Entrepreneurs are Desperate to Switch to Digital Payments. Here’s What’s Stopping Them, Mastercard Says.

Even Gen Z finds it difficult to convince legacy businesses to stop requiring cash and check payments.

BY BRUCE CRUMLEY @BRUCEC_INC

Illustration: Getty Images

Millions of entrepreneurs across the U.S. find themselves in a similar bind in the way they make transactions. Most remain heavily reliant on cash or checks when receiving or making payments, despite their strong desire to switch to faster and safer digital credit options. A new study by financial giant Mastercard indicates just how big that gap between aspiration and action still is, while offering advice to business owners to finally make the switch.

Those insights came with the publication of the “Ready for Change: Why Nearly Half of SMBs Want to Ditch Cash and Checks” report by Mastercard and digital payments news platform PYMNTS. Its survey of more than 400 entrepreneurs last December found that an average 54 percent of participating business owners said they were “very or extremely interested in reducing their reliance” on cash or checks in receiving or making payments.” Yet more than half of respondents remained anchored to those legacy transaction methods.

That’s even the case of digital native Gen Z company owners. Only 22 percent of respondents from that cohort reported they possessed a business credit card, leading 54 percent of those younger entrepreneurs to say they continue relying heavily on cash and checks to make payments. As a result, they also voiced the most enthusiasm for pivoting to credit options.

That same desire to go digital — but difficulty making the switch to online credit methods — was expressed by survey participants of all ages, sectors, and company histories. Indeed, participating owners whose business had been in operation for at least 20 years said 54 percent of their transactions are still done by checks.

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Legacy payment baked into business operations

There are three main reasons why surveyed entrepreneurs said they’d been prevented from making the switch.

The two of those were tied to legacy payment systems being baked into respondents’ business activities. That usually involved supplier or other partners insisting bills be paid by cash or check, or an entire sector like construction or restaurants being firmly rooted in those methods. That means that even when responding owners adopted digital means of settling accounts with their own customers, they were usually forced to continue paying suppliers in legacy cash or check form.

The third reason cited was restricted access to credit payment methods by card issuers themselves — usually due to their demands applicants establish a solid credit record beforehand. But with most small companies forced to continue relying on cash and checks until they obtain business payment cards, building up that required credit record is long and difficult, when not impossible.

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