What if you heard that over 70 percent of decision-makers in your industry had begun settling accounts payable (AP) and accounts receivable (AR) invoices in some new, faster way? Crazy fast, compared to the old way. And it’s awesome, because you have the exact same capability. Do you opt-out of the “new, faster way” because it contradicts the way you’ve always done it?
You might be shocked to discover that fully 42 percent of businesses still used paper checks as their main payment method in 2019. That’s particularly shocking because surveys now place around 73 percent of B2B decision-makers between the ages of 23 and 38 – and nearly 30 percent of people in this age range have never seen the inside of a bank. Statistical swarms of millennials and Gen Zers report never having used a paper check. Their perception of banking, aside from ATMs, is entirely app-based – and mobile.
It’s a disconnect that could not be more glaring. But the situation is righting itself as dynamic market forces reshape payments. “Instant” is becoming the posted speed limit nationally and globally for transactions. Paper checks are history, and that’s okay. It isn’t sad, like when Nana’s favorite old newspaper went digital. Not one teardrop will fall when the last paper check is printed and sent on its clunky, costly way. Likewise, when those odious words “the check’s in the mail” are uttered for the last time, it’ll be historic.
That’s the picture emerging as B2B payments hustle to catch up to consumers who ran off giddily with P2P and the FinTechs. Embarrassing, sure. But it’s totally fixable.
The Big Gig
Driving much of this action in the B2B space are gig economy workers, whose ranks have grown geometrically since the Great Recession. This group championed P2P a few years ago when it felt too risky and un-bank-like for a paper-centric world.
But gig workers’ payment preferences are clearly on the side of instant, almost regardless of individual income security. That’s because there’s been a looming sense that corporations have taken unfair advantage of gig workers, especially with regard to payment speed. It got so bad that New York City became the first municipality in the nation to pass a law making it easier for freelancers to sue for payment.
Stepping into this hot mess have been innovative card products, digital checks and cloud tools that enable more companies to bring indie contractors into the fold.
Banking on Instant
The Federal Reserve estimated the gig economy workforce at roughly 75 million Americans in 2018, while the Bureau of Labor Statistics has said freelancers could comprise 40 percent of the U.S. workforce in 2020. No unified definition of “gig economy worker” has emerged from the government. Instead, it’s been a private industry connecting underbanked gig workers with access to cash and banking products on the fly.
Companies that understand the value and rising importance of gig economy workers are making use of innovative corporate card products, apps and payments platforms to close the old gaps. As younger millennials and Gen Zers quickly become dominant in the workforce, ideas around banking and payments will change more rapidly. But there’s a hidden Easter egg for FIs: Numerous studies across age groups and job types confirm that people – including millennials and Gen Zers – remain willing to pay small fees or percentages for instant cash.