Recent research from the Association for Financial Professionals (AFP) finds that business-to-business payments by paper cheque increased slightly from 2013, bucking the previous downward trend in cheque use.
But before you re-order cheques, consider that 70 per cent of respondents to the 2016 AFP Electronic Payments Survey believe it is "very likely" or "somewhat likely" that their organizations will convert the majority of their payments to electronic within the next three years.
They are also optimistic about the impact of faster payments on their organizations. 94 per cent consider it important that faster payments are "smart" and are able to carry extensive remittance information.
The survey also finds that:
- Overall, a typical organization receives 44 per cent of its B2B payments by cheque, down from 50 per cent three years ago.
- A majority of survey respondents (51 per cent) consider cost savings a benefit of electronic payments.
- 80 per cent use cards to handle at least some employee pay, benefits, or reimbursements.
Prepaid MasterCard and Visa cards versus cheques
While it's true that a small rectangular piece of paper doesn't cost much on its own, all the associated costs that come with issuing a cheque are significant. Distribution and payment costs such as bank charges on cheque clearing, account administration, reconciliation and storage costs (filing and processing after the fact) add up.
Scotiabank's Cheque Cost Issuance Model shows that costs can be anywhere from $15-25 per cheque. In some cases it's as high as $50 per cheque. Postage is another cost that is significantly higher when issuing cheques - plus they are entirely reliant on the snail-mail system.
Three Types of Prepaid Visa Cards for Business (left to right): Scotiabank standard card (no branding), branded logo card, and completely custom prepaid card.
Prepaid credit cards are a cost-effective alternative to cheques and are widely used by businesses for reimbursing expenses, employee recognition, channel sales, issuing insurance/health benefits, and many other applications. For example, the Canadian government uses prepaid cards as an alternative to cheques and direct deposit, since they are cheaper to process.
Here are more reasons why prepaid cards are better than cheques:
- Postage fees are drastically reduced when reloadable prepaid cards are used since they only have to be mailed once.
- Recipients receive their money faster, and can spend sooner (no more having to go to the bank to deposit, and then waiting 5 days for a cheque to clear).
- There are fewer opportunities for fraud with a prepaid card, since all cards come with Visa or MasterCard network security and fraud protection.
- Lost/stolen procedures are simplified and can be resolved with a single phone call.
- Those who don't have bank accounts don't have to pay fees at predatory payday loan centres to cash their cheque.
- Funds can be withdrawn instantly at ATMs and can be used at any retail or online store worldwide that accepts Visa or MasterCard.
- Funds are easily loaded onto cards via an online platform, load and spend data can be measured and tracked in a single place.
- Restrictions can be placed on where cards can be used.
- Prepaid cards can be branded with the organization's logo and custom design.
- The functionality and flexibility of prepaid cards lets organizations integrate the payment vehicle into all kinds of promotional campaigns, rebates, and contests. The applications are endless.
Contact us today to learn how prepaid cards can help your organization move to electronic payments!