Rene Lacerte, CEO and co-founder, Bill.com
This article originally appeared in The Huffington Post.
All good things must come to an end — especially those that aren’t very good in the first place. Few decisions could have such a widely felt impact on our economy as getting rid of checks, which have been burdening businesses with excessive costs for decades. It’s time to bid them farewell.
Checks aren’t just outdated — they’re hurting the companies that use them. Every time businesses use checks to pay vendors or their employees, they incur huge untold fees. $65 per check may not sound like a burden, but given that 20 billion paper checks are used each year, the cost to U.S. businesses is more than the market caps of Apple, Facebook, and Hewlett-Packard combined. The value at stake here is greater than that of our largest publicly traded company.
The cost of executing a check goes beyond just payment fees, which averages $13 per check. On top of that you have reconcile costs ($18 per check), error handling ($5 per check), invoice fees ($11 per check), and approval ($18 per check). That adds up to a whopping $65 per check, according to RPMG.
How could checks be so expensive? Once the only ostensible way for businesses to pay their employees, technology has enabled cheaper, better options — right?
Driven by an exploding Fintech industry, the world of finance going digital — and fast. Global investment in financial technology ventures tripled to $12.21 billion in 2014 and is expected to continue climbing in the coming years. Fintech startups are emerging to complement all of the finance industry’s core services: lending, payments, credit, and investing. For example, consumers don’t have to go through stock brokers anymore to make their investments. That’s handled in an app now — and at a lower cost.
There’s little doubt that the proliferation of Fintech startups is improving the lives of consumers, but lost in this tidal wave of technology are businesses, which have an even greater need for the innovation financial software can bring. The stakes are simply higher.
In addition to improving the consumer finance experience, startups have to recognize the tremendous opportunity they have to improve the way companies process payments nationwide. The technology exists to solve this pressing issue. It’s just a matter of time until checks are viewed through a glass pane in a museum, like mechanical cash registers.
There’s no doubt that fintech startups have disrupted our lives — changing many of the ways we interact with the financial institutions we’ve become used to. While tech companies should continue to innovate the consumer experience, there’s an arguably even greater need for disruption in corporate finance. Businesses of all stripes shouldn’t be forced to incur egregious fees to accomplish simple tasks like paying employees.
Technology is often thought of as a window to a better future. But fintech can do so much more than that — it can save hundreds of billions today.