A significant majority of US mid-sized businesses still use paper cheques, even with soaring cheque fraud research from Codat, a provider of business data and insights for banks, reveals.
Cheque fraud nearly doubled between 2021 and 2022, with projected losses expected to exceed $24billion by 2024. Despite more secure digital payment methods like virtual cards gaining traction, many businesses continue to rely on cheques due to familiarity.
However, security is becoming a growing concern, with one in three businesses open to adopting digital methods if banks effectively communicate the benefits of electronic payments.
Charles Kreitler, Codat’s head of commercial banking says it is 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.
“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 emphasise the strengths of electronic payments and API-based data sharing in this area to accelerate the transition.”
Increasing risks
Businesses are increasingly aware of the risks associated with paper cheques. Top concerns include processing time (37.6 per cent), loss or theft (37.4 per cent), and security or fraud (35.7 per cent). Despite these challenges, nearly 35 per cent of businesses still feel that cheques offer more control over payment timing and even perceive them as safer.
But as digital payment methods like virtual cards become more widely accepted, many businesses are beginning to acknowledge their advantages. A key incentive for transitioning to these modern methods is security, says Codat, with 33.2 per cent of businesses stating they would be more likely to switch if digital methods offered robust fraud protection.
