When Digital Payments Get Downgraded to Paper Checks Everyone Loses
It’s a little-known quirk of the system, but many of the paper checks small- to medium-sized businesses (SMBs) receive actually start out as online bill payments made by their customers. This digital downgrade, if you will, is often the result of customers entering incorrect data into their payment request, perhaps using an alias or leaving out an address.
“When you log on to an online banking portal to make a payment, your originating bank will tell you to create that payee exactly as you see on your invoice or statement,” CheckAlt Business Leader for Catch! Rebecca Anthony told PYMNTS. “Customers do not do that. Customers enter whatever they feel at that particular moment.”
This problem is especially common in industries like healthcare and property management. In healthcare, customers rarely enter the physical account number. In property management, people often just enter their address, thinking that’s also their account number. In both instances, those small mistakes mean the payments can’t be processed electronically, and they default to paper.
Making Sure Payments Are Processed Quickly
However, if those errors are caught and fixed quickly, the customer’s online payment can be kept online. Correcting the data that the customer has entered incorrectly can make the payment match the biller profile and flow electronically.
That’s better for both parties because electronic payments are a lot cheaper than paper, eliminating paper is better for the environment, it’s a seamless process flow and it’s a much faster payment processing scenario.
“When customers log into their banking portals today, it will tell them that, that payment will reach the destination within five business days,” Anthony said. “But that’s really discretionary on how fast [the U.S. Postal Service] can move and where that check is going. If you sign up for our Catch! service, we’re going to eliminate that pain point, and those payments will be processed within one to two business days.”
Managing Both Paper and Electronic
Outsourcers that provide this service have tools to make this an easier process flow, preventing payments that cannot be processed digitally from defaulting to paper. Outsourcers can learn from one customer to another and apply what they’ve learned to each customer’s challenge. They also want to handle both ends of the payment spectrum.
“They want to be a full-service provider, managing both the paper and the electronic; that way, they can have visibility into why things are defaulting to paper,” Anthony said. “That’s something I really enjoy about CheckAlt because we don’t want to just process your payments electronically; we want to put eyeballs and that visibility in there to see how we can capture all of those payments electronically.”
Innovation Is Still Key
As she spoke, Anthony had just returned from Money 20/20. She noted that the event was the first time out in a long time for a lot of people, and that innovation is still key.
“These vendors really came prepared with what they’re trying to offer the market,” she said. “It made me really excited for the future of payments because it doesn’t look like anybody is stopping anytime soon.”
Looking ahead, Anthony said that as millennials and other young generations take over, paper will diminish. In the meantime, there’s still a lot of paper that needs to be solved for and new mechanisms are making payment processing easy.
“There’s got to be a next big, next best thing,” Anthony said. “I’m not sure what that is at the moment, but I can tell you that people aren’t going to stop until they figure it out because we’re in a generation where it’s no longer cool to write a paper check. So, I think people are out here solving for that problem every day.”