Transcript Slide 1

2007 Joint Payment Conference
ARC - A Case Study
Lee J. Achenbach
Sr. IT Analyst
October 19, 2007
PGE Quick Facts
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790,000 total customers
668,830 Residential customers
93,008 Commercial customers
52 cities served – Largest are Portland
and Salem
• 4,105 square-mile service area
• 1,975 MW of generation
• 2,700 employees
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SCE Quick Facts
• 13 million people
• 430 cities and communities in 50,000
square miles of service area,
encompassing 11 counties in central,
coastal and Southern California
• Commercial industrial and nonprofit
customers, including:
• 5,000 large businesses
• 280,000 small businesses
• 13,000+ employees
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What is ARC?
• ARC stands for Accounts Receivable
Conversion
• ARC is a process that converts a
consumer checks from a paper deposit to
an electronic ACH deposit.
• Available in 2002, PGE & SCE are a few
of the utilities in the U.S. to have
implemented ARC.
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Eligible ARC Checks
• Contains a pre-printed serial number
• No Auxiliary On-Us Field in the MICR line
• $25,000 or less
• Completed and signed
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On-Us
Courtesy of Electronicpayments.org
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Ineligible for ARC
• Checks that contain an Auxiliary On-Us
Field in the MICR line
• Checks greater than $25,000
• Third-party checks, Money Orders,
Travelers, cashier’s, and official checks
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Auxiliary On-Us
Courtesy of Electronicpayments.org
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Opt Out Option:
• NACHA rules require that customers be
given an opt-out choice from having their
checks processed through ARC channels
• PGE & SCE informed customers by
placing a message on the bill
• Each bill displays a message that
payments by check authorizes a
conversion to electronic debit
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Opt Out Option cont.
• Customer’s that opt-out are marked in the
Customer Information System (CIS)
• A nightly notification file is sent and loaded
into a Cash Remittance Opt Out table
• As checks are process they are identified
as either OPT Out or ARC payments
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Opt Outs Cont.
• PGE Opt Out:
– Multiple checks & one payment stub
– Multiple payment stubs & one check
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SCE Opt Out
• Opt out profile on customer account
• Indicator in scanline for customers who opt
out
• Indicator is read and check is sorted to opt
out pocket and sent to bank as paper
• Check only and other ineligible items are
processed under Check 21 law
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PGE’s ARC
• ACH file is electronically transmitted to the
bank of deposit via the EDI IT group
• PGE doesn’t ARC multiples or online
cashiering payments due to our automatic
reversal process
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SCE’s ARC
• Business checks are processed as paper in
separate job – clearing house discount fees
and some same day availability
• All others are sorted in Job 2 where
decisioning is made and 2 files are created
– ARC and Image (50% of ARC file is same
day availability)
• CheckFree processes ARC file and sends to
bank – handles Admin returns and NOCs
• Image file sent directly to bank
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PGE Check Retention
• Checks are securely stored on-site and
then destroyed within the month
• An electronic image of each check will
remain in the company’s records for at
least 7 years.
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SCE Check Retention
• Checks are securely stored on site for up to
14 days
• Double cut shred on site by vendor
• 2 year online archive of images
• 7 year DVD back up of images
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System Flow
Payment
Opt Out Notification
Opt Out Remittance
Cash
Remittance
ARC Remittance
Customer
Information
System
Balancing
ARC
ACH Payments
(Includes Adjusted)
ARC
ACH Returns
(Automated)
Bank
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Cash Remittance System
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Unisys NDP 500 Transports
Access Database
Application Server
Data Server
Windows Operating System based
2 Pass Process 1st Capture, 2nd Encode
Customer Information System
• Ventyx Banner® 2.2.2.1 heavily
customized (formally Indus, SCT)
• Oracle forms 5
• Oracle 9i database
• AIX Operating System
• 3 IBM P570 servers (A,B,C)
• AppWorx 6.1 Enterprise Job Scheduler
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SCE Operational
Environment
• Agissar Extraction Equipment
1. 1 Mail Sorter – envelopes are sorted according to contents –
40,000 items per hour
2. 2 ACE TRIOs – correctly oriented, single doc, single stub
auto extractor. 9,000 items per hour per Trio
3. 6 RVs – low speed auto extractor – multis, metal (coin,
staples, paperclips). 1,000 items per hour per RV
4. 1 Omation mail opener (used strictly for business mail)
• Banctec Image Processing
1. 2 E-Series Transports
2. ReadFirst OSA software
3. ARC with PayCourier Archive w/2 yr online storage
4. CheckFree decisioning
5. HP Server
6. 24 keying stations
7. Integrated with SCE customer information database
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Automatic Reversals
• ACH Returns go directly into the CIS
System
• How the return is processed is determined
by a systems rule table
• Notice of Change (NOC) returns are
ignored by the system but manually
changed in the Unisys decisioning table
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System Level Rules
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Auto Reverse cont.
• Two files – ACH & Remittance each carry the
same reversal key.
• ACH File the key is stored on Individual Named
Field on Type 6 Record
• Remit File key is stored as a composite of three
fields
• Key Stored with the payment record in CIS
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Auto Reverse cont.
• Return process uses key to find the
payment, reverse it, and charges a fee
• Updates credit history when a fee is
charged
• Generates a returned payment letter to the
customer
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$$ Savings $$
• Decreased bank fees for paper items
being processed through ARC
• Decreased bank fees for current ACH
items
• Averaging 82% of paper checks
processed converted to ARC (Target 75%)
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Savings cont.
• Elimination of courier fees (PGE special
deal with our bank)
• Priority ACH posting helps decrease return
activity and float time
• Typically the lowest cost per payment
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Savings cont.
• Electronic payments allow for 3 representments Over 50% of checks represented 2nd time clear (3rd try)
• ½ FTE Savings to date (Auto Reverse)
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$$ SCE Savings $$
• Retained clearing house discounted bank fees and
availability for paper items – business checks
• Decreased bank fees for ARC items
• 45% savings in supplies
• Averaging 82% of paper checks processed
converted to ARC (Target 85%)
• Increased availability by approximately 23%
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Lessons Learned
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Adjustments (encoding/keying
corrections) need to be resent as an
ACH
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Use multiple sample check amounts for
testing
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Find out if you are the bank’s guinea pig
Lessons Learn cont.
• The description of “Lockbox” was showing
up on customers bank statements which
caused confusion. ( Bank was able to
change description quickly to PGE PYMT)
• Get key players in joint meetings early and
often in the process
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Lessons Learn cont.
• Lots of time spent up front pays off on a
better product
• Better prep Customer Service Reps (CSR)
on what questions to expect and answers
to give to customers
• Have subject matter experts attend the
CSR training meetings with the trainers
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SCE Challenges & Lessons
Learned
• Unbundled RFP lengthened contract review process
• Not allowing concurrent contract negotiations caused delays in
moving project forward
• Test docs/checks – order far in advance, use vendor for
assistance to ensure checks meet micr requirements for
decision testing
• Automated transmissions – tight timelines make file failure
resolution difficult
• Invalid transactions (out of sequence transaction in single
batch type – automatic rejects – have to be physically pulled)
• Assumptions made by SCE and Financial Institution regarding
handling imperfect image files (Upside down/backward images,
corrupted images, foreign drawn items)
• 5000 item per file/hour limitation on Image file
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Summary
• Very complex especially the auto reversal
piece but worth the effort
• 17 separate internal and external groups
involved in the project
• Significant short term and long term cost
savings
• Reduced staffing hours that have been
redeployed to other critical areas
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Testimonial
PGE Manager of Revenue Collection &
Community Offices – Wes Friesen
"ARC has been a great project for PGE.
Opt-outs have been less than .02%, and
our conversion rate has exceeded 80%.”
“ It's been seamless to our customers, and is
saving PGE over $125,000 annually".
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Questions?
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Contacts
• Lee’s Email [email protected]
• Phone: (503) 612-3726
• Yeun's Email: [email protected]
• Phone: (626) 543-6368
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