Businesses can now compare the costs of using various payment methods as the Association for Financial Professionals (AFP) has released the 2022 Payments Cost Benchmarking Survey. This survey looks at the following costs: payment/bank provider fee, reporting, interchange for credit cards, as well as internal costs such as technical equipment, IT support, and personnel.
This information can be useful as you try to determine which payment option will be the best fit for your business and will allow you to compare the seven different payment options that are available to you– ACH credits and debits, check, credit and debit cards, wire, real time payments, and virtual cards.
The survey was completed 18 months after the beginning of the pandemic and shows the acceleration of electronic payment methods due to new work from home policies that were implemented across the country. It was found during the research that organizations typically process between 500 to 999 checks monthly and have 1,000 to 1,999 outgoing payments via ACH Credit. Previously in 2015, the average number of checks processed monthly was 1,000 to 1,999 while ACH Credit average was 500 to 999 monthly.
The data collected in the survey from 350 accounts payable professionals proves that paper checks are now more expensive than all electronic payment methods with the exception of wires. One interesting finding is that although the data shows high awareness of the cost associated with checks, still 92% of organizations continue to accept them daily. The average transaction costs for issuing a paper check was found to be between $2.01 to $4.00.
Approximately 92% of the survey respondents confirmed the main reason they have made the switch to electronic payments was due to increased efficiency, while 82% made the change because of cost reductions. The survey results show that the three main drivers for switching to electronic payments are because of cost savings, fraud controls, and better customer/supplier relations.
Although electronic payments are more efficient, this year’s survey suggests that paper checks are not going to be going away at this time. Nearly two thirds of companies would move forward with replacing paper checks if there was a cost benefit, however, 37% of respondents confirmed they would always use paper checks regardless if they are more expensive.
Overall, card payments continue to be underutilized. The survey shows that the number one drawback that is holding companies back from electronic payments is the cost to convert. Due to the manual labor that is involved in helping vendors accept electronic payments, most companies are not interested in making the effort to change.
However, virtual card processing could be a great option since it is easier to automate as vendors are generally able to accept these. As businesses are considering if card payments can be a valuable tool for their organization, they should consider the opportunity costs of accepting versus not accepting card payments to confirm if this could be a good payment strategy for them.