Cheques May Become An Historical Artifact
Changes to the way that Canadians make and accept payments for goods and services holds many positive and worrisome implications for the country’s small- and medium-sized businesses, according to the Canadian Federation of Independent Business (CFIB). Top among the concerns to entrepreneurs is the future of cheque writing in Canada as there is a very real possibility that a federal review may recommend the phasing out of paper cheques in the near future.
“Given the vast majority of firms in Canada are small businesses, it is vital that any changes to the existing payments system does not hinder their growth but rather creates additional opportunities and benefits. Small-and medium-sized businesses (SMEs) need to be assured that they are not being taken advantage of and that there are enough reasons to justify a full switch to electronic payments,” stated CFIB’s executive vice-president Brien Gray.
CFIB recently submitted new research to the Task Force for the Payments System Review, which found that paper cheques are still the most popular form of payment for Canadian small businesses – particularly for business-to-business transactions. While credit card and debit card transactions are the most commonly accepted forms for payment at retail and hospitality firms, cheques represent the largest portion of total sales for all other types of small firms.
“While cheques are still incredibly important to small firms,” said Gray, “if the transition to a new electronic payments infrastructure is done right, there is an opportunity for small businesses to quickly warm to the new options.” The recent Canada Post strike caused much stress and frustration for small firms relying on cheques in the mail as their source of payments. “A fully integrated electronic payments infrastructure for business-to-business transactions would be a welcome step away from dependence on Canada Post for many entrepreneurs,” Gray added.
To help inform policymakers to get the transition right for SMEs, CFIB surveyed small business owners on the current state of the payments system, opportunities for advancement, and obstacles in going electronic. For SMEs, it is critical to ensure that any new payment system introduced is low-cost, secure, accessible, and user-friendly,” stated CFIB’s vice-president of research Doug Bruce.
Findings indicate that SMEs prefer to use cheques as a type of payment since they are low cost, easy to use and help with record keeping to meet compliance and business needs. The cost of accepting (setting-up, processing and reconciling) electronic payments is an issue for business owners, especially for smaller firms. For SMEs, past experiences with electronic solutions providers and credit card companies have eroded trust in the current payments system. Business owners’ views have been tainted by high credit card processing fees and hidden charges. “Electronic solution providers will have to be better at serving entrepreneurs through increased transparency, reasonable costs and choices of payment type,” stated Bruce.
