Are Online Payments Really Secure?
Today, almost every element of our daily lives have been disrupted by technology. Our analog world has moved entirely online, and the global pandemic has only increased our reliance on software — especially for tasks that are essential to work.
However, when it comes to B2B payments, about 50% are still made via paper checks, meaning businesses everywhere are waiting weeks (if not months) to collect mission-critical revenue. On top of being incredibly inefficient, paper-based payment methods are also highly susceptible to tampering and fraud.
Still, many AR departments don’t see a way out: they’ve found themselves in a state of tenable inefficiency for so long that they’ve succumbed to the reality of manual processes that siphon time and money away from their businesses.
That’s because digital payment methods make sense for peer-to-peer transactions since those tend to be small — for example, if you’re using Venmo or PayPal to pay a friend back for dinner, it's unlikely that you’ll be sending over $100 through these apps at any given time. However, B2B transactions tend to be much larger, which is why online payment security is top of mind for finance teams that are searching for digital payment solutions.
So, how can businesses ensure they’re making secure payments online, and what do AR departments need to know before choosing an optimal digital payments solution?
Why are online payments more secure than manual payments?
Contrary to what most people believe, digital payments are actually much more secure than paper-based payment methods.
According to the Association for Finance Professionals, checks are, without a doubt, the number one vehicle for both attempted and actual fraud when it comes to B2B payments. In fact, between 2015 and 2019, 73% of surveyed companies experienced actual or attempted fraud, and for 70% of those companies, the fraud was associated with paper check payments. On top of that, on average, eight people will handle a check before it goes completely through the full payment cycle. Each time a check is exposed to an individual party, it increases the risk of that check being tampered with.
Rest assured, customers can pay securely online and businesses can use digital solutions to automate the entire cash cycle. Digital payments remove the need for checks altogether, and therefore greatly reduce risks like tampering, fraud, and human errors. Unlike checks that inevitably pass through the hands of 8 people before getting deposited, a digital payment just goes to 2 parties: the sender and the receiver of the payment. On top of that, digital payments use algorithms and smart contracts to protect against tampering and ensure the payment is received by the intended payee.
What are the advantages of online payments?
In addition to ensuring secure online transactions, digital payments have many advantages. Namely, they help finance teams save on the most meaningful elements of any business: time and money.
Here’s how digital payments can change the game for your finance organization:
- Speeding up time to cash: In addition to being highly susceptible to fraud, checks also increase your AR department’s DSO time as a result of mail float: the time it takes for a check to be sent through the postal system from the sender to the receiver. Digital payments eliminate mail float entirely, and depending on the type of digital payment that’s being used (eCheck, ACH payments, direct deposits, phone payments, etc.), they can be processed instantly or within a few business days. For companies relying on revenue to properly schedule operations and stay solvent, digital payments can make or break the access of a business.
- Reducing fees: While checks appear to eliminate transaction fees, there’s actually a high labor and processing cost associated with them. According to Bank of America, it costs your business anywhere from $4 to $20 to process each paper check. If your business is receiving and processing 5,000 paper checks per month, that can cost you $1.3k daily, $40k monthly, and $480k yearly just to get your checks in the bank. The right digital payment solution eliminates the cost of processing paper checks because it will automate your entire cash cycle for you.
- Enabling recurring payments: Autopay and recurring payments are incredibly helpful when it comes to getting better insight into your company’s revenue and helping you plan for future operations. When it comes to paper checks, it’s much harder to plan for recurring payments even if you know you’re getting checks from the same payer every month because those checks could be sent at different times, get lost in the mail, be tampered with, or be written incorrectly. Digital payments eliminate the potential for errors and also allow your company to easily collect recurring payments on the same time and day of each week or month. In this way, secure online payments can help your business collect revenue in a more organized and predictable way.
- Increased security: As we stated above, paper checks are an incredibly risky payment method, so online payment security is critical for AR departments looking to switch from manual to digital payments. The good news is that EFT transfers are protected by the Electronic Fund Transfer Act (EFTA), which gives users legal recourse if they become the victim of unauthorized transactions and lost or stolen debit cards. It also allows banks to set a withdrawal limit on debit cards to protect against fraud and allows individuals and businesses to seek compensation if their banks violate EFTA guidelines. On top of that, digital payments are less likely to be lost in the mail or fall prey to fraud by internal employees.
- More flexibility: When it comes to making an online transaction, payers have much more flexibility. They can make payments anytime, anywhere, and initiate them without having to adhere to standard post office hours or spend money on postage. On top of that, employees, contractors, and third parties often prefer receiving payments digitally because they can get their money much more quickly.
- Easy integration options: One of the most convenient aspects of secure online payments is that payment portals can be easily integrated into your existing ERP solution so that AR cycles can be completed in the same system that you use to manage other aspects of your business. Digital payment options are available for both Sage Intacct and NetSuite. If you want to learn more about how your company can accept digital payments via NetSuite, check out our guide here, and if you want to learn about best practices for accepting digital payments via Sage Intacct, be sure to read our blog here.
Why do online payments matter for your business?
Cloud and blockchain-based AR solutions can automate the entire cash cycle, meaning your team can focus on what really matters: driving more revenue. Additionally, by automating every step of the AR and AP processes, digital payment offerings can help take your finance organization to the next level.
Here’s why online payments matter for your business:
- Speed Time to Cash: Offering a secure online payment option to your customers through smart invoices and embedded payment options allows you to collect your revenue more quickly. These kinds of features will make it possible for your business to easily reduce DSO.
- Streamlined processes: A safe online payment solution will allow your company to streamline cash flow management with automatic reconciliation of daily bank transfer data. They’ll also allow your team to save time through automated cash application and the ability to easily reconcile deposits, refunds, disputes, fees, and adjustments.
- Better analytics: The right online payment solution will wrap data-driven applications around payment flows, meaning your finance team will be able to gain more insight into critical functions like collections and reconciliation. You’ll get more insight into where your revenue is coming from, and this information can be relayed to your sales and marketing team so you can continue to reach out to like-minded customers.
How can your finance team choose a secure online payment option?
Today, B2B payment volume is estimated to be over $125 trillion, which is four times the size of consumer-to-business payments. That means that trillions of dollars are currently susceptible to the drawbacks of paper-heavy payment processes.
Payment security online is top of mind for businesses everywhere. The good news is that, for finance teams looking for a way for their customers to pay them through secure electronic payment methods, there are many options available.
Ideally, an online payments option will do the following:
- Be able to be easily integrated into your existing ERP system
- Reduce DSO and speed up your time to cash
- Save your business money by eliminating the need for paper checks
If you’re ready to make the switch to digital payments and want to talk through online payment security methods, you can request a demo with us here.