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

Key Summary

• Despite a strong desire among small business owners to abandon inefficient cash and check transactions, many remain trapped by legacy workflows, supplier requirements, and rigid credit qualification standards that prevent the adoption of digital alternatives.
• To bridge this gap, financial institutions are beginning to evolve their underwriting processes, moving beyond traditional credit scores to incorporate holistic data like cash flow insights, customer reviews, and payment consistency.
• Successful digital transformation isn't just about swapping payment methods; instead, it requires a gradual approach where entrepreneurs integrate modern credit tools into their existing invoicing and accounting systems to unlock better data, forecasting, and growth opportunities.

Even Gen Z struggles to convince legacy businesses to stop requiring cash and check payments.

Millions of entrepreneurs across the U.S. find themselves in a similar bind when it comes to making transactions. Most remain heavily reliant on cash or checks for both receiving and making payments, despite their strong desire to switch to faster, safer digital credit options. A new study by financial giant Mastercard shows just how wide that gap between aspiration and action still is, while offering business owners advice 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, on average, 54% of participating business owners said they were “very or extremely interested in reducing their reliance” on cash or checks for receiving or making payments. Yet more than half of the respondents remained anchored to those legacy transaction methods.

That’s even the case with digital native Gen Z company owners. Only 22% of respondents from that cohort reported having a business credit card, leading 54% of younger entrepreneurs to say they continue to rely heavily on cash and checks for 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 businesses had been in operation for at least 20 years said 54% of their transactions are still conducted by check.

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 that applicants establish a solid credit record beforehand. But for most small companies, forced to continue relying on cash and checks until they obtain business payment cards, building the required credit record is long and difficult, and can be impossible.

That requisite also explains why younger entrepreneurs who had launched their enterprises only recently were found to be the most reliant on cash or check payments, despite being digital natives who mostly use online or mobile platforms for personal consumption.

Despite those enduring sticking points in entrepreneurs’ efforts to pivot from cash to credit, Mastercard’s global head of small and medium enterprises, Mark Barnett, says things are moving forward on both sides of that payment equation.

Changing Credit Qualification Metrics

For starters, he notes, card issuers like Mastercard are realizing there are far more entrepreneurs who want the speed, safety, and customer data collection advantages that using credit pay methods provide than there are small businesses now using those assets.

As a result, many card issuers are beginning to examine other financial and business metrics beyond traditional credit records when evaluating applications from smaller companies. Those include an entrepreneur’s broader history of reliably paying bills, as well as consolidated cash flow insights, customer reviews, and even their social media presence.

As that happens, Barnett says entrepreneurs themselves need to rethink their views and the structuring of their transaction practices to be able to update them effectively.

“Cash and checks are not just payment methods,” Barnett said in email comments to Inc. about on the survey’s results. “They’re workflows that are embedded in how businesses invoice, approve, reconcile, and keep records. Simply adding a credit product does not change that. To drive real change, digital solutions need to replace or integrate with the underlying workflow, not just the transaction itself.”

Barnett warns that the way those legacy payment workflows are modernized to digital credit options will differ for each company, as well as by the sectors they operate in. But the key to making the switch, he says, is to begin that process with one part of the wider system, and gradually spread those changes to ensure they “feel like an upgrade, not a disruption” as they advance.

“Tools must map seamlessly onto how businesses already handle invoices, approvals, and supplier relationships,” Barnett said, who noted that’s more happening more as rising numbers of entrepreneurs make a determined effort to escape from the legacy cash and check trap.

“The silver lining for these businesses is that the appetite for digital transformation is growing,” he continued. “This is part of a broader shift we’re seeing across small businesses globally: digital payments, access to capital, and protection against cyber threats are no longer ‘nice to have’ — they’re critical to survival.”

Digitizing Pay System Provides Compound Benefits

So, what are the best ways for small business owners to shift from cash to digital credit as their primary payment method?

According to Barnett, they should “start with one high-friction workflow” and gradually spread to others. In doing so, he added, business owners should closely study the numerous solutions available — be it “a traditional business credit card … charge cards, prepaid options, or virtual cards for tighter expense controls” — to choose the one best suited to their company.

As part of that strategy, Barnett advises entrepreneurs to speak with their main business partners about the switch, and help them navigate the change — or possibly even enlist them to join what could be a broader payment system upgrade of their shared ecosystem.

Meanwhile, small business owners should request guidance and support from their banks, payment providers, or other network partners as they pivot from cash and checks to digital credit options. Full transition will take time, but Barnett says every step in a company’s payment system upgrade will produce compounding rewards as it evolves.

“Even digitizing a portion of your spend creates a real-time record of where money is going,” Barnett says of the online and remote payment benefits to entrepreneurs. “That data can help you spot spending trends, forecast cash flow more accurately, negotiate better terms with suppliers, and make more informed growth decisions — while strengthening your financial profile over time.”

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This article was written by Bruce Crumley from Inc. and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.