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Modernizing payments
Accounts Payable

Modernizing payments: Why you need a new operating model

August 23, 2023
by WEX Corporate

Is your business tired of slow and unsecure payment methods? Do you still use paper checks, or manual accounts payable (AP) and accounts receivable (AR) processes? Has your business been the victim of check washing fraud? Please keep reading to learn how to give your business the security, simplicity, and efficiency it needs for continued success in the modern world.

According to the triennial Federal Reserve Payments Study (FRPS), the number of payments made with checks in the US declined from 18.1 billion in 2015 to 11.2 billion in 2021. Despite the decline in check use, check fraud has been rapidly on the rise. It specifically affects older generations and small-business owners. The Financial Crimes Enforcement Network (FinCEN) reported that banks filed 680,000 cases of check fraud in 2022, which is almost double the amount of the previous year. Paper checks can be wrongly deposited, duplicated, modified, or sold. The circumvention of paper check security features increasingly calls on payers and payees to put in more work to ensure safe payments, which ends up costing both parties valuable time and resources.

It is clear that checks are becoming obsolete and the need for more secure, efficient transaction methods is greater than ever. Companies must modernize their payment methods and adapt their operating model to suit the new digital era. While it can be difficult to take the first step, you are committed to the success of your business. Let us explore why it is crucial to leave paper checks and manual payments behind in order to nurture a thriving business.

Take a step into the digital age of payments technology

People across the nation and globe have made immense changes to the way they pay and now seek processes that are quick and easy to use. This trend is reflected in the growth of card payments value by 10.0% per year from 2018 to 2021, faster than in all prior FRPS measurement periods. It will only continue to grow, so businesses have moved toward digital payment methods to optimize operations.

According to Visa Navigate, a survey of 1,000 companies with annual sales revenues ranging between $10 million to $1 billion showed that 46% of them plan to invest in digitized operations. Moreover, one in three businesses have favored using electronic payments rather than paper checks. WEX understands the importance and benefits of digital payments, and accordingly offers a breadth of payment solutions to help optimize your business:

  • Payment management offers a securely integrated engine for virtual cards, commercial cards, and AP.
  • Payment processor accelerates implementation timeframes and access to transactional data for efficient transactions.
  • Payment delivery ensures your customers a smooth bill pay experience with automated processing, same day payments, and security.
  • Supplier services assists in getting your suppliers to accept electronic payments, identifying and enrolling the best supplier candidates, and utilizing the vast WEX payment network.
  • Payment gateway automates the AR process and uses tokenization to limit risk.

WEX provides reliable and secure payment processing. As the use of digital payments steadily increases, so does the use of virtual cards. A study from Juniper Research found that the number of global virtual card transactions will grow from 28 billion in 2022 to 121 billion in 2027, and the U.S. will represent 72% of global revenues from business to business (B2B) virtual card transactions by then.

Despite the immense recent growth of virtual card adoption, WEX is not new to the industry. WEX brings 25 years of experience offering virtual card solutions and is well positioned to help your business adopt digital payments.

The power of virtual cards

Essentially, virtual cards are digitized forms of physical payment cards. They retain the unique identifying numbers of a card, all the while ditching the plastic and enabling more secure and efficient transactions. However, rather than having one or a few physical credit cards for all your purchases, you can now have a unique virtual card for every transaction. Virtual cards have multiple use cases:

  • Single-use virtual cards utilize card numbers that are only valid once. With these cards, you can customize and control security features such as the expiration date, acceptable merchants, and available funds. They can be used for a single transaction or multiple transactions that add up to a specified amount. In either case, they are invalid for further use once the desired payment has been made.
  • Ghost cards have established credit limits for goods and services, and those limits are provided to vendors. You can control security features such as the spending limit and expiration date. However, as the cards can be used multiple times, it is important to only use them with trusted vendors.

With virtual card use comes the confidence that you are maximizing the capabilities of your business. Virtual cards offer countless benefits:

  • Security. Precisely control when your cards are used, what they are used for, and how much they can purchase.
  • Simplicity. Streamline purchases and make the accounting process easy, as all the payment data you need is directly attached to each transaction.
  • Efficiency. Deliver payments in a timely manner and reduce manual processes.

You can set the monetary limit on your cards all the way down to the exact penny. Moreover, you can even control the acceptable Merchant Category Code (MCC) for your cards, which limits the types of businesses that your card can engage with. Now that is secure.

Compare your payments technology options

Did you know that Automated Clearing House (ACH) transactions only allow for 80 characters of added remittance data? With virtual cards, you can include more robust data and even create customized data capture fields. Virtual cards are also quicker and have real-time processing. On the other hand, same-day ACH transactions were only introduced in 2016 and they have higher transaction fees than regular ACH transactions. And as for paper checks, well, their processing time is even slower as it relies on mail delivery speeds. In either case, virtual cards can save you valuable time when making payments.

Virtual cards do not require physical invoices, statements, receipts, or checks. You can simply set up automatic push notifications to manage your payments, in effect saving your business from the hassle of wasting paper and managing drawers full of documents. And perhaps best of all, there are no pesky little plastic cards to keep track of. All the information for your virtual cards is stored safely and securely using WEX systems.

Hear from a payments industry expert

To all the businesses still hesitant about switching to electronic payment methods and virtual cards, “Don’t be afraid to embrace change or a new process,” says Susan Holbrook, vice president of corporate payments at WEX. “Virtual cards are a widely accepted form of payment, being a secure, efficient, and profitable means to pay bills.  There are numerous advantages to both clients and suppliers.”

“The big value is the efficiency, the reduction of fraud, the security, and how immediate it can be — you can make a payment right on the spot when needed,” says Susan. “WEX can help because we have a whole client enablement process that will do analysis for you and identify the suppliers who would be a good fit. We reach out to them and get them set up on the program for the clients. We make it really seamless and easy.”

Though, many businesses still use paper checks as a product of habit and routine, and switching to electronic payment methods may seem like a difficult undertaking for them. To this, Susan reiterates that switching to electronic payment methods is a simple and seamless process when done through trusted companies like WEX. “It’s helpful to know that it’s pretty easy to do. It’s not hard. Again, WEX is an expert at it. Our people are terrific, they’re very collaborative, they’re supportive, and they stay with the client through the entire process and they continue to work with the client to continually grow their program.”

Susan adds, “That’s what our clients say they like about us. They like working with us, they say we’re easy to work with, our follow-up is great, our supplier enablement program is one of the best.” WEX values and builds meaningful relationships with its clients. “We view it as a true partnership, we’re very collaborative. We listen to what’s important to the client, what their goals are and then we build a customized program based on their needs.”

In addition, there is a strong financial incentive for using electronic payment methods and virtual cards. With these tools, many businesses have now made their AP departments profitable, creating a new revenue stream by simply paying their vendors. “If you’re cutting a check, you don’t get any money back for that,” says Susan. “The folks in accounts payable and procurement can spend more time doing more value-added work as opposed to doing manual work, process work, and paperwork.”

A payments transition success story

Although switching to electronic payment systems may seem like a difficult transition, WEX is here to help your business every step of the way and make the entire process easy.

“The WEX products have been really great. They make it so that we can send these payments electronically,” says Lori Townsend, vice president of accounting at Smart AutoCare. “Traditionally, we were sending the payment by calling the shop and giving them a credit card number over the phone or letting them know that we were sending a check for the repair. We have changed and we have gone to an electronic means of sending these payments to the shop. And, sending them electronically has saved us money and it has sped up the process so we are able to process a lot more claims than what we normally would be able to do.”

“The shop can only run it for the exact dollar amount that we’ve told them to run. They can’t do it for a penny more, they can’t do it for a penny less,” Lori adds. “And that’s been a really great time saver and allowed us to really grow.”

Businesses will save valuable time and money by changing their business operating model to include electronic payment systems. The security, simplicity, and efficiency of electronic payments allows businesses to focus on their products and services while worrying less about administrative tasks. So, join Lori and countless other proud users of WEX payment products to propel your business forward and acclimate to the digital era.

What the future holds for payments technology

As technology rapidly progresses, our way of life continues to change in major ways. It is shocking to think that just 18 years ago only 16% of the global population had access to the internet, according to a report published by the International Telecommunication Union (ITU). Nowadays, that share sits at 66% and more than 70% of the global population owns a mobile phone. The world is more interconnected than ever and technological advancements keep us moving forward. An application exists for nearly every task, and companies like WEX work hard to create digital platforms that suit your needs. So, what lies ahead?

A cashless society is an idea that has been floating around for several years. Some people view eliminating cash as the clear path forward, while others view it as something to avoid at all costs. A cashless society could bring benefits like more convenience, better transaction records for reductions in crime and corruption, and safer funds and financial information. Though, there are potential disadvantages including an increased reliance on technology and less financial inclusion, as not all communities and demographics have access to the platforms that enable electronic payments. In a 2022 study by the Pew Research Center, roughly 41% of Americans stated that they do not use cash in a typical week, up from 24% in 2015. When demographics are taken into consideration, these trends tell a deeper story. For example, younger generations push the scale toward going cashless, as 54% of Americans ages 18-49 do not worry about having cash on hand while that is only true for 28% of Americans ages over 50. Taking socioeconomic status into account, Americans with annual household incomes under $30,000 are more likely to use cash for most of their purchases than those with higher incomes.

While it is unlikely that an entirely cashless society will soon prevail globally, engaging in such thought experiments and analyzing data trends is necessary for staying ahead of upcoming shifts in technology. It is important to make consistent changes to your business operating model to adapt to these shifts, rather than struggling to make drastic changes years from now. So, take a small step today and consider implementing electronic payments to improve your existing payment processes, ensuring that you stay a step ahead of the competition and emerging technologies.

Learn more about how WEX payment solutions can be tailored to your business, so you can accelerate and streamline operations while creating lasting growth and success for your organization.

Sources:

Federal Reserve Payments Study
Wall Street Journal
Visa Navigate
Juniper Research
US Treasury
Nacha
International Telecommunications Union
Pew Research

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