Why are we still using checks?
The year is 2019. NASA is discussing a manned mission to Mars, driverless cars are on the road, you unlock your portable phone/mini computer with your fingerprint, and yet, most businesses still use paper checks to make their payments. Why is this outdated, inefficient payment method still being used by the majority of businesses?
There seems to be a few factors at play here. First and foremost, familiarity. For better or for worse, checks are a part of life for most businesses and have been a part of the payment ecosystem for hundreds of years. Businesses have built their internal processes around the use of checks, and believe it’s more burdensome to change their ways than it is to continue with the tried and true method of manual check processing. But why is this still true in this digital age?
The manual entry method of a cheque is slow and prone to error, but checks are cheaper than credit cards, universally accepted, and can be used as a simple record keeping system for businesses. Checks also give businesses a (false) sense of control, by allowing owners to personally sign, or have oversight, on every payment made. Familiarity and inertia can go a long way in keeping checks alive, but still, 67% of those polled would be willing to move away from cheques if they had other options. This leads us to another piece of the puzzle, innovation.
Most businesses don’t feel they have a legitimate alternative to cheques for their payment needs, and this is especially true for small businesses. While consumers have PayPal, Apple Pay, e-Transfer, etc. most businesses are left using either checks or credit cards. Credit cards are a great alternative for small payments, but the fees become unreasonable for large business payments. Small businesses need a digital payment option that is intuitive, secure, cheap, and helps reduce payment reconciliation, and they want it to be fast.
“Small firms are indeed looking for new, faster ways of payment,” said Dan Kelly, President of the Canadian Federation of Independent Business, an advocacy group for 110,000 Canadian independent businesses. “Many firms are particularly interested in new ways to make business-to-business payments where larger sums of money can be transferred quickly without hold times or high transaction costs.”
In fact, 81% of those surveyed are willing to integrate new technologies into their operations, with newer businesses even more keen (88%) to find a new payment method.
However, there is still the issue of infrastructure. Most banking infrastructure is old…like really old. In fact, many banks still use systems implemented in the 1970’s, which means that truly innovative solutions have to be built on top of, or integrate with, outdated systems. Until banks replace these systems and start moving towards open banking and real-time payments, businesses will be left wanting better payment options.
The small business is still the backbone of the economy and there are finally companies realizing the opportunity that lies in providing a digital payment product that caters specifically to small businesses. Still, in order to enable businesses to give up their checkbook, we will need to see two things. Firstly, companies must continue to produce payment products, like Ablii, that are cheap and intuitive to use, but also offer the security and control businesses require. Secondly, both the government and banks must fully commit to implementing new payment infrastructure that allows technology companies to bring truly innovative products to market. Only then, will the checkbook be eliminated once and for all.
