US businesses don’t want to check-out the cheque
Just as the UK Treasury announces that it’ll be authorising cheques digitally, the Wall Street Journal uncovers that over half of US businesses still use cheques (or check’s as they say on the other side of the pond) to make payments.
While many Americans pay for bills using online payments, direct debits or even through credit cards, it’s less common that they settle their debts using cheques. Most people are very comfortable making use of alternative payment methods throughout almost every aspect of their lives, the cheque rarely gets a look in or a glancing thought. But US businesses still feel that paper beats plastic and digital as a way to pay the bills.
The news comes from a survey carried out by the Association for Financial Professionals, which shows that US businesses still pay for half of their bills by cheque. The WSJ reports that this is a 74 per cent fall from 2007′s numbers, but that’s still a huge amount of incredibly stubborn companies left in the mix.
It doesn’t make much sense to use cheques either, as the cost of an individual cheque being written can cost a business anywhere between $4 and $20 in just time spent paying an employee per cheque. It’s absurd. Why would anyone want to spend so much on making a payment when there are far more efficient ways to do it?
It becomes even more astounding when it appears that American businesses and consumers wrote four times as many cheques in 2012 as the 28 EU member countries did in the same year. That just puts America’s awful payments landscape into perspective. Europe, Japan, and Brazil are far more advanced in their payments ecosystems compared to America – as evidenced in Target fraud case due to a lack of Chip & PIN technology.
It seems that for many US businesses, the clunkiness of cheques is actually beneficial. DNJ Pharma Inc. finance director Michael Brown cites the extra time on money being transferred gives the company some leeway financially – allowing them to gather interest on a payment before it goes out. Others prefer cheques as they allow for the information sharing to be handled effortlessly by a centralised checking service that clears cheques and sends money to the appropriate bank account. It also makes life easier for those in the finance department who can just check a cheque against a received payment and quickly see a correlation – in their current form, ePayments don’t offer the same level of payment detail in invoices.
The US is trying to promote the use of online payments with businesses, but without the same regulatory authority that the EU system has, it can’t bring in a ubiquitous solution like the Single Euro Payments Area regulation.
“In much of the rest of the world, central authorities are more willing to mandate changes like in Europe. In this market, Congress has been less of a mind to say the banking industry must use this standard,” Claudia Swendseid, a senior vice president at the Federal Reserve Bank of Minneapolis, said to the WSJ. “The market is certainly moving in the direction of fewer checks.”
When and why do you think businesses may move away from using cheques? Should they ever?