Consumers Have Ditched Cash and Paper Checks – Why Haven’t CFOs?

In today’s hostile macroclimate, every competitive edge counts for businesses looking to navigate ongoing headwinds.

One area that is receiving increasing attention is commercial payments, which have historically been riddled with frictions and mismatches when it comes to how firms pay and get paid.

“There’s still an awful lot of cash and paper checks being used,” Judith McGuire, senior vice president, global products at Discover® Global Network, told PYMNTS CEO Karen Webster. “Particularly in the Asia-Pacific region.”

McGuire explained that despite the world’s pivotal phase shift to digital payments, 62% of companies use cash to pay for commercial goods and services.

This is a staggering number, especially considering the benefits that digital payments offer.

“We have an environment where consumers are growing ever more digital, but then when we get to business purchases, everyone is back to cash and checks,” McGuire said, underscoring that there is a great opportunity to “take that consumer experience of digital payments, and move it into commercial payments.”

That’s because activating the payments opportunity within commercial transactions demands new ways of thinking about how money can and should move — requiring organizations to align on efficiencies that can refashion commercial payments by making them more user-friendly.

A shift in behavioral expectations around the payments occasion is doing just that by helping accelerate the digitization of B2B relationships.

Consumerization Is Driving a Better Commercial Payment Experience

Modernizing commercial payments simplifies cash management and invoice reconciliation, offers benefits such as cost savings, trackability, speed and security and can also provide access to supplier portals and real-time revenue reporting.

Digitizing commercial payments also establishes a needed foundation of certainty, which traditional methods like checks are inherently unable to match.

Still, old habits die hard, McGuire noted — and cash has been a tradition in some regions, making it difficult to change.

Paying vendors remains a major legacy pain point, particularly for big companies with multiple payment options that create complexity within both existing and new relationships.

But modern solutions like VCNs (Virtual Card Number) are “showing up as an important trend,” McGuire said, with a “huge opportunity” to expand across the commercial payments environment due to the control they provide and the ability to customize those controls.

While businesses that embrace the benefits of VCN and other digital payment methods will be better positioned for success in the future, misperceptions around cost and integration challenges persist and will need to be overcome for businesses to fully embrace digital payments for their business expenses, McGuire said.

It’s important to look at embracing changes that are aligned with the corporation’s culture and business goals and drive changes that can make a pivotal difference — it might mean making a small movement versus a big shift — move from cash to prepaid, move from prepaid to credit supporting capital management — to move to digital payments such as virtual card.

Integrating advanced technologies can help create bridges that assist enterprises in transitioning away from legacy paper check processes and improving back-end functions with flexibility and a hierarchy of commercial payments that wasn’t possible to put in place before.

Leaning Into the Behavioral Commercial Payments Shift

With the emergence of wholly digitized B2C and peer-to-peer (P2P) payment solutions, there is a growing familiarity with intuitive, secure, and digital ways of sending payments from one party to another in ways that are comfortable for both sides of the transaction and increasingly cost-effective.

“That expectation [around cost, convenience, and security] is starting to carry over when consumers move into a commercial environment,” McGuire said.

Despite the challenges businesses face in fully embracing digital payments, the benefits are clear, and the vast majority of companies intend to invest in digitizing their payments.

Crucial to accelerating the transition of consumer expectations to a business environment is understanding the unique challenges that the billers and the suppliers and purchasers have and meeting those challenges with products and services that alleviate the frictions, McGuire said.

As technology evolves, McGuire highlighted a few key innovations, including VCNs, that may further transform the commercial payments landscape.

“We continue to see the expansion of tokenization across all aspects of our payments ecosystem,” she said, noting that VCNs are effectively tokens themselves, only with controls around them.

“Whether it looks like a virtual card, or we start seeing commercial payment credentials stored using tokenization, that’s one technology I see expanding and enabling [further digitization of] commercial payments,” McGuire added.

After all, the world is moving toward digital payments, and businesses need to not just keep up but also stay ahead to remain competitive.

Given the head start consumer payments already enjoy when it comes to digital, the payments landscape is full of use cases and learnings for businesses to build on.