4 Reasons Why Your Business Needs To Switch From Cheques To Prepaid
Cheques Vs. Prepaid
In 2004, 81 percent of businesses used cheques for business-to-business payments. In 2007 that number fell to 74 percent. In 2016, the number now sits at a paltry 51 percent. The reason for this rapid fall? Prepaid payments.
In today’s fast-moving society, employees and employers alike don’t have time or money to waste with an outdated and inefficient payment plan like cheques. Open-loop prepaid cards offer consumers, businesses, and governments a fast, efficient, secure, and flexible payment solution while avoiding the pitfalls of credit. Prepaid cards can be used anywhere that MasterCard, Visa, or American Express is accepted, including online and internationally, and is a far superior form of payment when compared to the archaic cheque-based system. According to a recent survey by Leger, 55 percent of Canadian consumers would consider using an open-loop prepaid card after learning about the benefits.
A study conducted by Mercator Advisory Group reveals that in 2015, $3.1 billion was loaded onto open-loop prepaid cards in Canada. Open-loop prepaid cards are the fastest form of electronic payment in the U.S., and this trend is expected to follow in Canada. MAG reported that the total value of money loaded onto prepaid cards was $264 billion in 2014.
Check out 4 reasons why your business–or boss–should switch from cheques to prepaid:
Studies have shown that creating a cheque costs $0.82 vs. $0.13 for electronics payments. HR management software company PaySavvy determined the total cost of issuing one cheque is $17 when you take into account secondary costs. This can prove especially costly for industries that produce and distribute a significant number of cheques. In most cases, prepaid card fees are actually lower than the cost of a chequing account, and there is no minimum balance required with a prepaid card, unlike chequing accounts that will charge fees if you do not meet a certain criteria. According to a Leger survey, 40 percent of Canadian consumers would like a payment card with a set spending limit. 82 perecent of Canadians want a payment card where they would not be charged those fees. In the same survey, 15 percent of Canadians rarely or never stick to a budget and 12 perecent never even set budgets. In addition, 30 percent find it difficult to track their spending with their credit and debit cards.
Paying an employee by cheque can sometimes take days, leaving them short on funds and short on patience. Even worse, some banks will place holds on cheques, limiting the employee to only a portion of their hard-earned wages. This becomes an even bigger issue when dealing with employees who work on the other side of the country or world, work freelance, or are unbanked. Payments can be sent out to prepaid cards in minutes, and payments can be made as often as required. Employees can then use the funds to make online purchases, or anywhere that credit cards are accepted, unlike traditional banking or cash-based systems. Prepaid users can also share money with secondary cardholders or send money for a low cost.
Prepaid cards greatly reduce the security risks related to cash and cheque fraud. Losing a cheque is now a thing of the past. If your card is stolen you do not run the risk of losing everything in your bank account or damaging your credit. All data is encrypted and totally confidential. If you lose your card, simply reapply for a replacement—your card balance stays the same. Most prepaid cards have protection against lost cards, theft, and unauthorized transactions.
While cheques are an easy way to distribute funds, they cannot be tracked, and do not provide any additional advantages to the giver or recipient. With prepaid, employees can get their account balance, transaction history, and other information instantly via online services, mobile devices, and more. Users can also set limits and properly outline a budget, cutting down on pointless expenses. Likewise, management can manage/budget funds, get reporting, and improve employer-to-employee relationships. Each prepaid card is registered by the cardholder before it can be used, allowing companies, governments, etc, to generate a list of users and subsequently market to them effectively. Prepaid cards are also reloadable, allowing an ongoing relationship with the recipient – your company can send email campaigns and additional rewards to maintain a longterm relationship.