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Smarter Payments

Debunking Common Electronic Payments Myths

Contrary to misconceptions surrounding electronic payables solutions, companies that adopt virtual card programs often boost their efficiency while increasing their savings and better protecting against fraud.
Christopher Claus, Head of Single-Use Accounts Product Development, J.P. Morgan Commercial Card November 17, 2017

Economic growth in the US has been somewhat tepid in the long recovery from the global financial crisis, but there have been bright spots along the way. The middle market has helped create new jobs and grow the US economy. The National Center for the Middle Market reports a 6.7 percent year-over-year revenue growth rate for the middle market over the last 12 months and the employment growth rate remains strong at 5.7 percent1. As these businesses continue to expand, leaders are looking for opportunities to effectively manage growth, gain competitive advantages and improve the bottom line.

To best capitalize on growth opportunities, companies shouldn’t overlook their payment strategy as an area to increase efficiencies, reduce costs and optimize working capital. Incorporating a modern virtual card solution for B2B payments can better position the organization to remain competitive in a dynamic marketplace.

Boost Efficiency and Savings with Your Payments Strategy

While businesses of all size are trending away from checks and toward electronic payments, middle market adoption has lagged. A 2016 Association for Financial Professionals’ (AFP) Electronic Payment Survey2 found that 47 percent of middle market companies use checks for at least 60 percent of their B2B payments, compared to just 32 percent of large market corporations.

B2B Check Payments in the US

Percentage of Organization's B2B Payments Made by Checks
Share of B2B Payments All Annual Revenue Less than $1 Billion Annual Revenue at Least $1 Billion
Up to 20 Percent 21% 16% 24%
21-40 percent 19 20 21
41-60 percent 20 17 23
61-80 percent 21 25 21
81-100 percent 19 22 11
Median 50% 60% 45%

Reliance on checks often ignores common direct and indirect cost areas, including:

  • Lost employee time
  • Materials, supplies and postage
  • Losses due to human error in a manual process
  • Losses due to fraud
  • Inefficient working capital management

Commercial card programs address many of these issues by reducing overhead, providing robust reporting, tracking functionality and solidifying control functions. Global acceptance of credit cards and rebate options are additional reasons why 70 percent of AFP report respondents stated that they’re likely to convert a majority of their payments to electronic methods over the next three years.

In particular, single-use account solutions are increasing in popularity because they provide an added level of efficiency and control, in addition to organization savings in the form of a rebate. Each supplier payment carries a unique 16-digit virtual account number. That means the credit limit on each single-use account number is set to the specific amount of each payment. And because it’s electronic, buyers are able to automate the payment process with a solution that combines the benefits of a purchasing card, the functionality of a check and the efficiencies of ACH.

Common Myths About Upgrading to a Virtual Payments Solution

Myth: The current payments process works

While legacy processes may seem sufficient, today’s fast-paced environment challenges middle market businesses to better manage payables and cash. A lack of transaction visibility and control, and fragmented or incomplete reporting can directly impact the bottom line. Further, the growing risk of fraud requires innovative processes and solutions. In 2016, 74 percent of companies were impacted by payment fraud3. Virtual cards offer enhanced security features to mitigate the risks of fraud and misuse.

Myth: Digital solutions require extensive IT support

While larger corporations have complex integration requirements, many virtual card programs for mid-sized businesses offer a turnkey interface that requires limited IT expertise. Administrators can easily set critical transaction parameters and “go live” to quickly get the program up and running. The right virtual card provider will offer an implementation solution best suited to meet the company’s specific needs.

Myth: Staffing levels can’t support a new program

Virtual card programs are designed to make staff more efficient. Solutions can automate administrative functions, simplify tasks and streamline account reconciliation, reducing the time employees spend on manual data entry and check management. Reducing the strain on staff resources gives employees more opportunities to focus on value-added areas of the business that sustain growth and provide a competitive advantage.

Myth: Upgrading payment solutions is too expensive

Virtual payment programs reduce processing costs, enhance disbursement capabilities and capture more spend. In fact, a 2015 RPMG Electronic Accounts Payable Benchmark Survey indicated that organizations that use virtual payments report the cost of the average invoice payment to be $9, as opposed to $31 for a traditional check payment. For organizations whose suppliers offered early payment discounts, more than half also report that they continue to receive that discount when the invoice is paid with a virtual payment.

To learn how virtual cards can benefit both buyers and suppliers, read A Closer Look at Virtual Card Benefits for Both Buyers and Suppliers.


1http://www.middlemarketcenter.org/performance-data-on-the-middle-market
2https://www.afponline.org/publications-data-tools/reports/survey-research-economic-data/Details/epayments-survey/
3https://commercial.jpmorganchase.com/directdoc/payments-fraud-2017.pdf
4http://www.rpmgresearch.net/product-view.php?product_id=66

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