You don't have to cast your mind back very far to a time when paying for something with cash or a cheque was the only way to make that purchase or complete a transaction.

Ever since the board of the UK Payments Council set the date of 2018 for cheques to be phased out, there has been widespread impetus to develop other forms of payment, capable of accommodating today's consumer and business environment governed by a digital, borderless economy.

With the imminent death of the cheque in just a few years, the onus is moving from paper to electronic payments, enabling the same job of switching money from one bank account into another in a matter of seconds, irrespective of time and geography.

So, how can these emerging payments evolve and become the precedent for international payments, overturning the cheque writing tradition of the last 350 years?

At last, some of the barriers to adoption of electronic payments are finally being eroded, as well as the constraints of geographical borders as the payments world converges into a more globalised infrastructure. The payments industry is lagging behind other more automated sectors of the financial services market, despite having responsibility for keeping the world's money moving. The goal is a move to e-payments, particularly vital to keep abreast of today's digital world.

If you take the US for example, paper payments still account for 78% of all commercial payments today. A recent study showed that more than 160 billion back office cheque conversions took place in 2009.  Thankfully, the rate of acceleration to e-payments is increasing at around 6% year-on-year as finance directors wake up to the fact that the traditional rationale behind the use of cheques has all but disappeared and that there are serious cost savings on the table.

Typically, a corporate would resist any inertia to change paper payments in order to keep the float income, delay payment and ensure the remittance information is sent along with the payment. The cost of enrolling vendors and suppliers into e-payments can also act as a disincentive if payments are for small and or infrequent amounts, along with the cost and time involved required to keep banking information up to date.

Many corporates embark upon costly cheque-to-ACH conversion programmes executed in-house only for them to fail through a lack of resources. The alternative is to hire specialists to get all suppliers on board as fast as possible, and the return on the investment is attractive, with some firms citing efficiency savings of up to 80%. With new vendor enrolment and beneficiary management capabilities, payment institutions are able to enrol suppliers, capture their beneficiary banking details and then execute payments to these suppliers with the remittance information - worldwide.

E-payments: an evolving market need

The move to e-payments has partly been driven by a strong focus on cost control (the cost of a single cheque in the US can be as much as $10) and heightened interest in innovative technology over the past couple of years. Unlike cheques, which clear at unpredictable times, e-payments allow for much greater visibility and control by allowing corporations to know their daily cash position. They can, therefore, manage their funds all the way up to the time they deliver the file using their investment tools, instead of having to keep a certain amount of cash in a pay-from account, because they don't know when these cheques are going to clear.

Despite the long-term benefits of paper to electronic conversion, companies, particularly mid-sized corporations, are still wary of altering their current processes in these economic times due to IT constraints. However, moving to e-payments also offers regulatory and security benefits (40% of US corporates are moving to electronic payments for this reason alone). Once the corporate has approved the identity of the vendor enroled in the programme, the potential for fraud is dramatically reduced, along with compliance and security requirements of international payments. The immediacy of the payment allows it to be tracked straight away and know exactly when payment is released. 

Banks and other payment providers are finally waking up to the need to help companies move towards this goal of e-payments. Five years ago, there were very few independent companies and even fewer banks offering paper to electronic conversion and vendor management services. Today, corporation can tap into offerings ranging from the collection of banking and other contact information to gathering remittance delivery preferences. This new technology, coupled with the explosive growth of the internet and online communities, is quickly moving to an area where vendors have the ability to manage and update their banking details seamlessly through a secure online platform that is tied to a sophisticated workflow and approval engine.

We are also seeing a major step change taking place with disruptive technologies and processes changing the current complex, non-standardised payment networks.  What is required is an intelligent, intuitive global network that can facilitate such an environment whereby correspondent bank networks are no longer necessary or desired. There are several players in the payments industry today that are building their own global ACH networks, providing seamless access to more than 60 countries (and growing) so that businesses and consumers can benefit from low cost, real time payments and increasingly same day payments.

This e-payments environment allows for a much cleaner transaction process than could ever be possible in a paper-based environment and puts an end to the legacy of slow, cumbersome, siloed international payments, constrained by physical borders. The conversion to this electronic world continues to gain pace, aided by payment innovations, savings and efficiency potential making the process less painful, along with a mindset more predisposed to positive change in this area.

These disruptive forces in the market will make the shift from paper to e-payments even more compelling as payments become faster, more transparent, more accurate and of course, cheaper. As the world opens up and beneficiary banking details become more accessible as they are removed from their silos, the global ACH network will become a reality and set a new benchmark for the payments industry across the world.

David Sear is managing director at Travelex Global Business Payments