Disadvantage of Paper Checks Antiquated Process

It’s Time to Leave Antiquated Paper Checks Behind: How Going Electronic Can Help Your Business and the Disadvantage of Paper Checks.

Electronic payment transactions have become incredibly commonplace.

In any given day, a consumer might buy clothes on the internet, purchase a cup of coffee using an iPhone app, or pay their bills online – or maybe even do all of the above.

Advances in electronic payment technology have enabled all of these transactions to take place quickly and securely. Consumers no longer wonder if their personal credit card information is in jeopardy when they use it to make a purchase online. Likewise, businesses trust electronic payment platforms with their customers’ money as these platforms have been proven to quickly deliver payment to businesses.

Delaying and jeopardizing the safety of these C2B (customer to business) transactions by requiring customers to pay in cash or check would be crazy, right?

Correct. Technology has rendered cash and paper checks unnecessary in C2B payment transactions. Think about where you spend money on a regular basis – few businesses that make frequent direct transactions with consumers are still cash or check only, and virtually none are check only. Businesses have generally accepted that electronic payment is most consumers’ preferred method of payment.

Given the success of electronic payment in C2B transactions, it’s baffling that 42 percent of B2B (business to business) transactions are still conducted using paper checks.

When paper checks started being used for large financial transactions in 1865, they were a hot new piece of technology. Paper checks were the first non-cash instrument to be used for payment. And they remained the dominant non-cash instrument for almost 100 years, until credit cards were popularized in the 1950s.

The world has changed dramatically since 1865, and even since the 1950s. Digitalization and the internet have altered almost everything about how businesses operate. Paper checks have been left behind as a relic of a different time.

Consider the differences between an electronic payment transaction and a paper check payment transaction.

An electronic transaction generally only requires you to swipe your credit card or to enter your credit card’s number, expiration date, and security code. And that is it – in the time it takes you to swipe your card or type up its digits, money has been successfully and securely transferred from your checking account to the business.

A paper check requires you to carefully copy out what and from whom you are buying, what it costs, and when you are buying it. You might be making this transaction with someone who lives elsewhere, in which case you will have to put your check in an envelope, address it, find a stamp to put in the corner, and take it to the post office. The recipient of the check will receive it in the mail, open the envelope, and take it to the bank to be deposited – at which point they will discover that you forgot to sign the back of the check and the whole process will have to be repeated.

Such a process is out of step with our modern world. Furthermore, paper checks are the top subject of fraud today. Anyone who comes across a check sees the sender’s account number, business name, and routing number, which is all the information they need to access their checking account.

Changing payment systems can be logistically difficult. And given how essential paper checks were to the financial world for over one hundred years, it is understandable that businesses are having a hard time seeing the extent to which checks have been holding them back. But by following the path laid by C2B transactions and embracing electronic payment transactions, businesses can make their all of their B2B transactions cheaper, more secure, and more efficient.