Over time in American society, how consumers pay for items has evolved drastically.
In the 1970’s paying with cash only was a very common and acceptable payment option. In 2022, electronic payment options, such as credit cards like Visa and Mastercard, are more commonly used than cash. In fact, according to the American Bar Association, “75% of people now prefer to pay with a credit or debit card.”
In addition to credit cards, digital payment options such as ApplePay, Google Wallet, Venmo, and PayPal are becoming widely accepted across the country. Cryptocurrencies such as Bitcoin are also becoming more popular.
Law firms have also experienced an evolution of how they receive payments from their clients from the barter system to cash, paper checks to e-checks, and now credit cards and other digital payment types. What type of payment option is next for law firms? Bitcoin?
History of Payments Types in the U.S.
An examination of the history of payment types in the United States showcases the evolution of payment technology in the United States. Early in the years of the Federal Reserve, a national check-clearing system was established that used telegraph wires to transfer funds between banks. Then, in the 1970’s, the Federal Reserve created an automated clearing house system, or ACH, that provides an alternative to processing paper checks.
Fast forward to the 21st century, in 2019 the Federal Reserve began building what is known as the FedNowSM Service which provides real time, 24/7, interbank payments all year long. In today’s technologically advanced and tech booming society, we now see a new concept of payment options such as digital wallets, mobile payment apps, and new digital assets including but not limited to cryptocurrencies and stablecoins.
With the boom of digital currencies, Federal Reserve policy makers and banks around the globe are exploring the pros and cons of using central bank digital currency (aka CBDC). In considering the use of digital currency, policymakers are considering factors that include but are not limited to:
Benefits to consumer households and businesses,
Protecting consumer privacy;
Risks to consumers, businesses, and the government;
Protecting against criminal activity; and
Obtaining support from stakeholders.
As policymakers and banks worldwide are exploring the use of digital currency, should law firms explore these forms of currency as well to allow for more lawyer payment types and options for their clients?
Understanding Payment Types in the U.S.
To determine what lawyer payment types to provide to your clients, it is important to understand payment options. According to the Board of Governors of the Federal Reserve System, “[m]oney serves as a means of payment, a store of value, and a unit of account,” with each money type carrying “different amounts of credit and liquidity risk.”
In the United States, examples of money forms include:
Central bank money. This type of money is a liability of the central bank which comes in the form of physical currency issued by the Federal Reserve as well as digital balances held by commercial banks at the Federal Reserve. This type of money is the safest type of money because it does not have credit or liquidity risk. It also serves as the foundation of the U.S. financial system.
Commercial bank money. This money type is a digital form of money that is most commonly used by the public and has very little credit or liquidity risk due to the availability of federal deposit insurance and the supervision and regulation of commercial banks. Commercial bank money is held in accounts at commercial banks.
Digital Money. This type of money, also known as cryptocurrency, is a digital asset with money-like characteristics. Cryptocurrency came about from technological innovations that provide for a decentralized means to allow for peer-to-peer payments. This type of money has not yet been widely adopted in the United States because it carries with it price volatility. Crypto also has limitations on transactions and is also vulnerable to loss, theft, and fraud. Another type of digital currency is known as the stablecoin which is used mostly to facilitate trading of other digital assets.
Nonbank money. This money type is digital money that is typically held as balances at nonbank financial service providers. These firms typically conduct balance transfers on their own books using a range of technologies such as mobile apps. This type of money has more credit and liquidity risk and lacks the full range of protections that commercial bank money has.
The tech revolution that our society has experienced in recent years has brought sweeping change to various industries with the use of advanced technology, innovative software solutions, and digital tools changing the way business is conducted in the 21st century with more services becoming virtual, convenient, and mobile. Various businesses have had to adapt to the new technological changes or be faced with closing its doors.
The legal industry is no different when it comes to adapting to change and embracing new technology and digital offerings. Lawyers now have advanced software at their fingertips that allows for document organization and automation, timekeeping and billing, and practice management, allowing lawyers to operate more effectively and efficiently. Clients themselves are evolving as well and expect a variety of options, including convenient options, to pay their bills.
If you want your firm to be seen as a modern and tech savvy firm, you may want to consider modernizing your online payment tools which can be a way to show your clients and prospective clients that you embrace the technological innovations brought by the 21st tech age.
Interested in Other Ways to Tech Up Your Firm? Consider Document Automation.
If you are interested in taking the next step to update your law firm’s technology portfolio, and want to learn more about how to automate your document preparation process, contact AccessioDocs today. We provide custom solutions for attorneys in every area of the law. We have a cost-effective process that will help you grow your practice and make it more efficient without increasing your payroll expenses.