Consumers have been given a variety of new payment choices over the years. Many of those options make it simpler and more seamless to pay, including smart cards that support tap-and-go payments at point-of sale (POS) terminals, buy buttons that complete transactions in one click and mobile wallets that accept QR codes and use near-field communication (NFC), among others. The same cannot be said for many companies’ accounting departments, however. Despite the wide availability of faster, easier electronic payments methods, checks remain the most common for business-to business (B2B) payments. They are immediately followed by use of the Automated Clearing House (ACH), an electronic payments network that dates to the 1970s — the era that gave us the eight-track cassette.

The disconnect between consumer and B2B payments ecosystems is even more peculiar given the innovation wave that has swept the business landscape in recent years. FinTech startups, technology giants and financial institutions (FIs) have been creating new solutions in large numbers, and real-time payments have advanced considerably. 

With such a plentitude of electronic payments options available, how can we explain paper check, ACH or other seemingly antiquated methods’ continuing resilience in the B2B market? Is there any sign that companies are looking to do away with them?

PYMNTS, in collaboration with Mastercard®, surveyed hundreds of company executives in leadership roles in accounts payable (AP), accounts receivable (AR), payroll and treasury management to cut through the hype and gain a clearer understanding of today’s B2B payments ecosystem. Our sample encompassed a wide variety of business sizes and types, including companies generating more than $1 billion, mid-sized companies earning betweeen $10 million and $1 billion and small businesses earning more between $1 million and $10 million.

While checks and ACH are still the most common B2B payments methods, mounting pressure to reduce costs, maintain data security and streamline cashflows is leading savvier companies to explore the new technologies’ potential to alleviate friction. 

Most companies appear largely satisfied with the status quo, however. More than 70 percent of those in our survey were fine with using ACH for B2B payments, and approximately 60 percent said the same about traditional checks. 

Nevertheless, check payments come with a high price tag, one that is difficult for any company to overlook. By some estimates, the aggregate cost of issuing a B2B check payment can range from $4 to $20, and possibly more in terms of lost time.1 The desire to drive these excessive costs down appears to be leading some businesses to explore newer, faster and more convenient B2B payment options. Larger companies show particular interest in finding automated alternatives to the paper check, with more than 40 percent of those earning upwards of $1 billion in annual revenue planning to make AP innovations in the next three years. 

the current state of the market

One might expect the size of a business to be a determinant in how businesses pay vendors and receive payments from clients. After all, a large company with a dedicated accounting department would be better positioned to cast aside paper-based payment systems and impose its preferences on its business partners than a small one with a single bookkeeper. Small and large firms make and receive payments very similarly, however: Check remains king, according to our findings, followed by ACH. Credit and purchasing card payments are a distant third.

We did see somewhat predictable differences based on company size, though. Larger firms appear more likely to use ACH than smaller ones, for example, and cash is more commonly used by small and medium-sized businesses (SMBs) — especially to receive payments.

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