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Explaining ePayment Fees: Do Electronic Payments Really Cost More Than Paper Checks?

October 14, 2022
ePayment fees explained

As finance teams begin to integrate new technology into their workflows, many accounts payable (AP) and accounts receivable (AR) professionals are noticing the benefits that come with electronic payments (ePayments).  

By providing multiple payment methods for vendors beyond paper checks, businesses are helping to ensure payments are executed quickly, accurately and securely. For suppliers, electronic payments power predictable cash flow and help ensure visibility into payment status. 

Here’s a breakdown of three popular payments methods commonly available to vendors:

Mastercard (VCC)AvidPay DirectPaper Check
SpeedPayment within 1 business dayPayment within 1-3 business daysPayment within 7-10 business days
EaseMerchant account makes it simplePayment simply shows up in your accountThere's the hassle of waiting for the mail and depositing payment
SecurityOne-time use provides extra layer of securityTransfer from one verified bank to another provides secure transactionTop target for fraud

Now let’s take a deeper dive into the benefits, drawbacks and fees associated with each payment method:

Check payments: Familiar, but slow and susceptible to fraud

Paper checks are a physical representation of a checking account where the associated bank’s routing number gets mailed to a payee. Once an invoice is approved and a check is cut, it can take anywhere from seven days to a few weeks for payment to reach a vendor.  

What are the benefits of paper check payments? 

The main benefit of utilizing check payments is that they are widely accepted and are a familiar payment method to most businesses.  

What are the drawbacks of paper check payments? 

Despite the benefits, paper checks can get lost, are highly susceptible to fraud and present missed opportunity costs. 

Those costs are what you could otherwise be doing with the funds if you weren’t waiting for them to arrive, clear and be deposited. For instance, would you invest in inventory for another job, supplies to grow your business or maybe a marketing campaign? What is the cost of not having those funds? 

Additionally, according to the Association for Financial Professionals’ 2021 Payment and Fraud Control Survey, checks continue to be the top vehicle for payment fraud. The survey points out that 66% of businesses that were victims of payments fraud were targeted via checks. 

Relying on checks may be more expensive than you think. 

What fees are associated with paper check payments? 

For finance teams to process check payments, they must endure payment fees that are expensive to maintain due to the personnel needed to maintain efficiencies, the potential time being wasted, and the cost of supplies such as stamps, envelopes, paper, etc.  

For suppliers, checks are free to receive.  

Why do suppliers have to pay fees for paper check payments? 

Usually, banks can deposit check payments for free unless the supplier wants to have the money deposited immediately or if they don’t have a bank account.  

Though suppliers typically avoid fees with paper checks, the slow payment timelines can negatively impact cash flow.  

AvidPay Direct: Enhanced direct deposit in just a few days

AvidPay Direct helps to process payments by using an enhanced direct deposit process that takes only a few days for funds to clear. 

What are the benefits of AvidPay Direct payments? 

AvidPay Direct is an electronic payment method that transfers funds electronically from one verified bank account to another, while providing security and 24/7 fraud monitoring. Funds arrive in your account within one-to-three business days of your customer approving payment. 

AvidPay Direct payments eliminate the need to deposit a check or run a card. It’s an attractive option to use when you have limited resources on your team to handle reconciliation of payments, want to avoid paper and prefer a direct payment along with the data you need, when you want it.  

Enhanced remittance notes are also included with every payment for easy reconciliation.  

What are the drawbacks of AvidPay Direct payments? 

One drawback to using AvidPay Direct is the industry-standard transaction fees.  

Why do suppliers have to pay fees for AvidPay Direct payments? 

Fees are associated with AvidPay Direct because the payment method includes 24/7 fraud monitoring efforts, access to support teams and enhanced remittance information. 

Mastercard: The fastest, safest option

Many finance teams accept processing a payment via Mastercard (or virtual credit card) because they are widely regarded as the fastest, safest payment option available today.  

Virtual cards are randomly generated 16-digit numbers that work like credit cards. These cards can only be charged one time for a specified amount to pay a specific invoice. 

What are the benefits of Mastercard payments processing? 

In addition to the speed and security benefits, Mastercard is popular because it uses simple processing for transferring funds. 

These cards are smart choices if you already have an existing merchant account set up, need full transparency into the invoice to payment process, want quick access to funds and can budget the minimal transaction fees as part of operating costs. 

Businesses often opt for credit card payments because they have a structure in place to receive payments through card processes and because payment is quick. It allows them to direct funds to their account and receive their money within one business day after payment approval.  

What are the drawbacks of Mastercard payments? 

Typically, the most common challenge suppliers have when processing Mastercard payments are the transaction fees and the time it takes to manually input credit card numbers.  

Finance teams are required to manually input credit card numbers into their payment terminals, which can introduce human error.

With Straight Through Processing (STP)*, however, payments travel from approval to a merchant account on electronic systems using automation. There are zero human touchpoints until it’s time to upload remittance data into your ERP (Enterprise Resource Planning) system.  

WATCH: Straight Through Processing from AvidXchange

Typically, the fees associated with Mastercard payments are interchange fees, assessment fees and processor’s markup fees.  

The amount of these fees can depend on several factors including the industry in which the company belongs, the type of card being used, online purchases versus in-person purchases and more.    

Why do suppliers have to pay fees for Mastercard payments? 

Suppliers typically pay fees for Mastercard payments to accommodate for the speedy payment processing, convenience and security of virtual credit cards (VCCs).  

VCC payments include highly valuable remittance data, such as invoice amount, number and date, and payment information. This remittance data makes it much easier for AP/AR professionals to manage invoice and payment data more securely than individual check stubs (which can tend to go missing).  

Are ePayment fees worth it?

It’s important to keep in mind that processing fees are necessary to ensure businesses can manage their cash flow effectively. 

Digital payments are generally associated with higher fees as opposed to paper, but in exchange, digital payments bring more predictable, reliable cash flow. 

It’s up to individual businesses to decide which form of payment makes the most sense for their cash flow needs. 

At AvidXchange, we understand the needs of a business can change over time. So, we offer suppliers in our AvidPay Network the ability to change their preferred payment method at any time by speaking to a member of our dedicated supplier support team. 

Click here to learn more about how AvidXchange helps suppliers get paid for the work they’ve already done.  


*Not all suppliers are eligible for Straight Through Processing services
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