Paying by check is antiquated, expensive and easily susceptible to fraud. It’s also essential if you’re a treasurer for a U.S. corporation. In the United States, check use for business-to-business (B2B) transactions remains at roughly 50 percent despite a multitude of recent advances in payments technology. Simply put, checks aren’t going away any time soon in the United States.
The latest AFP Payments Guide, Not Going Anywhere: Why Checks Still Matter, underwritten by MUFG Union Bank, examines why so many corporates still use checks, why checks are the payment method most susceptible to fraud, and what treasury professionals can do to protect themselves when paying by check.
Why 1 Percent Matters
When AFP published the 2016 AFP Electronic Payments Survey, one particular data point stuck out. B2B payments by check actually increased by 1 percentage point from 2013 to 2016. “While 1 percentage point might not sound like a lot, you have to understand that we’ve observed check use to be declining since 2004, back when it was at 81 percent,” wrote Magnus Carlsson, AFP’s manager of treasury and payments, in a blog post late last year. He went on to note that the survey runs every three years and with each increment, check use has decreased substantially—until now.
The small increase can be attributed to larger organizations using checks more often. The survey found that check usage at businesses with annual revenues of $1 billion or more went from 40 percent to 45 percent. Surprisingly, smaller organizations—which are typically known for clinging to checks—actually reduced check usage by 3 percentage points over the same time period.
But there is another factor at play. Some corporates keep checks because cyberfraud has been skyrocketing.
Greg Litster, president of high-security check provider SAFEChecks, said he has corporate customers who have diminished check use substantially in favor of e-payments—but then moved back to checks. “Over the last year, we’ve seen some of the companies ordering more checks,” he said. “And what we’re told is that they are so afraid of the cyberthreats that they would rather issue a check.”
Despite the well-founded fear of cyberfraud, check fraud remains the payment method fraudsters target the most. According the 2017 AFP Payments Fraud and Control Survey, 75 percent of organizations experienced check fraud in 2016, an increase from 71 percent in 2015. AFP had been observing a declining trend in check fraud since 2010—but that all changed last year.
AFP’s new guide on check payments delves into why check fraud continues to plague corporate treasury and finance, providing readers with how these schemes are conducted—and why companies are often held liable for losses. We also hear from fraud experts, treasury and finance practitioners and bank representatives on some of the best methods you can use to stop fraudsters in their tracks.
Checks are here to stay. While financial professionals should continue to prompt vendors and clients to move to safer and cheaper payment methods, they must take checks seriously. That means investing in the proper protections to thwart would-be fraudsters.
Download Not Going Anywhere: Why Checks Still Matter here.