Do Businesses Exhibit Payment Preferences as Payors? Evidence from Malaysia

Abstract

This paper examines the factors that affect business to business payment preferences. The payment methods have been classified into three categories, namely cash only, paper based and electronic-paper. A multinomial logistic model was used to determine the effect of the factors on the odds and probability of businesses selecting these three payment methods. The factors were broadly divided into two groups: (i) firm’s characteristics and (ii) business payment perceptions and priorities. The findings indicate that characteristics of the firm such as location, business sector, scale of operation, age of the firm, the average total value and volume of monthly payments, and priority of payment attributes have significant effects on business payment preferences. The significance of business priorities in determining the range of payment methods used indicate that businesses that prioritise cost prefer to use electronic-paper based payment methods while those which emphasise convenience and security tend to use paper based payment methods.