15 May RELEVANCE OF FEDERAL RESERVE PAYMENT STUDY FOR B2B AND B2C
Every three years, the Federal Reserve provides a snapshot of U.S. payments in their Annual Payment Study. The latest report revealed a number of important points for our industry and our business.
For business-to-business (B2B) billers there are a couple of things to note.
- ACH made up 61% of the payments in 2012 (Chart 2). Be sure your billing system can efficiently handle these payments.
- Although check volume has dropped over the years, it will remain a stable, and still dominant, noncash payment option well into the future. Bear in mind that check-conversion to ACH makes this number seem lower than actual written checks and you could reap this benefit if your systems facilitate this conversion.
There are also some key findings for business-to-consumer (B2C) billers to be aware of in their planning.
- Debit and pre-paid cards were the fastest growing noncash payments. This is important for a couple of reasons.
- Debit gets you lower merchant fees and therefore more profitability.
- Pre-paid cards pose a risk in that future recurring payments may fail if the card is not replenished, so make sure your billing system has the smarts to detect a pre-paid card and perhaps limit exposure or have the customer put down a backup payment method.
B2C billers in “safe” categories may opt to use PIN-less debit to lower their merchant fees. This used to be restricted to low risk bill-pay industries like utilities, phone companies, etc. but now larger merchants (like Amazon) are starting to use them.
According to the report, 18% of payments were ACH in 2012, which offer the benefit of low fixed fees (typically fixed at $0.20 – $0.60 compared to ~2.75% + $0.20 for a non-swiped credit card). You’re leaving money on the table if you’re not offering this method of payment. Balance that against the longer settlement (2 days) and dispute period (60 days) to determine the risk-reward balance for your business.