PROVIDENCE – If they haven’t done it already, 41% of businesses are setting up “real-time” payment networks or are discussing it with their banks, according to a new survey from Citizens Bank’s Citizens Commercial Banking brand.
The survey of 150 businesses, ranging in annual revenue from $10 million to more than $500 million, found that more than 75% still make or accept payments using paper checks and more than 45% still make or accept some payments in cash.
However, 90% expect instant electronic payments to “dramatically transform” the way they do business and nearly two-thirds said such real-time systems will eventually mean the end of cash and check payments, ushering in a new era of instant transactions that will improve business cash flows, according to Providence-headquartered Citizens.
The bank described the ongoing shift as “the biggest upgrade to the U.S. payment system” since the Automated Clearing House was introduced in 1974.
Under the conventional payment model, it usually takes a day or more for checks to clear and money to move from one account to another. In contrast, payments can be made electronically by a customer through a real-time payments network and the funds instantly move from one account to another. Information about the transaction also travels with the funds, so recipients know where the money is coming from and why, Citizens said.
The survey found that 60% of businesses said the new networks would improve collection activity and posting to clients’ accounts, as well as helping them manage cash flows more effectively.
In addition, businesses noted real-time payment networks can reduce fraud, include payment data with payments, and automate payments more easily.
“Real-time payments are the most sweeping change to the U.S. payment system since the 1970s and businesses see this as a crucial opportunity to modernize their payment practices,” said Michael Cummins, head of treasury solutions at Citizens. “There are tremendous advantages in terms of speed and certainty of payments. Cash-flow predictability and payment reconciliation will also be greatly improved.”
Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.
