March 4, 2022

SURVEY REPORT - The State of Digital Payment in Construction

The pandemic changed working practices for millions of us across the UK, and whilst some - namely those in the construction sector - still had to turn up on-site every day, most of us were forced to adjust to new ways of working.

Whilst opinions on working locations may be divisive, one thing is indisputable: technological innovation flourished. Findings from a 2021 survey carried out by Construction News showed that a considerable amount of construction firms have already increased their dependency on technology since 2020 - and that trend doesn't look to be slowing down.

Changing attitudes towards digital payment systems in construction?

One interesting point to note is, in a survey carried out by the same publication 12 months earlier, results showed only 32% of respondents had either adopted a digital payment system - or were planning on turning to one.

However, one year later, that figure had risen to two-thirds. 41% say they have already digitised their payments, whilst another 22% expect to do so soon. One intriguing point to note too, despite being traditionally associated with being slow to adapt to new technologies, only 11% of those in the construction industry have no plans to move to digital payment.

Although the surveys were run 12 months apart, a similar combination of respondents from leaders and senior figures in the industry were polled, with roughly 70% of both samples coming from contractors and subcontractors.

The findings, which show a sharp uptick in technology adoption, offers signs of hope for the end of the late payment problem that has plagued the industry. The contentious point of technology within the sector has been widely discussed, including during a recent webinar we ran, where Iain McIlwee, CEO, FIS, said, “Everybody's got different systems and different processes. If we could bring more consistency into the industry, that would help - technology is a key driver to doing this.”

Construction News industry payments survey

Working with Construction News, we surveyed a sample of 257 respondents who recognised many upsides to utilising technology.

When asked about bringing money into their business, most respondents associated digital payment systems with several benefits.

Most ranked the following as either "important" or "very important" elements of digital payment:

When asked about making payments to others, a different set of expectations became apparent:

Findings

From looking at the results, several takeaway points stand out. One finding revolves around the barriers to widespread adoption. The most common issue flagged was over a lack of digital knowledge and skills - as answered by 58% of participants.

Other problems listed were over the cost involved (54%), the time and effort to change over (47%) and resistance amongst suppliers (44%).

But, the survey results also suggested something intriguing. Findings showed that as more organisations become familiar with the benefits associated with digital payments, they could develop a preference for working with like-minded firms.

Inefficient and old-fashioned payment processes can cause headaches for companies making and receiving payments, as we discussed in a recent webinar, so those who refuse to modernise payment practices will fall to the back of the queue.

Standardising digital payments in construction

When further pressed for detail about what it would take for digital payment practices to become the industry standard, we gathered six prominent responses:

Mindset

Comfortably cited as the most frequent challenge within the industry, mindset plays a massive role. Several reasons - such as an ageing workforce or a digital skills shortage - could explain why there's such a resistance to change. One civil engineer responded by declaring, "payment issues I've seen have to do more with contracts that don’t reflect the real costs, which is why projects are delayed and over-budget. Were a more realistic approach considered, then technology could play its part". However, a different respondent noted, "any change needs to be fully understood; it's more of a change-management issue rather than a digital payment issue."

Leadership and legislation

However, not everyone agreed that the issue was with those at the heads of construction firms. Others responded by saying that, in fact, clients must drive change. Some wanted to see more leadership from banks, whilst others called for more legislation, as one subcontractor boss stated, "Contractors need to be forced to pay on time." However, concerns were raised about smaller clients, as it was recognised that they're likely to struggle to reap benefits in the same way larger firms do.

Standardisation

For some construction companies, payment methods vary on a case by case basis. Many still have a reliance on a collection of spreadsheets, whilst others may be down the line in their digital journey. The head of a consultancy firm stated that by standardising, they wouldn't have to "provide the same information to a lot of different payment platforms", whilst a subcontractor manager said, "the architecture of digital systems needs to be unified across the different applications."

Payment terms

Many subcontractors may hope that digital systems force the hand of larger contractors, meaning they have to pay on time. Various other contract issues were also highlighted, including retentions. But, a subcontractor boss raised a valid counterargument, expressing concerns over "reducing the human interaction in the supply chain - which could lead to sums being potentially rejected without a discussion about why they were included in the first place.”

Security and trust

The online world, for some, can seem like the Wild West. With fraud and cyber crime rising in recent years, security and trust issues have sparked notable concerns for respondents. “Main contractors need to do what they say will,” said one subcontractor boss. “It doesn’t matter what systems are in place: if they don’t want to release a payment they simply won’t do it, digital or not.”

Time

Some see the issues around digital payment phasing out with time. As the older side of the construction industry naturally phases out, adoption could just come as a natural progression that takes time. One consultancy director polled claimed, "it'll happen - it's just a matter of waiting until the industry is ready and comfortable with it happening."

Modernising your payment processing

As we begin to find our way into 2022, promising signs are emerging. Many firms in construction have either completed or are beginning to modernise their payment processes.

Whilst many participants expect benefits to emerge, changing the culture and mindset of the industry is going to continue to become a contentious point. The easiest way may simply be to let the sector move at its own pace and phase in technology with the new generation of workers.

But, for those looking to get ahead of the curve - and stay ahead - why not try Payapps? Arrange a free demo of our digital solution and see how you can standardise your payment processes, staying on top of your dates and deadlines, ensuring you hit every milestone.