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Financial institutions should embrace electronic payments over checks

Dec 12, 2018 Dave King

Some payment processing companies and financial institutions are hesitant to embrace innovations in the electronic payment field. Although mobile and online transactions have been labeled as the next big thing in the payment sector for several years, the channels have yet to see large-scale adoption.

For a variety of reasons, consumers have not utilized electronic portals as much as many have predicted. Due to market fragmentation and inconvenient systems, the adoption rate for these payment options has failed to accelerate in the last few years.

Even so, the promise of electronic transactions is such that the market for online and mobile purchases has expanded significantly in recent years. This shows that despite the market being full of payment solutions that have yet to be optimized, consumers still want access to these financial tools. For this reason, banks, lender and other financial outlets need to embrace the electronic movement.

Diversify options
Although one of the main issues with the current electronic payment market is the fact that there are numerous transaction portal technologies available, financial firms should diversify what they offer consumers. Certainly, establishing a unified mobile payment interface that works with all cards and mobile devices is necessary step, but it's not the only way to implement electronic processing.

Many financial firms tend to neglect prepaid and gift card products. However, these financial mediums are very much in demand. A recent survey from the Retail Gift Card Association found that 74 percent of holiday shoppers are planning to give at least one gift card to a friend or family member this year. Generally, the holiday season is the most lucrative time of the year for businesses and payment processing outlets. This seasonal spike in gift card use is reason enough to include prepaid and gift card offerings in any electronic payment strategy.

Vendors want simplicity
Older payment technologies such as checks can take a significant amount of time to process. As a result, many retail outlets are using new electronic channels that allow for faster payment processing.

CFO Magazine reported that a recent survey from the Association for Financial Professionals found that 81 percent of businesses already receive a portion of their payments from major customers through ACH credits. This is a clear indication that enterprises are opting for more agile processing solutions that enable them to manage large-scale transactions. For this reason alone, financial firms should introduce the latest electronic payment tools if they haven't already.