Digital Payments: The Benefits, How To Use Them In Your Business And What To Look For In A Provider

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When inflation and interest rates soar, businesses must look closely at their spending to protect their bottom line. In my many years of experience in accounts payable and automation, I have seen a recurring pattern: A significant untapped savings opportunity lies within most companies’ accounts payable processes.

The scope of payment options has expanded so that we can now handle transactions faster and reduce transaction costs and both consumers and businesses are adopting digital payments. If you’ve been considering it, but haven’t yet taken the leap, here are a few ways digitizing payments could help improve your business—and how to get started.

Six Ways Digital Payments Can Improve Your Business

There are several ways digital payments can help improve your bottom line and make for a better customer experience.

• Digital payments can help reduce fraud. Digital payments leverage several technologies to secure and encrypt transaction data and multi-factor authentication, making it more difficult for bad actors to initiate fraudulent transactions. Plus, with digital payment types like virtual credit cards, you have a one-off payment dedicated to only one vendor for only one amount, thereby helping to protect your actual credit card from being hacked.

• Digitial payments can help reduce costs and waste. The Association for Financial Professionals reports that 92% of companies accept paper checks as incoming payments, and 86% accept them as outgoing payments. Sending and receiving checks can incur hefty processing costs like bank fees, printing, postage and secure disposal. AFP found that digital payment fees are much lower—they can be less than $0.50 per transaction—and are a greener solution. Some digital payments have no associated costs, meaning no additional fees, which could earn you cash back.

• Digital payments can increase transaction speeds. While traditional payment methods like paper checks can take days or weeks to process and complete, digital payments can be almost instantaneous. By digitizing payments, companies can be better about paying invoices on time, every time.

• Digital payments give you real-time cash flow visibility. When a payment occurs, the account balance reflects the change immediately and all currency conversions happen right at the moment of the transaction. Thus, executives can track expenses and income in real time and make quicker business decisions in key areas such as spending, investing and hiring.

• Digital payments can increase scalability and accuracy. Companies can spend six to ten hours a week processing and reconciling payments. Not only is this cost-prohibitive at scale, but it also leads to high exception rates that require more time and money to correct.

• Digital payments can turn a cost center into a value driver. Consumers often consider cashback offers when deciding which credit cards to use. Businesses can get the same perks with VCCs as with physical credit cards. Plus, VCC numbers can be used only once, and companies determine how much money to fund in the credit card. Cashback offers could mean reoccurring revenue for your organization on every invoice you already need to pay.

What To Consider When Choosing A Digital Payment Service Provider

To move ahead with digital payments, you’ll need to find a provider that is a good fit for your business. As you make that decision, it’s important to consider a few factors.

• Security: Your provider should have a stellar reputation for following industry-standard security protocols and protecting its customers’ sensitive information. Ask for details about their encryption approach.

• Fees: Look for providers that are fully transparent about transaction fees, monthly fees and chargeback fees. Take time to identify potential hidden costs such as early cancellation fees, monthly minimums, charges in case of a breach, etc.

• Integration: Evaluate the effort required to integrate the digital payment service with your existing systems, such as your website, point-of-sale system or accounting software.

• Reputation: Consider the provider’s reputation in the industry. Search for reviews and mentions of the provider in the news. Ask for referrals to ensure they have a track record of providing reliable and trustworthy services.

• Geography and currency support: If you conduct business worldwide, verify that the provider supports the countries and currencies where you operate, as some may have operating limitations.

• Scalability: If your business is growing and you expect transaction volumes to increase significantly, make sure the provider can scale with you.

Taking The First Step With Digitized Payments

For companies looking to improve the bottom line with digital payments, there are some ways to include them in your AP process.

ACH payments: This common digital payment draws funds directly from a checking account and requires no signature, check printing or postage. However, there are some potential drawbacks, as these payments are not real time. Once posted, they are irrevocable and irreversible. Additionally, ACH payments aren’t the most secure digital payment, with 37% of companies reporting fraud attempts through ACH in 2021.

Wire transfers: Wire transfers occur in real time but are a costly digital payment option. They can also be risky because they are often irreversible. Nevertheless, they are the preferred method for international payments and large transaction amounts.

Virtual credit cards: This is a quick and easy way to get paid. They don’t require the sharing of sensitive information and there are no transaction fees associated. With cashback perks, they can also become a source of recurring revenue. However, be aware of virtual cards with percentage-based transaction fees, as they can add up quickly on large invoices.

Fraud detection, faster transactions, reduced costs and a potential new income stream are all reasons to consider adopting digital payments. If you’ve started your AP digital transformation journey, don’t stop at the payment stage.