Chase, AFP Applaud B2B’s Shrinking Check Use

The paper check continues to be a prominent — and, in many cases, dominant — payment method in B2B transactions.

PYMNTS research released last October in the “Bringing Corporate Payments Out of the Dark Ages” webinar revealed 64 percent of B2B payments are made with checks, despite consumer payments’ acceleration toward electronic tools.

According to Vijay Ramnathan, Comdata senior vice president of product management and strategy, “there is paper in the beginning, paper in the end” in the B2B world, leading to an 18 percent error rate in B2B payments, he told Karen Webster.

But a new report from the Association of Financial Professionals, underwritten by JPMorgan Chase, suggests that corporate payments appear to finally be shifting away from paper checks.

In the AFP’s latest Electronic Payment Survey, researchers found that check use in B2B transactions is now at an all-time low of 42 percent. It’s a stark contrast from its historical high of 81 percent in 2004, analysts noted, and suggests checks are steadily declining within corporate payments.

The AFP’s report was released the same week a range of new electronic B2B payment tools were announced, the latest in a deluge of digital payment solutions emerging in recent years.

On Wednesday (Sept. 11), Mastercard announced a collaboration with blockchain company R3 to create a blockchain-based tool for cross-border B2B payments.

“Developing a new and better cross-border B2B payments solution by improving worldwide connectivity in the account-to-account space is central to Mastercard’s ambition,” the firm’s executive vice president of New Payment Platforms Peter Klein said in a statement. “Our goal is to deliver global payment infrastructure choice and connectivity as demonstrated through our recent strategic acquisitions and partnerships, including our relationship with R3.”

Only a day earlier, payment processing giant Stripe announced an expansion of its corporate payment offerings with the launch of a commercial card product in yet another effort by an industry stakeholder to encourage businesses to shift away from paper. Indeed, Stripe’s card product is a reflection of an influx of internet-run businesses that are built on digital-first business models, the company said in its announcement.

While more businesses are not only shifting away from paper, but operating with an embrace of digitization, the AFP and JPMorgan warned that checks remain popular and are far from being gone for good in the corporate payments ecosystem.

“Although new technology is appealing, treasury and finance professionals tend to stick with what works for them, and their vendors,” said AFP President and Chief Executive Jim Kaitz in a statement this week. “Check and ACH transactions have been around for a long time for a reason. That said, it is encouraging that check usage is in decline, as electronic payments methods are much more efficient, and have a much lower risk for fraud.”

Further, the report noted, just because businesses appear to be shifting away from paper checks doesn’t mean they’re fully embracing automated, digital payment tools.

The AFP surveyed 379 corporate treasury professionals and found that 68 percent are using wire transfers to move money across borders, for example, a finding that researchers said highlights “the challenge in making changes to payments processes even if current systems are inefficient and costly.”

Nearly three-quarters of survey respondents agreed that API technology will have the greatest impact on the corporate payments space, while 60 percent pointed to open banking as the biggest disruptor.

There are barriers to progress, though, with most businesses saying that a lack of standard remittance information is the biggest challenge to adoption of electronic payments information.

And while industry stakeholders continue to promote the ISO 20022 payments messaging standard — a standard that could address those remittance data challenges — researchers found a surprising increase in the percentage of professionals unfamiliar with ISO 20022 (42 percent lack familiarity, compared to 34 percent in 2016).