Many of us don’t even carry wallets anymore. Things like Apple Pay, Google Wallet, Bitcoin, and a multitude of other electronic payment innovations are aimed at removing our wallets from our pockets and putting everything on our phones. Even some states are moving toward electronic driver’s licenses. Soon we’ll be able to buy pants with one packet in them for our phones only.
Yet despite this market move toward electronic everything, checks remain the standard business-to-business payment method, accounting for over 55% of B2B transactions. How is this possible? We discussed this a few months ago, citing the distinction between B2C payments and B2B payments. While virtual credit cards and e-wallets have made it easier for consumers to pay with credit cards stored on their phones, this same method does not work as well for businesses that, one, are not paying a payable before a POS machine, and two, are not willing to accept a 5% merchant credit card fee. If someone owes me $10,000, I am not going to accept a payment method that charges me $500.
But there is another big issue facing businesses that most business owners quote when asked why they don’t pay via new electronic methods: security. Over the many generations that checks have been the keystone in B2B payments, security has become tighter and tighter. Whether it is security in the check stock itself through chemical detection paper, micro-printing, fluorescent fibers, and toner grip paper to name a few, or check printing software enhancements like electronic signatures, encrypted bank information, or Positive Pay capabilities, check security has become a key differentiator of check payments.
While these new B2C or even P2P payment methods provide the flexibility that consumers want, the security risks associated with larger B2B payments are still too great. There is a reason that you can send $50 to a friend free of charge through Popmoney, but this same service won’t allow a business to send more than $5,000 a month. It’s too risky for the banks to back those payments. If you need to process that much in a month, which most small businesses do, then banks will say just send them a check.
There’s a reason that checks have stayed relevant in this electronic age and it’s because they are reliable, secure, and trusted.
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