Despite the giant leaps forward in digitisation that have transformed payments, old-fashioned cheques haven’t died out. In the US, an estimated 40% of payments between businesses (B2B) for goods and services are still made via labour-intensive and costly paper process that include printing and mailing cheques.

It’s not unheard of for payments to take over 30 days between buyers and sellers when it involves writing a cheque, says Alberto Casas, Head of Global Product Management at U.S. Bank based in Minneapolis, Minnesota, America’s fifth largest bank. Casas has just overseen the roll out of an advanced receivables product for suppliers he hopes will influence B2B buyer behaviour move from analogue processes to digital tools.

“The B2B space is recognised as the largest, last frontier in terms of digitisation. Although consumers rarely pay with cheques today, when two businesses interact many still write cheques due to the lack of standardised invoicing and varying levels of technical readiness to adopt digital payments. In many ways the US is still a cheque orientated society.”

The propensity to use cheques means that for many US corporates collecting payments from their customers is an enduring headache. Suppliers are at the mercy of their buyers’ preferences on how they pay and their varying levels of sophistication, a spectrum that includes digital processes but also, particularly amongst a cohort of smaller buyers, physical paper invoices and cheques.

“We have come up with a solution for suppliers that offers all of their buyers, across the spectrum, the opportunity to adopt digital invoices and electronic payments,” he says, adding that interest in the product is being fuelled by higher interest rates and suppliers wanting to free up capital. “Treasury teams want to free up internal sources of capital by making payments more efficient rather than go to the market to fund their operations.”

The solution

The product has undergone a handful of pilots and Casas reports significant interest in the market. A particular focus will be marketing the product to the bank’s so-called “lockbox” clients for whom it services payments on their behalf. Under this antiquated service buyers mail cheques to a specific PO Box owned by the bank, and deposit cheques in a special post office box instead of directly to the company. U.S. Bank goes to the box, retrieves the payment from the post office, processes it, and deposits the funds directly into the supplier’s bank account while also providing important detail captured from the paper invoices for cash application purposes.

“We are partnering with our suppliers; saying we know you collect via cheque today, but we can help engage and incentivise your buyers to move away from cheques to our direct electronic payment model. We have a big opportunity to use our product Advanced Receivables to support our existing clients.”

U.S. Bank, says buyers are enthusiastically jumping on board. “It has been broadly welcomed,” he says, mostly because it is cost saving compared to existing processes where staff “are tied up receiving physical invoices, feeding them into their system, printing a cheque and mailing it.”

Another benefit of the solution is that it warehouses all payment activity, including emails and physical paper and ISO formats.

In the chaotic world of physical cheques and paper invoicing; email traffic between suppliers and buyers, and days separating the payment and confirmation, it’s not always clear what the payment is for. Cheques are sometimes sent without any information leaving suppliers having to figure out what the payment is for.

“We are not just accelerating collection; effective reconciliation is also really important. It’s very complex for a supplier to manage all these payments and so we do the reconciliation for them,” says Casas.

He concludes that easier and faster payments ultimately support more business activity. Many buyers face credit limits, unable to buy more goods if they have exceeded their credit limit. “The credit limit is freed up as soon as suppliers make payments for services purchased,” he concludes.