What will it take for mid-sized US businesses to move on from the check?

Much of the world moved on a long time ago from old school payments – yet US businesses are still stubbornly clinging on to their checkbooks. A vast majority (71%) of businesses are still opting to pay suppliers by check despite security issues, inefficiencies and widely available modern payment methods.

For banks, this means there’s a massive opportunity in the mid-market to present the benefits of digital payments and ultimately transform businesses’ B2B finance operations. Virtual card is one of those avenues, with global processing volume on track to reach $13.8 trillion by 2028, according to Juniper Research.

In a recent research project, Codat looked deeper into the reasons why US businesses are still committed to checks and uncovered the top incentives driving adoption of more modern payment methods. 

With this evidence, there are three key recommendations for banks to help them accelerate the switch to better and more profitable payment methods like virtual cards.

1. Comprehensive, hands-on support 

Familiarity bias plays a massive role in maintaining the status quo in payments - 44.1% of the 500 businesses we surveyed cite it as a reason for sticking with checks. This is likely a ‘don’t fix what isn’t broken’ mentality at play. Many finance teams (36.5%) are also attached to the perceived control that checks offer. 

But the comfort and supposed convenience of sticking with checks also comes at a big cost. They are notoriously inefficient, with 37.6% of businesses reporting extended processing times as a challenge with using the paper. The best way to overcome customers’ reluctance to change is to underline the help on offer to get set up with new systems. Training for the team, a clear project plan and, in the case of moving to card payments, supplier enablement programs that support vendors to accept new payment methods.

The final point is particularly important given the significant proportion of businesses continuing to use checks because of supplier preferences (33.7%). Promoting and conducting supplier enablement programs, therefore, plays a dual role of helping to overcome resistance to change from both customers and their suppliers.

2. Emphasize improved ability to combat fraud as a reason to move away from check

Our research shows that fraud and security are a major challenge with checks – nearly 36% cite security or fraud concerns, and over 37% note lost or stolen checks as an issue. 

The data reveals that security is even a higher incentive than cost savings, and will likely be a more effective message for promotional campaigns and relationship managers to lead with. 

For commercial card teams, it will be important to make sure prospective customers understand how using unique card details for each supplier significantly lowers the risk of misuse and can also reduce reliance and costs associated with check fraud prevention services like Positive Pay and Lockbox.

3. Lead with ease of use when presenting alternative payment methods

In our research, the top factors driving virtual card adoption were ease of use and time savings. Likewise, a significant proportion of those we spoke to (14.2%) had heard of virtual cards but had not adopted them because going through the process to get set up would be too time consuming. 

Preconceptions about the barriers to switching to digital payments and lack of understanding  of the set up process are likely impacting the speed of transition. Client education campaigns are vital here, and may include simple demos, comprehensive FAQs and step by step breakdowns of the onboarding process. When positioned alongside the hand-on support mentioned above, this creates a multi-faceted value proposition that stands to increase sales conversion for commercial card programs.

The Role of Banks in Transforming Payments

Banks have the power to guide mid-market businesses away from inefficient, check-based systems toward more streamlined solutions. The key to unlocking that power is a multi-faceted approach that hones in on the biggest challenges of checks and advantages of digital methods. Virtual cards offer substantial benefits, from faster payments to enhanced security, but without the right messaging and support, many finance teams will continue to hesitate.

By investing in targeted educational campaigns and providing tangible financial incentives, banks can address the key pain points mid-market businesses face with checks and demonstrate the clear value of adopting virtual cards. 

It’s time for the mid-market to catch up to modern times when it comes to payments, and banks are the key to bring businesses up to speed.