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US Businesses Cling to Check Payments Despite Risk of Fraud, New Data From Codat Reveals
Codat, the leading business data and insights provider for banks, has released new data that reveals a vast majority (71%) of US mid-sized businesses still use paper checks for supplier payments.
Check fraud nearly doubled between 2021 and 2022, and more than $24 billion will be lost to check fraud in 20241. Despite this risk, new research commissioned by Codat of over 500 mid-sized businesses shows mid-market finance teams remain committed to checks.
Digital payment methods like virtual cards offer more security features and are growing in popularity among mid-market businesses, with processing volumes expected to hit $13.8 trillion by 20282, yet most US mid-sized businesses still rely on this 300-year-old payment method.
The data shows that the number one reason (44%) businesses stick with checks is familiarity and comfort, rather than the reliability or benefits of the method. Challenges are still present for those who would prefer to use digital methods, with 1 in 3 businesses reporting suppliers only accept/prefer checks,
Businesses are grappling with multiple issues associated with checks, the top concerns being processing time (37.6%), loss or theft (37.4%), and security/fraud (35.7%).
But despite the security and fraud risks, nearly 35% of businesses say checks feel safer or give them more control over payment times.
However, one in three businesses revealed a top incentive for switching to a modern method like virtual card would be security features (33.2%), suggesting security is becoming a priority.
Codat Head of Commercial Banking Charles Kreitler says it’s up to banks to position the benefits of digital methods to clients in the right way: “The banks that we work with are eager to help their commercial clients transition away from paper-based payments but the continued reliance on checks tells us that digital payments still have a PR issue to solve,” he said.
“Our data suggests that businesses are starting to care more about security than cost savings when considering alternative payment methods, so there’s a real opportunity for banks to emphasize the strengths of electronic payments and API-based data sharing in this area to accelerate the transition.”
To view the full data report from Codat, visit codat.io/blog/.
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