Paper Cheques Still Have a Role in the Digital Age--But Not So Much within FX Transactions

The cliché “The cheque is in the mail” has never inspired confidence. In local B2B transactions, cheques are the equivalent of adding a shell to snail mail. But paper cheques still have a role in the digital age.

The digital role of the cheque begins when the writer or recipient scans its image on one end of a transaction. The payer can scan the check on a computer or smartphone for deposit to the recipient’s bank account. The recipient, on the other hand, can scan the paper copy of a cheque and save postage or a trip to the bank.

Cheque Usage, However, is Declining Worldwide.

A report from Capgemini¹ and BNP Paribas² provided some not-surprising statistics on the declining role of cheques worldwide. Electronic payment technology has driven down cheque payment volume globally by over 13 percent as recently as 2015. That followed a previous decline of nearly 11 percent in 2014 with a consistent downward trend during the past 16 years.

Credit and Bank Debit Cards Hold the Lead.

Supplanting paper cheques were debit cards and credit transfers, the leading digital transactional instruments. Again, between 2014 and 2015 global non-cash transactions reached $433.1 billion.

Cheques are Still Holding Their Own in the UK and the US.

Despite the aforementioned decline in cheque usage, one survey of 1,000 businesses in the UK showed that over half of the survey, takers are still making and receiving payments by cheques. Here’s why:

30% said cheques were the most familiar method.
29% found it easier to manage their cash flow through cheques.
25% had to comply with their customers’ preferences for payment by cheques.
21% liked the fact that cheques processed through their accounts slowed their cash drain.

An interesting finding of the above survey was that many businesses still use paper payments because the bank cheque clearing system was slow—providing a 5-day lag for businesses that need to make a payment before actually having the available cash.

In the US a report published by the Association of Financial Professionals (AFP)³ from its Electronic Payments Survey showed a one-percent increase in the use of B2B payments. Surveyors noted that US corporations are leaning towards supporting the worldwide trend in electronic B2B payments as bank payment technology provides faster and more efficient clearing services.

Cheques Come with Their Own Set of Problems.

The AFP Payments Fraud Survey found that despite the reluctance among certain businesses to go paperless, cheques are the most common vectors for payment fraud in the US. About 75 percent of the companies victimized by payment fraud fell victim to fraudulently altered cheques.

Other problems are stopped checks or the inevitable processing errors as well as the recipient having to wait while the cheque clears. While many businesses are adopting more efficient and secure accounts payable automation processes, some challenges remain. Going from cheque payments to B2B automation can be challenging for small businesses, especially when financial service providers only offer automated payment services to larger clients.

With Overseas Payments, the Problems are Compounded.

Put away your chequebook. While mobile check imaging shows promise for small business owners in effecting more rapid local currency transactions, overseas payments and collections come with their own set of challenges. The overseas payment process entails verification, FX conversion, as well as compliance and security assurances. And you can’t do that through the mail with a paper cheque.

You don’t want to deal with foreign cheque conversions and payment headaches. Likewise, your overseas suppliers don’t want the hassle of converting your dollar payments to their local currency. Then there is the expense and hassle of entrusting your payments to the mail system at home and abroad.

The Volatile World of FX and Ancillary Bank Charges Can Stunt your Growth and Hurt your Cash Flow.

Converting currency on the foreign exchange market must be done through a bank. Banks make money on the deal twice: First, when they apply an inflated “spread” on the currency; second, when they apply an arbitrary transaction fee. Include another bank—yours, for example—and they also attach hidden charges.

Banks, like any other business, concentrate their resources and expertise in areas that make them the most profit: Mainly loans and investments. They don’t provide their customers with a full-featured and transparent FX platform, but they funnel your money on the top end, and what comes out is not always the most favorable exchange rate.

You Need a Digital Overseas Payment Platform.

If your business has overseas clients or customers and a large number of overseas payments, an unexpected change in the FX rate in a high-dollar deal could soak up your profit. You have neither the time nor expertise to shop around or set up multiple bank accounts overseas.

A digital payment platform—MTFX Foreign Exchange & Global Payments, for example — have all those agreements in place across multiple countries and the accompanying overseas account numbers where your customers reside.

It is All about Risk Management and Cash Flow.

Timing is everything in business. You want to execute the payment while the currency exchange rate is most favorable. You also want to receive your payments with a fair profit and without having to pass on high bank charges to your customer.

MTFX Foreign Exchange & Global Payments is a full-service platform. It provides risk transparent management for your overseas transactions. Contact us and learn how we can expedite your overseas collections, give your customers flexible payment options, and eliminate exorbitant bank charges and fees.

Open your account in less than five minutes and try MTFX on your next business international money transfer.

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