Transcript Current Payment Trends – CMTA A focus on working capital and expense reduction.

Current Payment Trends –
CMTA
A focus on working capital and expense
reduction
If only it were this easy…
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Agenda
 Common A/R pain points
 Cost and prevalence of payment types
 Paper checks
 ACH Debit
 Website collections
 CC and E-Check
 OBP
 Cash
 Integration with accounting system
 Migration to electronic payments
 Parting thoughts
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Common A/R Pain Points
 Inefficient paper posting process
 Tedious re-keying of data in
places
 Need to increase throughput
staff
multiple
without adding
 Pressure to lower transaction costs
 Lack of visibility and control
 Need for better auditing and reporting
 A/R follow-up when collection issues occur
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Checks Still Dominate for Bill Payment
 Checks continue to dominate
C2B landscape for utility type
services
 Easy to receive
 Setup not technical
Checks
66%
ACH Debits
12%
 Universally accepted
 Issues with checks
Other
14%
 Per item costs are high
 Availability delays
E-Check
2%
Credit Card
6%
Method of payment received from “Major Business Customers”
Source: 2007 AFP Electronic Payments Survey
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Payment Methods
More Company Control
Credit Card
Debit
OTC Check
E-Check
Online Bill Payment
Credit Card
More Expensive
Less Expensive
ACH Debit
Check by
Mail/Drop
Less Company Control
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Internal or External Lockbox
External Lockbox

Scanning
Scanned by provider
Internal Lockbox
Remote Deposit
Scanned at company site

Scanned at company site
Keyed
Datadata scanned
Remittance

Remittance data scanned

Discretionary data can be
keyed with each check or
scanned from coupon

Electronic posting file
available, combined with
other payment types
Information is input a
part from the deposit
process
and/or keyed from
invoice/coupon

and/or keyed from
invoice/coupon
Posting File

Electronic posting file
available from bank
Posting available at
scanning point

Eliminates keying from
images
Eliminates keying from
most images
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Key considerations for item processing
 Internal factors
 External factors
 Equipment upgrades
 Declining number of checks
 Staffing
 Environmental forces
 BCP and continuity plans
 Check 21
 Audit control
 ARC BOC
 Process customization
 Bank fees
 Customer contact
 Location of provider
 Centralized
 Decentralized
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Decentralized Deposits
Courier or Drop-Off
Desktop Deposit
 Pros
 Pros
 Effortless for company
 Can be deposited immediately
 Customer contact and
convenience
 Setup is universal
 Cons
 Cons
 Availability of funds subject to
delivery method
 Multiple steps for staff
 Armored carrier forces early
cut-off
 Courier may still be needed for
cash
 Entry cost can be a barrier
 Security of check items being
deposited
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Recurring ACH Debits
The silver bullet?
Not quite
 Most control for biller
 Most companies report a
plateau
 Least expensive method
 Internal processing
 Bank fees
 Returns, NOCs, and NSF still
remain
 Environmental changes
 Internationally consumer
protection laws are tightening
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Company Maintained Website
 Payment collection
methods
 Credit Card
 Payment function is usually
provided by third-party
 Client entered
 Credit Card and E-Check
options are expensive
 Voice entered
 Strict regulations on data
 E-Check – One-time debit
 Multi-functional tool
 Company information
 Service bulletins
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 Cumbersome for
consumers
 Usually for one-time
payments
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Credit Card Payments
Cons
Pros
 Different state laws and
statutes affect strategy
 Good funds model
 Regulated vs. Non-Regulated
 Less risk of returns
 Widely used and accepted
 Comparatively expensive on
an average ticket basis vs.
other methods
 Very tight rules around
protecting consumer data
 Complicated pricing structure
 Chargebacks can be a problem
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Payment Processing Center Check
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Online Consumer Preferences
My bank or credit union's site
52%
Each individual biller's site
25%
I have no interest in viewing and paying my bills online
10%
Online por.tal (e.g AOL, MSN or Yahoo!)
8%
Other
3%
Brokerage or other Investment-related site
2%
0%
10%
20%
30%
40%
50%
60%
Source: 2007Javelin Strategy & Research
• 52% of consumers prefer to pay bills at their bank’s site
• Benefits cited by consumers:
 Flexibility & control
 Streamlined process
 Easy set-up of automatic payment
Protection
 Fraud/Identity Theft
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Online Bill Payment Usage
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Electronify Your Online Bill Payments!
Number of US online households that pay bills online by generation
60M
Gen Yers
(b. 1975-1990)
50M
40M
Gen Xers
(b. 1964-1975)
30M
20M
Boomers
(b. 1946-1963)
10M
Seniors
(b. 1900-1945)
0M
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: Forrester’s Consumer Technographics® 2000-2005 North American Benchmark Studies, Forrester’s North American
Consumer Technology Adoption Study 2006 Benchmark Survey, and US Census Bureau
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Online Bill Payment Projection
 Bank online
channel growth
30% faster than
overall online bill
payment growth
 Banks will achieve
nearly twice the
five-year growth
rate of biller sites
by 2011
Source: Forrester Research, 2007
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Online Bill Payment Projection
 Gen Y EBPP adoption
will increase by 157%
 Gen Y will represent
only 26% of US
households, yet they
will make up 36% of
EBPP users
 By 2011, Gen X and
Gen Y will constitute
65% of EBPP users
Source: Forrester Research, 2007
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How do you handle cash?
 Expedited payments made by consumers at in-person or walk-in
agent locations.
 In person payments provide an alternative for your customers who
do not have bank accounts and can’t mail a check or pay by
credit/debit card.
 Service validates and processes payments in real-time or in a
periodic batch mode. Your customers receive a confirmation
number and real time posting credit.
 Reduces the expenses of late payment processing as well as
cutting off and reinstating services
 Data transmissions improve the accuracy and efficiency of A/R
postings
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Online Bill Payment Trends
 In Summary
 Online bill payment growth expected to continue surging
 Faster growth expected in bank-hosted channel
 Not a “bank vs. biller” battle
 Large billers need a strategy for handling increased
volumes of online banking payments and the challenges
created by electronic exceptions
 May require a mindset shift around billing/payments practices
 Paper remittances can be expected to continue declining
 Further impetus to outsource paper remittance processing
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Working Capital Value Proposition
 Increased number of electronic payments
 Reduced DSO
 Reduced Account Analysis fees
 Reduced time spent reconciling account
 Reduced number of rejected payments
 Reduced number of inbound data transmissions
 Compressed month end reconciliation
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How to Streamline Receipt and Posting?
1.
Automate the receivables process

Receive a data file for both paper and electronic receivables

Standardize the use of remittance data across payment type
2.
Integrate automated file to your accounting system

Import file into system and initiate automated posting

Only work the exceptions that do not meet matching rules
3.
Convert as many payments as possible

Encourage trading partners to pay via ACH and OBP

Use electronic methods to receive data for paper payments

Maximize your online bill payments
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Automating Your A/R Process
ACH Credits/Debits
Data files sent to Receivables
Hub for each payment type
Hub creates standardized file per
requested time and format
Incoming Wires
Data files
Card Payments
Consolidated
Data File
Data files
Bank Receivables Hub
Online Bill Payments
Accounting System / ERP
Data files
File transmitted to Acct system
at requested time
File is imported and used for
auto-posting
Mail/OTC Payments
Remote Deposit
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Integration Defined
 Automated file received from bank
 File uploaded into accounting system
 Data used to identify customer and apply receipt
 Receipts applied automatically by system
 Leverages matching logic to minimize exceptions
 Only exceptions need to be worked
 Reconciliation can also be automated
.
.
Consolidated
Data File
Accounting System / ERP
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Key Considerations
 Business case is straightforward
 Banking partner can be consultative partner on this
 Benefits can quickly offset initial investment
 Need to consider future staffing needs
 Smaller companies starting to automate/integrate
 Software providers more focused on bank integration for
payables and receivables
 Less demand on IT Resources required
 Time to benefit doesn’t have to be measured in “months”
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Glossary
 ARC – Accounts Receivables Conversion
 BCP – Business Continuity Plan
 BOC – Back Office Conversion
 BSP – Banking Service Provider
 EBPP – Electronic Bill Payment and Presentment
 NOC – Notification of Change
 NSF – Non Sufficient Funds
 OBP – Online Bill Payment
 OTC – Over the Counter
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Pathway to Electronic Receivables
Image Based Deposit
Payment via your
website
Lockbox with
Conversion
ACH Credit
OBP
ACH Direct
Debit
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Distribution of How Consumers Pay Bills
Source: Javelin Strategy and Research – 2009 Online Banking and Bill Payment Forecast
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