The inertia of the B2B payments environment
It is no secret that consumers are shifting more and more towards digital payment methods, a trend that has recently been accelerated by the global pandemic. The B2B payments sphere, however, is lagging behind dramatically. Shockingly, 64% of business transactions are still processed with paper cheques, compared to 67% of consumer payments that are already made online. The problem of outdated payment mechanisms affects both SMBs and large corporations in Canada. According to Payments Canada, paper cheques are still the most commonly used payment method for the majority of corporations and small to medium-sized businesses (57% and 70%, respectively).
Not surprisingly, B2B being inert when it comes to digitizing payments is causing supply chain friction, inefficiency, and revenue losses. Businesses that use cheques were found to have lower annual revenues than those who made the leap to digital payments. Overall, current payment processing procedures increase operations cost for Canadian businesses by $3 billion to $6 billion annually, and much of that loss can be attributed to paper cheques.
But why do cheques remain so resilient in the B2B world?
There are several reasons, including familiarity, a sense of control, and universal acceptance. However, many business owners don’t realize the true cost and security risks associated with cheque payments.
Uncovering the hidden cost of cheque processing
The real cost of a paper-based payment operation comes to light when taking into consideration both primary and secondary costs. Secondary costs include bank fees for issuing cheques, fraud protection, cheque reconciliation services, retrieval of transaction history, and cheque images.
Administration costs, printing, envelopes, postages, supplies, and more can add up, and prove to be very expensive for industries that produce and distribute a large number of cheques. When you take into account how many hours of your employees’ time is being wasted issuing, reconciling and chasing after cheques, you will be surprised by the amount of money you spend on cheque processing. The average cost to a business for issuing a single cheque varies between $15 and $25 - in some cases, it can be as high as $50 per payment.
Cheques are not only more costly for your business than you might expect, but they are also not as secure as you may think. Indeed, cheque fraud is found to be the most common type of payment fraud. In 2019, 74% of organizations reported being affected by cheque fraud, compared to 33% and 22% for ACH debit and credit payments respectively - an eye-opening realization considering that the perceived security risks of online payments are one of the main reasons why businesses stick to cheques.
The digital payments opportunity
In the post-pandemic era, many businesses have been hit hard and are trying to cut costs wherever they can. Using digital alternatives instead of paper cheques can be a great way to reduce expenses in a painless, efficient way. Digital payments are not only more cost-efficient but also faster to process and more secure than paper-based payment methods. For businesses, this represents an opportunity to increase internal efficiencies, lower administrative costs and improve cash flow. The digital transformation in the B2B payments environment is long overdue and here to stay.
Shifting from traditional to digital payment methods doesn't have to be tied to expensive transformation costs. With DivDot, you only pay for what you use: A flat fee per transaction - no set-up fees, no percentage charges, no transaction limit. Our payments software is designed to help you move away from cheque processing. Unlike many digital alternatives, we offer no-limit transfers for a flat fee. Pay suppliers, collect money from customers or set up recurring payments, all from one dashboard.
It’s easy to get started! Integrate MazumaGo (formerly DivDot) payments with your current systems and start transferring within a matter of minutes. Sign up now to find out how simple business payments can be.