PUB. 18 2021 ISSUE 3

24 DIGITAL ACCELERATION OF BUSINESS PAYMENTS By William J. Schoch, President & CEO, Wespay I n the first half of 2020, the business outlook for many industries was uncertain. The abrupt decline in consumer demand caused many small business owners and corporate treasurers to seek the safety of increased liquidity and to pursue efficiency in cash flows. Since then, we have seen a dramatic change in business payment practices, prompting many community banks to reevaluate their current payment solutions and reconsider future investments. First: Checks Decline One of the initial and most dramatic changes has been the sharp decline in check writing. Some organizations had limited access to check stock, printing equipment, and adequate staffing to maintain the appropriate controls of the process. Stories abound of creative solutions implemented to ensure security in the issuance process and the physical safety of all involved personnel. Check volumes quickly declined and remain low. Business check writing is estimated to have dropped between 25-35% year-over- year at peak periods in 2020. The next question naturally emerges: Is this a temporary situation or the realization of an accelerated digital migration for business payments? The Association for Financial Professionals (AFP), a trade group of corporate treasury and finance professionals, conducted an online survey of its members in the fall of 2020. The survey sought to understand how organizations were planning to handle business-to-business (B2B) payments. These results seem to validate the observed decline in check writing. One- third of responding AFP organizations claim to currently issue a majority of electronic B2B payments. Clearly, the movement to electronic payments is not a new trend, as the B2B migration first emerged in the 1990s. However, the evolution has been slow and incremental. Until recently. The more important finding in this same survey is that nearly 60% of responding organizations are very likely to prioritize electronic B2B payments, which indicates we may be seeing only the tip of the iceberg. We may be in the midst of a digital migration of business payments, unlike any previous change we have seen in this user segment. Second: Electronic Payments Surge So, if checks are declining, what payment methods are being used for B2B payments? One clear benefactor is the ACH network. In the second quarter of 2020, B2B payments in the ACH grew in the low single digits. That volume quickly grew to double digits in the second half of 2020 and is approaching 30% year-over-year growth in 2021. Illustration Source: 2020 AFP Payment Survey, A Snapshot of Electronic Payments and Payments Fraud at Organizations