Buyers, vendors blame each other for slow digital payment adoption

Dive Brief:

More companies are prioritizing the digitization of accounts payable, but buyers and vendors each say the other has hindered broader adoption of digital payments, according to a new report from MineralTree, an accounts payable and payment automation provider owned by Global Payments.
Notably, 57% of finance leaders polled blamed vendor unwillingness to accept electronic payments as the main hurdle preventing wider adoption of such payments. But 63% of vendors said their customers aren’t ready to ditch checks, MineralTree’s State of AP report, released Sept. 22, revealed.
Use of checks did drop 10% among accounts payable teams, compared to 2021. Of different types of electronic payments, virtual cards saw the biggest gains over last year: 38% of companies this year said their use of that payment method increased, compared to 9% who said that in 2021, per the report. MineralTree noted that growth is likely due to the rebates finance teams get with virtual cards.

Dive Insight:

Although business-to-business payments have been far slower to digitize than consumer payments, the COVID-19 pandemic has fueled the shift toward faster electronic payments on the business side as well.

Indeed, getting paid promptly is the top priority for vendors receiving payment, MineralTree discovered. Payment speed even beat being paid the correct amount.

It also came in ahead of payment processing cost, quality of remittance data, responsiveness to inquiries and whether payment preferences were respected. MineralTree surveyed 912 finance professionals handling AP, as well as 180 suppliers, between February and April.

Issues such as supply chain disruptions and the need to pay vendors on time have applied pressure to accounts payable, MineralTree noted. Supply chain disruptions created challenges such as invoice processing issues and delays (44% of AP teams reported this), and payment delays and reconciliation issues (39% said this).

About 71% of accounts payable teams told MineralTree they plan to use electronic payments for more of their spending. That matches vendor desires, with 82% saying they want their customers to make more payments digitally, the report said.

Finance leaders said they’re shifting to electronic payments for time savings (77%), more timely payments (63%), cost savings (57%) and increased security and fraud protection (49%). After virtual cards, Automated Clearing House (ACH) payments saw the next biggest gains – 67% said they’ve turned to that payment method more to pay suppliers.

Additionally, 31% of companies put more payments on corporate cards, 20% said they turned to wire services for more payments and 19% said their use of international or cross-border payments increased, MineralTree said.

Automation is another aspect of B2B payments that’s gaining steam in both payables and receivables. As companies ramp up digitization efforts and prioritize on-time vendor payments, the share of those who’ve automated the AP process jumped from 32% last year to 52% this year, the report said.

Still, many have just partially automated the process. Just 16% said they’ve fully automated AP, MineralTree reported. About 42% of companies haven’t turned to automation because they say their current processes work.