How your bank’s client-facing teams should position the benefits of virtual cards to support the transition away from checks.
Digital payment methods, like virtual cards, are growing in popularity among mid-market businesses, and Juniper Research predicts they will reach a processing volume of $13.8 trillion by 2028. This adoption can be attributed to the significant business benefits they offer, including:
- Easy access to credit lines
- Better cash flow management
- The ability to pay suppliers faster
Despite this, many mid-market finance teams remain committed to checks, which creates an intriguing opportunity for banks. If banks can successfully roll out commercial cards to these businesses, they stand to gain substantial non-interest income.
So, how exactly can banks support mid-market finance teams in their shift from checks to virtual cards?
To help inform banks’ strategies for promoting their virtual card programs, we surveyed 500 financial professionals employed at mid-market US businesses. In this article, we’ll share our findings to reveal:
- The top pain points of mid-market finance teams
- Why many still rely on checks
- The blockers to adopting virtual cards
- Top incentives banks should offer to encourage virtual card adoption
Interested in digging deeper? Download the full survey dataset here.
Key challenges faced by mid-market finance teams
Our research revealed the accounts payable process to be the most time-consuming task faced by mid-market finance teams, surpassing other responsibilities like expense management, accounts receivable, and even financial planning and strategy.
Clearly, the accounts payable process is more than ripe for transformation, and finance teams are very much on board with this sentiment. 92% told us that increasing the efficiency of their accounts payable processes was a priority for the year. After all, the technology being used as part of the AP process is particularly outdated, with as many as 71.2% of businesses still reliant on checks to pay suppliers, comparable only to business credit cards used by 70.4% of respondents.
The challenges with checks are wide-sweeping and well-documented. Among the surveyed cohort, 37.6% said the processing time was too long, while 37.4% complained of lost or stolen checks, and 35.7% highlighted security and fraud concerns.
The biggest pain point associated with checks is their processing time, closely followed by security concerns. So banks will resonate with their clients by highlighting the fast processing speeds and strong security features available with virtual cards.
Reasons for sticking with checks
Despite acknowledging that checks are slow, inefficient, and prone to fraud, 71% of mid-market businesses continue to depend heavily on them. Why?
According to our survey, this is mostly out of habit. 44.1% of respondents cited familiarity and comfort as a reason to stick with checks. It’s probably this familiarity that leads 36.5% to believe that checks give them more control over the timing of their payments and 36.2% say that it makes record-keeping easier. Plus, despite the security concerns mentioned above, this sense of comfort even goes so far as to convince 34.6% of respondents that checks are more secure.
Another blocker to abandoning checks is that they remain defacto across the whole US B2B ecosystem. 33.7% said that their suppliers will only accept checks or prefer checks, which makes it a difficult payment method to shake off.
Given that the residual dependence on checks often stems from a sense of familiarity and comfort, Banks should offer comprehensive hands-on support and guidance on the advantages of switching to virtual cards, including features like advanced payment scheduling and enhanced security.
Moreover, concerns that suppliers may not accept virtual cards suggest that finance teams aren’t fully aware of the comprehensive supplier enablement programs offered by banks to onboard vendors to electronic payments.
Banks can reshape this perception through targeted educational campaigns, such as webinars and informational sessions designed to clarify how supplier enablement programs work. Banks can also build trust and understanding by demonstrating how these programs can facilitate a smooth transition for both clients and vendors.
Additionally, sharing case studies and success stories from businesses that have effectively implemented these solutions can highlight the positive impact on supplier relationships and transaction efficiency. Offering personalized onboarding support for finance teams and their suppliers is crucial; by providing hands-on assistance, banks can address specific concerns, ensuring that both finance teams and suppliers are comfortable with the transition process.
Blockers to adopting virtual cards
Awareness of virtual cards amongst mid-market finance teams is high. 94% of respondents said they were familiar with them. Adoption amongst those respondents is already almost 50%. So what’s causing the remainder to drag their feet?
For 14% of respondents, the main reason for hesitation is a lack of understanding of how they work and a concern that integrating them into current processes would be too time-consuming. Beyond that, others just don’t see the point. 12.8% say they don’t think their business would benefit, and 11.8% are worried about their perceived higher costs.
To convert hesitant finance teams, banks should offer detailed, step-by-step onboarding guides for virtual card programs, highlighting the extensive support available from the bank during the transition.
It’s also essential to clearly articulate the financial advantages of virtual cards compared to other payment methods. This can be done by showcasing bespoke rebate offers based on the client’s recent transactions.
Top incentives banks should offer to encourage virtual card adoption
According to our survey, the most important benefits banks should highlight are efficiency and security. 37.2% of respondents mentioned ease of use, 35.4% cited time savings, 33.2% highlighted security features, and 32.6% voted for simplified reporting as primary reasons for adopting virtual cards.
The next priority was financial incentives. 33% of respondents said cost savings, and 32.4% said rebates, rewards, and cashback were important factors when evaluating virtual cards.
And finally, another important consideration is the service provided by the banks. 25.2% appreciated the assistance banks offered in helping suppliers accept card payments and 24.4% valued their support in managing payments and accounts.
When discussing the incentives of virtual cards, banks should lead with efficiency gains, followed by security features. It’s also important to highlight the services you offer to ensure the client knows they will be supported during the transition and beyond.
How Codat can help banks accelerate virtual card adoption
Banks are playing a key role in switching mid-market businesses away from inefficient payment methods to more modern solutions that will benefit their businesses. However, we know that a key bottleneck in supporting this transition is accessing the right data in the right format in a timely and secure manner.
To support our banking partners, we created our Supplier Enablement product, which allows banks to:
- Access to the data they need to onboard more clients through targeted campaigns
- Reduce time spent collecting and processing data
- Accelerate the speed-to-spend
- Cut spend churn in half, through continued visibility of supplier data
