Transcript Allstate Insurance Payment Strategies

Utility Payment Conference
Payments 101
Terms and Acronyms
October 27, 2009
Presented by
Kim B. Folks
Agenda
► Payment
Organizations and Associations
► Payment
Regulations
► Payment
Tenders, Terms and Acronyms
► Miscellaneous
Payment Information
Payment
Organizations & Associations
Federal
Reserve
NACHA
Federal
Reserve
• Central Banking system
• Created in 1913
• Private banking system composed of:
 Board of Governors appointed by the President
 Federal Open Market Committee
 12 regional Banks
 Member banks
 Advisory councils
NACHA
NACHA-The Electronic Payments Association
(formerly known as the National Automated Clearing House)
• Not-for-profit association
• Represents more than 11,000 financial institutions through
direct memberships
 Network of regional payments associations, and 650
organizations through its industry councils
• Develops operating rules and business practices for:
 Automated Clearing House (ACH) Network
 Electronic payments in areas of Internet commerce,
electronic bill and invoice presentment and payment
(EBPP, EIPP), e-checks, financial electronic data
interchange (EDI), international payments, and electronic
benefits services (EBS)
Payment Regulations
Red Flag
Regulation E
Electronic Funds Transfer
Act (aka Reg E)
• Issued by the Board of Governors of the Federal Reserve
System
• Implemented in 1978
• Governs electronic fund transfers from a consumer’s
account
• Protects consumers’ rights and sets limits on consumer
liability for unauthorized payments
• Imposes specific obligations to billers for recurring
payments
“Red Flags” What is a Red Flag?
Red Flag Categories:
•
ALERTS, NOTIFICATIONS OR WARNINGS FROM A CONSUMER REPORTING AGENT
•
SUSPICIOUS DOCUMENTS
•
SUSPICIOUS PERSONAL IDENTIFYING INFORMATION
•
UNUSUAL USE OF OR SUSPICIOUS ACTIVITY RELATED TO A COVERED ACC
“Red Flags” Identification
Program must be reasonable
IDENTIFY
Relevant patterns,
practices and
specific forms of
identifying
possible red flags
DETECT
Red Flags that
have been
incorporated into
the program
Deadline extended until November 1, 2009
For additional information go to:
www.ftc.gov/redflagsrule
RESPOND
Appropriately to
any red flag
detected
UPDATE
Program
periodically to
capture lessons
learned and
changes in risks.
Network = Automated
Clearing House
(ACH)
• The ACH network is a highly reliable and efficient
nationwide batch-oriented electronic funds transfer system
• Governed by the NACHA operating rules
• Provides for the inter-bank clearing of electronic payments
for participating depository financial institutions
• The ACH network can be used to send either debits
(payments) or credits (refunds)
 A credit sends funds to a Receiver’s account
 A debit takes funds from a Receiver’s account
ACH Participants & Definitions
►
Originator: The company or individual that initiates an ACH transaction
►
Originating Depository Financial Institution (ODFI): The financial
►
ACH Operator: The central clearing facility operated by a private
►
Receiver: A natural person (or organization) that has authorized the
►
Receiving Depository Financial Institution (RDFI): The financial
►
Third-Party Processors: Processors that participate between any
according to an agreement with a Receiver.
institution that transmits ACH files on behalf of the Originator into the ACH
Network.
organization or Federal Reserve Bank, on behalf of participating financial
institutions, to or from which financial institutions transmit or receive ACH
entries.
Originator to initiate an ACH entry (debit or credit) to the Receiver's account
with the RDFI.
institution that receives ACH entries from the ACH Operator and posts the
entries to the accounts of the depositors (Receivers).
relationship within the ACH processing flow (i.e., correspondents, sendingpoint processors or payroll processors).
How ACH Works
Each type/method of payment in the
ACH “world” has its own rules and
guidelines. These are determined by
the Standard Entry Code (SEC) used in
the payment file.
Commonly used SEC codes
for the Utility Industry…
MTE
CIE
CCD
AAAAAHHHHHHH ! ! ! !
ACH Transaction Terms
 ARC – Accounts Receivable Conversion (mail)
 BOC – Back Office Conversion
 ODFI – Originating Depository Financial Institution
 POP – Includes check serial number
► PPD – Pre-authorized Payment and Deposit (auto draft)
 RCK – Return Check
 RDFI – Receiving Depository Financial Institution
 TEL – Phone
 WEB – Internet
Payment Channels
 ARC – Mail-in payments
 POP – Walk-up Retail Locations
 TEL – IVR (Credit card/Check) Payments
 WEB – E-Lock box (Consolidators)
► PPD and CCD – EFT – Auto Pay
► CTX – EDI 820’s
Accounts Receivable Conversion
(ARC)
ARC (Accounts Receivable Conversion) - Through electronic Accounts
Receivable Check (ARC) Conversion, eligible consumer checks received at a
lockbox or drop box can be converted into electronic debits and processed
through the ACH network.
 Checks drawn on consumer accounts payable in U.S. dollars are eligible for
ARC conversion.
 Checks are machine read to capture the Magnetic Ink Character
Recognition (MICR) information routing number, account number and check
serial number along the bottom of the check
 The data elements, along with the check amount, are used to create an
ACH record. Typically, the biller's bank account is credited the next business
day.
http://www.federalreserve.gov/pubs/checkconv/#what
Back Office Conversion
(BOC)
• Eligible checks converted to ACH debits
• Controlled environment in the back-office
• Authorized signature for conversion not required
• Scanning equipment installation not required
• Customer notification of conversion disclosed at the register and on
documents
• Checks that contain auxiliary on-us fields or those over $25,000 are
ineligible for BOC
http://www.federalreserve.gov/pubs/checkconv/#what
Point of Purchase
(POP)
 Location where payment takes place
 Purchaser and seller are both present
 Information from the consumer's check
is used to create the electronic transaction
Internet Payments
(WEB)
 One-time or recurring
 Should include Terms & Conditions
 Privacy statement
 Appropriate authorization language
 Receipts / confirmations delivered electronically
upon completion of payment
Internal Voice
Response Payments
 Can be either PPD or TEL Entry
(IVR/TEL)
 Requires written authorization if treated as PPD
 One-time or recurring for PPD
 If no written authorization on file then can complete only per TEL
rules.
 This requires written receipt or tape recording (actual oral
authorization)
 TEL = one-time payment
 Setting up PPD Payments via IVR is complex, normally IVR should be a
TEL entry
Payment Terms and Acronyms
 ACH
 EDI
 Non-contracted
 Authorized
 Internet
 P2P
payments
Contracted
 IRD
CTX
 IVR
EBPP
M-payments
Electronic Check  MICR
Conversion
 NOC
 Check21
 Unauthorized

 E-Lockbox



 EBIDS
Corporate Trade Exchange (CTX)
 The CTX payment format combines payment information and a
variable length record (called an addendum record)
 ACH format which allows for up to 9,999 addenda records with
approximately 800,000 characters
 Allows multiple payments to creditors or billers in a single transfer of
funds
Image Replacement Document
(IRD)
The legal equivalent of the
original check
Electronic Data Interchange
(EDI)
 A set of standards for structuring information electronically
 Technical conversation between two entities, either internal or
external
 Information is the same displayed on paper documents
 Transmission method is agreed to by the sender and recipient
Information sent by an RDFI to
notify the ODFI that previously valid
information for a receiver has
become outdated or that information
contained in a pre-notification is
erroneous
Used to credit or debit a consumer
account. (Payroll direct deposits
and preauthorized bill payments)
Return Check
(RCK)
A physical check that was presented but
returned because of insufficient funds may
be represented as an ACH entry
Electronic Bill
Presentment & Payment
(EBPP)
Electronic bill presentment and payment (EBPP) is the process
that enables bills to be created, delivered and paid over the
Internet.
The service has applications for many industries, from financial
service providers to telecommunications and utilities.
• Fast
• Secure
• Environmentally responsible
Mobile Payment
(M-payment)
Person To Person
(P2P)
☎ A point-of-sale (POS) payment made through a mobile device; cell
phone, Smart phone or personal digital assistant (PDA)
☎ A wireless or text enabled device can pay a variety of bills at
anytime without interacting with anyone.
☎ Ability to transfer monies with a mobile phone from person-toperson (P2P)
☞ Account number and personal identification number (PIN) for
authorization purposes required
Electronic Check
Conversion
• A process in which your check is used as a source of information for the
check number, your account number, and the number that identifies your
financial institution.
Transaction types include:
 ARC – Accounts Receivable Conversion
 BOC – Back Office Conversion
 POP – Point of Purchase
Benefits
• Privacy
• Secure and Protected
• Information of descriptive statement
• Environmental
http://www.federalreserve.gov/pubs/checkconv/#what
Check 21
• Passed in Oct 2004
• Produces a digital image by scanning both sides of a paper check
• If a paper document is needed, a photo-reduced copy of the original
checks is created (“substitute check” or IRD (Image Replacement
Document)
• Check21 is represented by:
 IRD – Image Replacement Document
 POP – Point of Purchase
http://www.federalreserve.gov/pubs/checkconv/#what
• In person payment
• Authorized or unauthorized
• Utility office location or 3rd party vendor relationship
• Receipt issued for payment transaction
• Data terminal equipment
 Kiosk – customer initiated
 Terminal – store or cashier initiated
• Potential 'real-time' payment posting
• An official contract/agreement
with a 3rd party payment
vendor
• The vendor authorize business
or retailer to accept payments
for the utility
• Cash, Check and Money Order
tenders accepted
• Advertised by utility
• No official contract/agreement
with 3rd party payment vendor
• A business or retailer accepts
biller/utility payments without
contractual agreement
• Typically only accept cash as
tender
• Usually 2 - 5 (business) day delay
of payment to biller
• Consumer funded convenience
fee of $1 - $5
Customer Payment Convenience
Channels
Methods
Frequency
Mail In
Customer
In Person
Credit / Debit
Card
One-Time
ACH
eCheck
Web
Scheduled
Check
Recurring
Assisted Phone
Cash
Touchtone Phone
Questions?
Payment Vendors
Visit the Utility Payment Conference booths
to learn more about the services available to
you from our supporting vendors
Thank You
Contact me:
Kim B. Folks
Tampa Electric Company
813-275-3845
[email protected]