While U.S. consumers are increasingly making payments with electronic alternatives, U.S. businesses still make more than 80% of their payments with paper checks. For some businesses, creating an end-to-end electronic supply chain offers the possibility of linking payments to their accounting systems, thereby permitting faster processing of invoices and payments and reducing the overall cost of the order-to-pay cycle. For other businesses, while an electronic financial supply chain may offer certain benefits, it also evokes concerns about high technology costs, increased security problems, shortened payment cycles, and changes to familiar business practices without significant immediate benefits.
The migration to electronic payments is a part of the larger process of achieving cost reductions in business-to-business (B2B) transactions. Over the past several decades, banks and solution providers have introduced various technologies aimed at further automating B2B commerce, but, for the most part, these technologies were affordable for only the largest firms. Recent technological advances—particularly the widespread use of the Internet—have meant that a wider range of businesses are able to automate more of their business processes. Killen & Associates' (2002) research indicates that, while the time it takes a company to Recent technological advances are allowing a wider range of businesses to reduce paper handling and automate more of their business processes. process, deliver, and invoice for an order has fallen from as much as five weeks in 1960 to two or three days in 2000, the time it takes for a company to make a payment remains about the same—45 to 60 days.1 As the exchange of information along the supply chain becomes increasingly electronic and automated, it raises the question: Will payments follow?