Summary
- Payment friction often happens outside the financial institution, especially in vendor payments and onboarding.
- Manual processes and checks continue to slow payments and increase risk.
- Financial institutions can help by enabling digital payments and simplifying vendor enrollment.
- Greater visibility and automation improve efficiency and the overall customer experience.
The Payment Experience Doesn’t Stop at the Bank
Many financial institutions are modernizing payments by investing in faster payment rails, stronger fraud detection, and improved digital banking experiences. However, the real friction in payments may not happen inside the bank. Instead, it can happen in the broader ecosystem where payments are sent, received, and managed.
Accounts payable teams still spend hours managing vendor payment preferences, mailing checks, and reconciling fragmented payment methods. Vendors may require specific formats or insist on checks. Payment visibility often breaks down once a transaction leaves the organization.
As a result, even if your financial institution offers modern payment capabilities, the overall vendor payment experience can still feel inefficient when internal processes rely on outdated methods. Reducing payment friction requires looking inward—examining how payments move through your own accounts payable operations and identifying where manual processes, check dependency, or lack of visibility are slowing things down.
The Hidden Friction in B2B Payment Workflows for Bank Customers
Despite the growth of digital payments, many banks still rely heavily on manual payment processes. Though their usage has dropped in recent years, checks remain a significant payment method in B2B transactions—often because vendor preferences or operational limitations make digital adoption difficult.
This creates operational challenges for both vendors and the financial institutions.
Common sources of commercial bank B2B payment friction
- Vendor preference for checks: Many vendors still request or require paper checks, slowing the transition to digital payments.
- Manual vendor onboarding: Enrolling vendors in ACH or virtual card programs often requires significant outreach and documentation.
- Fragmented payment methods: Institutions frequently manage multiple payment types across different systems.
- Limited payment visibility: Banks and credit unions may struggle to track payment status once funds leave their accounts.
- Exception handling and reconciliation issues: Failed payments, incorrect details, or mismatched remittance information can require manual intervention.
These issues may exist outside the direct control of your financial institution, but they directly influence how your vendors perceive the payment experience. When payments are slow, complicated, or difficult to track, the friction affects both operational efficiency and vendor satisfaction.
Why Does Payment Friction Matter for Financial Institutions?
When financial institutions struggle to pay their own vendors efficiently, several consequences often follow.
Slower electronic payment adoption
Internal teams may hesitate to migrate away from familiar processes if onboarding vendors or managing payment preferences becomes too complex, stalling modernization efforts across the institution.
Higher exposure to check fraud
Paper checks remain one of the most vulnerable payment methods for fraud. Continued reliance on checks increases risk for both financial institutions and their customers.
Higher exposure to check fraud
Paper checks remain one of the most vulnerable payment methods for fraud. Continued reliance on checks for vendor payments increases the institution’s own risk exposure—the same risk they counsel their members to avoid.
Operational inefficiencies for staff
Manual payment processes create more work for internal accounts payable teams, diverting time and resources away from higher-value functions and making it harder to scale operations efficiently.
Missed opportunities for cost savings and control
Institutions that modernize their own vendor payment workflows gain greater visibility into cash flow, reduce processing costs, and build the operational expertise needed to guide members through the same transition.
How Can Financial Institutions Reduce Payment Friction?
Financial institutions don’t need to overhaul their entire operations overnight to make a meaningful impact. By modernizing their own vendor payment processes through the right partnerships and integrated solutions, they can remove friction from within and build the operational foundation to guide members through the same transition.
1. Supporting the transition away from checks
Paper checks continue to create delays, operational costs, and fraud risks. With federal initiatives encouraging a gradual phase-out of government check payments and fraud concerns rising, financial institutions should lead by example and explore digital alternatives for their own vendor payments, including:
- ACH payments
- Virtual card payments
- Wire transfers where appropriate
- Other digital payment methods aligned with vendor preferences
Moving away from checks internally not only improves efficiency but also strengthens payment security, reduces administrative workload, and positions the institution as a credible advocate for the same transition among members.
2. Simplifying vendor payment enablement
One of the biggest barriers to electronic payment adoption is vendor onboarding.
Financial institutions may lack the internal bandwidth to contact every vendor, collect payment details, and manage enrollment into digital payment programs at scale.
Partnering with solutions that support vendor enablement can dramatically accelerate the transition.
- Vendor outreach and enrollment programs
- Secure collection of vendor banking information
- Ongoing management of payment preferences
- Support for vendors transitioning from checks to digital payments
When vendor onboarding becomes easier, institutions can expand their use of electronic payment methods more quickly and with less strain on internal teams.
3. Providing greater payment visibility
Modern financial institutions increasingly need real-time insight into their financial operations. Payment visibility is a critical part of that expectation.
Without centralized visibility, accounts payable teams often spend significant time answering questions such as:
- Has the vendor received the payment?
- When did the payment clear?
- What remittance information was included?
- Why did a payment fail?
Payment automation and integrated payment solutions can provide a centralized view of payment activity across multiple payment types. This visibility helps banks track payments, simplify reconciliation, and improve communication with vendors.
4. Strengthening fraud protection across payment methods
Fraud risk continues to evolve as payment methods diversify. Check fraud, phishing attacks, and business email compromise schemes are all ongoing concerns for finance teams.
Reducing payment friction should never come at the expense of security. In fact, automation often strengthens fraud prevention by introducing standardized controls.
Payment automation solutions can support stronger protection by enabling:
- Multi-layer approval workflows
- Secure vendor payment data management
- Automated payment validation processes
- Monitoring tools that help identify suspicious activity
By adopting secure digital payment methods and automated controls for their own vendor operations, financial institutions reduce both internal friction and fraud exposure—and gain firsthand experience with the same tools they recommend to members.
The Role of Integrated Payment Automation
For many financial institutions, the most effective way to reduce payment friction for your vendors is through integrated payment automation.
These platforms connect financial institutions with the accounting and core systems their own finance and accounts payable teams use every day. Instead of managing vendor payments through separate tools or manual processes, payment automation integrates directly into existing internal financial workflows.
Integrated payment automation can help financial institutions:
- Initiate and manage multiple payment types in one platform
- Automate reconciliation and remittance data management
- Enroll vendors into digital payment programs
- Track payment status and reporting across transactions
- Reduce manual processes in accounts payable operations
For financial institutions, these capabilities don’t just improve internal efficiency—they build firsthand expertise with the same tools and workflows they can extend to members and customers.
Turning Payments Into a Strategic Advantage
Historically, vendor payments have often been treated as a back-office function within financial institutions, but that perspective is changing. Institutions increasingly recognize that modernizing their own payment operations is a strategic opportunity—not just an administrative one.
Financial institutions that reduce friction in their own vendor payment processes can:
- Improve operational efficiency across internal finance and accounts payable teams
- Accelerate their own adoption of secure digital payment methods
- Reduce internal exposure to check-related fraud
- Build the institutional credibility to guide members and customers through the same transition
In a competitive financial services landscape, operational excellence in payments can strengthen the institution’s position from the inside out.
Looking beyond your institution’s walls
By simplifying their own vendor payments, adopting electronic payment methods, and automating internal accounts payable workflows, financial institutions can remove friction where it starts — within their own operations.
The institutions that modernize internally first will be best positioned to deliver the efficient, secure payment experiences that members and customers increasingly expect.
Integrated, automated payment solutions from AvidXchange can help your financial institution meet the needs of their vendors. If you want to learn more about payment modernization, check out our guide on how payment security can help win member trust.
The information presented on this page is based on research and intended for educational purposes only. Anyone seeking to follow the information contained herein should consult their own advisors and conduct their own research prior to doing so. AvidXchange, Inc. and its affiliates disclaim any and all liability resulting from reliance on the information contained herein.