For businesses, conflating electronic payments with whatever-the-opposite-of-paper-checks-is is shortsighted.
Electronic payment isn’t about forgoing checks for ACH, or card, or wire. It’s about ridding the organization from the time-consuming process associated with checks.
Aside from checks, businesses have other methods, such as ACH, wire transfers, or some form of card (p-card, virtual card, etc.) to make invoice payments. Making payments electronically means finding a solution that leverages alternative methods instead of checks.
Implementing an electronic payments solution isn’t about replacing one payment method (checks) for an electronic one—as in abandoning checks for ACH. Instead, it’s about harnessing every payment type—inclusive of checks—and using the most effective one.
The idea of electronic payments is about making the payment instruction—the crux of the payment—electronically. After all, it has always been about making the payment process better; about finding the shortest distance between you and your supplier.
Statements such as "organizations are more likely to have made greater progress integrating their ACH and paper check systems than with integrating their cards and wire system" align with a binary approach to electronic payments. Here, electronic payment means organizations either use checks or use some other payment form—but not both.
This misses the point of electronic payments entirely. It’s not a race to abandon paper checks; it’s a way of joining many payment types together.
Electronic payments are about changing how a payment is initiated (or communicated), not the shape the payment takes.
Instead of finding an alternative to checks—trying to dethrone the king—a better way to think of electronic payments is to join payments through abstraction.
Abstraction is a term used in computer science. It means higher-level details are ignored, so programmers use what’s necessary to them to get the job done.
You see abstraction at work whenever you order something online. Online retailers specialize in selling products; they don’t concern themselves with the specifics of how shopping cart software works. What matters to them is that your shopping cart order is paid for and shipped out.
This is what the electronic payments paradigm should be.
The “how” of how suppliers are paid should not concern accounts payable—just that suppliers are paid when instructed.
Abstraction of electronic payments is how to handle many different types of payment methods and using the right method when instructed.
When you pay a supplier, payment method is often the least of your concerns.
Redefining the electronic payments paradigm also makes electronic payments future proof. The payments industry is an ever-moving target; payment types and methods are always in flux.
Take for example ACH’s expansion to same-day payments, or nascent blockchain technology such as the bank-friendly Ripple network. Could these payment rails have been imagined a handful of years ago? Or better yet—do you know where the next payment advance will come from?
Abstracting electronic payments makes payments future proof.
Since the concept of electronic payment isn’t about paying by any one specific payment method, adding future payment types or technologies is merely a matter of “plugging in” a new payment standard.
So, whether it’s paying a supplier by a new type of wire transfer (ISO 20022) or through the newly enabled same-day ACH, both you and your electronic payments are ready for wherever the future may go.