Companies are embracing social tokens, real-time payments, virtual cards and other digital innovations for their speed, security and convenience, according to new research from Citizens. Yet, traditional payment modes—checks, automated clearing house (ACH) and physical credit cards—still have a stronghold.
“This is a time of disruption in the payments world,” says Matt Richardson, executive vice president and head of treasury product solutions for Citizens. “While we see many treasury departments taking advantage of new technologies, some have been slow to adapt.”
The Citizens survey of 205 treasury executives at middle-market businesses ($50M to $1B annual revenue) in February and March 2023 focused on company use of payment modes and what treasurers think of their options. Key findings include:
• Middle-market companies report that they use about five payment methods on average. As the menu of payment methods expands, companies are assembling a custom mix to meet their needs. Payment usage is all over the place, with all payment methods showing some popularity. Physical credit cards and wire transfers topped the list. Some of the relatively newer methods, such as virtual cards, still face lower adoption levels. Half of businesses continue to use paper checks.
• Companies also show a high level of interest in expanding their payment mix. Six in 10 non-users of real-time payments said they were “very likely” to consider incorporating them into their payments strategy. This is likely due in part to speed associated with real-time payments solutions. About 40% of non-users said they would consider virtual or digital credit cards or business-to-consumer (B2C) payment alternatives (platforms such as Zelle).
• Companies are using B2C options such as peer-to-peer payment for a number of treasury functions. Consumer payments have seen a lot of innovation in recent years, with new options such as Venmo, PayPal and Zelle. Middle-market businesses have started to embrace these tools as well. Among companies who said they currently use B2C options or are likely to in the near future, most say they will use these tools to pay vendors. Paying salaries is another popular choice. Nearly half of companies say they would use B2C alternatives to issue refunds.
• One innovation in B2C technologies is the use of social tokens, which allow payments to be sent to a phone number or email address rather than needing bank account information. Most companies rate social tokens as both easy and secure, and they would use them for both bill pay and payment requests. They also like the security of not retaining bank account info on their servers.
• Virtual cards, a digital alternative to physical credit cards, are another emerging payment technology that is earning more interest from middle-market companies. The sectors with the highest virtual card adoption include human capital management and business services. These sectors typically have a less complex accounts payables environment with a supply base that tends to be more susceptible to accepting card payments. Consumer sector businesses have been the slowest to adopt virtual cards.
To see more results from the 2023 Payment Trends survey, click here.