costs. The data was further organized into external and internal costs of these payment methods across a broad demographic spectrum.
Underwritten by Bottomline Technologies Inc., the survey is the first of its kind for the AFP. Its key findings show that two out of three organizations would replace paper checks with electronic payments if they could establish an appropriate justification and cost benefit. Additionally, 88 percent of respondents would be motivated to make the change from paper checks to electronic forms of payment simply to improve operational efficiencies.
Jessica Moran, General Manager of Cloud Payment Solutions at Bottomline Technologies, noted that the survey reinforces client feedback about the inefficiencies of check-based payments and the increasing need for business process automation. "Leveraging this credible benchmark data is extremely useful for finance professionals making the case for automation," she said.
Carlsson said that numerous studies focused on paper check usage in the United States over the years have established that checks work well, are ubiquitous, and are easy to use for consumers and businesses alike. Additionally, business people employ checks for B2B transactions to ensure that remittance information will follow the payment.
Carlsson further noted that many organizations are weighing the related costs of legacy infrastructures designed to handle paper checks against investments in new, digital processing systems. "In order to build a business case for making these kind of changes and investments in new payments infrastructure, you have to know the cost of making payments," he said. "Traditionally this has been very difficult for organizations to compile due to the many variables that go into the calculations."
The full report is available at www.afponline.org/paymentscost.
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