Digital payments are transactions made via electronic or online methods, without the physical exchange of hard currency.
They can take many forms making use of modern digital technology and include the internet, mobile, contactless, and payment software.
Companies have traditionally had to rely on methods such as Automated Clearing House payments (ACH), business wire transfers and checks/cheques, which are not only manual and costly but also leave them exposed to fraud.
The trend for digital payments is on the rise. Our recent poll showed that 72% companies are now fully digital with business payments, with 28% remaining a mix of digital and traditional.
So why are so many companies making the switch? According to our research, speed and accuracy of digital payments came out top, over security and fraud protection.
With so many new and emerging digital payment options available, it may be hard to know where to start.
Here is a simple overview of four popular digital payment methods businesses use.
- Blockchain and Cryptocurrency
Blockchain is a fixed digital ledger that facilitates the recording and tracking of business transactions. It can be shared and distributed across entire computer networks, with each transaction being a ‘block’ of accurate but unchangeable information that’s available only to members of the network.
Cryptocurrencies such as Bitcoin are digital or virtual currencies that provide the means of monetary exchange within the Blockchain platform. Bitcoin was created in 2009 as a secure method for sending money over the internet, and it can be exchanged for cash just like any asset.
- Automated payment technologies
There are a growing range of cloud-based platforms that can now automate the entire AP process from invoice to payment. Known for being one of the most manual areas within finance, Accounts Payable processes really benefit from digital management.
Automation eliminates paper completely and stores all invoices and vendor details accurately and securely. Offering a range of payment options within the platform, users can choose from methods such as virtual cards, ACH, or eChecks/eCheques.
- Virtual cards
A growing method for secure online payments are virtual cards. These can be used like credit cards, for instantaneous payment, but they only exist online. They are often prepaid with a set balance or have a spending limit, which gives companies greater control over spend as it happens.
Unlike physical cards that have a fixed card number, expiry date and CVV code, virtual cards have dynamic details which are single use for each and every transaction. This makes them more secure as they are impossible to recreate, share, or steal.
- eChecks / eCheques
eChecks/eCheques – also known as electronic checks/cheques, direct debits and ACH transfers – are an electronic version of a paper check/cheque.
They share the same benefits of security, speed, and processing efficiency with all electronic transactions but have the same processes as paper checks/cheques. This makes them a comfortable and familiar option for companies as a faster and less-expensive way to make payments.
How to prepare your vendors for digital payments
A poll in our recent webinar ‘The Future of B2B Vendor Digital Payments’ showed that 76% of companies still used paper checks/cheques. So how can you help prepare your vendors for digital payments?
Here’s some advice from our expert panel:
- Research the best digital payment options for your business and decide on your solution.
- Make sure you have a fully up-to-date vendor masterfile with the correct email addresses for your vendor contacts as this is essential for digital payment communications.
- Communicate with your vendors personally about your digital payment methods so they are hearing it from you and not a third party. This will increase your adoption rate.
For more advice on digital payments, you can watch the full webinar on demand.