Japan Ditched Floppy Disks, but Can Businesses Ditch Paper Checks?
Technological innovation moves fast, but sometimes businesses can move slowly. Or even not at all. Take for example the news from Reuters that the Japanese government officially, and finally, decided last month to cease the use of floppy disks for things like business and regulatory reporting, among the over 1,000 other required use cases. The […]
The post Japan Ditched Floppy Disks, but Can Businesses Ditch Paper Checks? appeared first on PYMNTS.com.
Technological innovation moves fast, but sometimes businesses can move slowly. Or even not at all.
Take for example the news from Reuters that the Japanese government officially, and finally, decided last month to cease the use of floppy disks for things like business and regulatory reporting, among the over 1,000 other required use cases.
The last, new floppy disk was manufactured in 2011, according to The New York Times, and there have not been any new products produced in the time since. But, for the last decade and change, many Japanese businesses — including mines, oil companies, retailers, shopping centers and more — were required to submit documents to regulators and each other on floppy disks.
While the story of Japan’s longstanding embrace of historically outdated technology is a fun one, particularly given the nation’s reputation as a tech powerhouse, it is also illustrative of a situation that B2B businesses know all too well. Widespread use should not be equated with efficiency, and doing things the way they’ve always been done should not be equated with sustainable business growth.
As 40% of B2B payments, for example, are still made with paper checks, and 81% of companies still pay other enterprises through those paper-based channels.
But the iceberg of institutional inertia holding back digital B2B payments progress is beginning to thaw, and Japan’s transition away from floppy disks already has firms eyeing the opportunities that embracing digital transformation can offer.
Read also: New Milestone for US E-Invoicing Could Pave Way for Paperless B2B Payments
Legacy B2B Payments Are Holding Back Businesses
A growing confluence of technological innovation, regulatory support, market demand and the operational benefits of digital payments is increasingly eroding the long-standing institutional inertia that has historically hindered progress in B2B payments.
“B2B payments haven’t evolved much from the modalities that dominated the landscape 40 or even 50 years ago,” Boost Payment Solutions Chief Operating Officer Illya Shell told PYMNTS in May.
“Traditionally, payments were an afterthought,” Shell added. “But modernizing global B2B payments is an enormous opportunity.”
Only a small percentage of B2B payment flows have been digitized or optimized, he said, noting the market is young.
“Much of what’s left is really hampered by rigid and inflexible systems,” he said.
Ernest Rolfson, CEO and founder of Payments-as-a-Service solution Finexio, told PYMNTS in a June conversation that “corporations in America are using some very old, very reliable monolithic systems to manage their treasury function.”
But those older systems aren’t making muster or moving the needle much as the global operating landscape enters the second quarter of the 21st century. The PYMNTS Intelligence report in “Getting Paid: Digital Payments for Improving Cash Flow and Customer Experience” found that 79% of B2B suppliers want to receive digital payments, including wire, ACH and virtual cards. Faster payment processing is not the only impetus, as 76% of firms believe that buyers are likelier to pay on time when they pay electronically.
See also: How APIs Bridge Modern and Legacy B2B Payment Architectures
Embracing and Creating a New Era for B2B Payments
As modernization initiatives continue to gain momentum, observers say the adoption of digital payment solutions in the B2B sector is poised to accelerate, driving efficiency and competitiveness in the global marketplace.
WEX Chief Strategy Officer Jay Dearborn told PYMNTS in May that bringing B2B payments fully into the digital age needs a global platform with three elements — payments, data and software — working concurrently to help simplify commercial transactions.
“The network of buyers and sellers is incredibly complex,” Dearborn said. “When I think about modernization, I’m always trying to think about our largest customers and our smallest customers. What are the use cases that payments will help them unlock, creating more ease in the way that they do their business?”
Digital B2B payments generate a wealth of data that can be harnessed to gain valuable insights. By analyzing spending patterns, optimizing supply chains and enhancing decision-making processes, businesses can derive benefits from this data.
At the same time, seamless integration with enterprise resource planning (ERP) and accounting systems simplifies financial management and reporting, further driving the adoption of digital payments.
The cost efficiency and operational benefits of digital payments cannot be overstated. By reducing the costs associated with paper-based processes and manual reconciliation, digital payments offer savings. Moreover, real-time payments and improved transaction visibility enable better cash flow management, which is crucial for businesses of all sizes.
PYMNTS Intelligence found that 45% of small- to medium-sized businesses (SMBs) cited manual invoice review as a problem when making payments, with 19% saying it was their top issue.
“With deep learning and advancements in computer vision, AP [accounts payable] tasks are very automatable compared to where they were 10 years back — it has made a huge difference,” Krishna Janakiraman, head of engineering at Ottimate, told PYMNTS in April.
“There is a tremendous amount of efficiency that could be driven through using AI when it comes to automating the digitization of paper invoices,” he added.
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The post Japan Ditched Floppy Disks, but Can Businesses Ditch Paper Checks? appeared first on PYMNTS.com.