Dive Brief:

• Vendors and customers continue to blame each other for the slow shift away from paper checks in business-to-business payments, according to a new report from MineralTree, an accounts payable and payment automation provider owned by processor Global Payments.
• The biggest obstacle to ditching checks for a digital alternative like automated clearing house payments was the perception that customers were hesitant to make the change, according to about 60% of vendors surveyed for the report. That number barely changed from last year, when roughly 63% of vendors surveyed as part of MineralTree’s 2022 report said the same.
• Roughly 36% of AP teams surveyed for the report said they pay vendors via check over half of the time. And roughly 35% said they pay vendors via ACH over half the time, according to MineralTree’s State of AP report, released Wednesday.

Dive Insight:

Preparing a single paper check costs a business between $4 and $20, the report noted. On top of that cost comes the delay of waiting for the check to go through the mail. And paper checks are more vulnerable to fraud than other payment methods like ACH, the report said.

Despite those factors, check use persists: Although roughly 99% of vendors surveyed said they accepted ACH, the percentage of payments made via check was neck-and-neck with that for ACH payments this year, the report said.

Growth in the use of digital payments has remained steady for AP teams. The report found that 53% of AP teams reduced their use of check payments in 2023, the same figure as last year. About 63% said they increased their use of ACH payments this year, compared to roughly 62% last year.

Besides checks and ACH, virtual card use edged up from last year. Last year, about 57% of survey respondents said they did not use virtual cards. That figure dropped to about 51% this year. Still, of the respondents who did use virtual cards, more than half said they used them for fewer than 10% of payments, the report said.

What both vendors and customers did agree on was that speed mattered most, even more than getting the amount right. And 76% of vendors surveyed said that a customer paying electronically is more likely to pay on time.

That need for speed could be met by the Federal Reserve Bank’s instant payment service, FedNow, which launched in July. During a May earnings call with analysts, Jack Henry & Associates President Greg Adelson said that FedNow could replace check payments or virtual cards used in B2B settings.

For the report, MineralTree surveyed 821 finance professionals handling AP, as well as 246 suppliers, between March and April.