Tuesday, September 30, 2008

The Credit Crisis and Cash Management

By Mark Brousseau

As a result of the unfolding credit crisis, the use of purchasing cards and travel and entertainment (T&E) cards may soar as companies look to take advantage of float, buyer discounts and reductions in accounts payable staff available for posting and payments. That’s according to Ed Bachelder (ebachelder@hitachiconsulting.com) of Boston-based Hitachi Consulting (formerly Dove Consulting, a division of Hitachi Consulting).

“The goal will be for companies to conserve their cash and help treasury management minimize their need for credit,” Bachelder told me. “The cost of capital for many businesses will double if the Washington D.C. bailout does not work.”

Bachelder also believes that inflation could also be on the rise again if the bailout does not work and the dollar weakens. “This looks a lot like 1978-82, with the specter of stagflation, and double-digit inflation and interest rates,” Bachelder said. “That was the era when complex treasury and cash management functions rose to prominence in most companies.”

Many companies will also look for ways to reduce costs as a result of the credit crisis, Bachelder said. For instance, some companies will leverage self-service and automated technologies. “Look for more promotion of Internet bill payment, and less ‘live representative’ interaction,” he said. “Billers will jump on the pay-it-green bandwagon and get serious about online bill presentment, seeking payment via ACH debits (pull) and credits (push).”

Bachelder also believes that outsourcing will continue to grow as companies pare back to their core competencies. “More firms may decide that running an in-house lockbox may not be part of the picture,” he explained. What do you think? Post your comments below.

Saturday, September 27, 2008

Economic Volatility May Drive Expedited Payments

Posted by Mark Brousseau

An interesting article from the American Banker on the impact of recent economic volatility on expedited payments:

Will Slow Economy Speed Bank Adoption of Expedited Bill Pay?
American Banker
By Daniel Wolfe
September 19, 2008

The slowing economy could offer banks an opportunity to earn fee income from expedited bill payment, a technology that vendors have tried to integrate with their other payment services but financial companies have been slow to adopt.

Bill-payment providers have long promoted these same-day payment capabilities, which typically carry a fee of $10 or less, as a better option to consumers than the late fees many billers impose.

Observers say that consumers' payment habits have been disrupted by the ailing economy, and that many people now see last-minute payments as a good tool to manage cash flow.

According to a survey published this week by Javelin Strategy and Research of Pleasanton, Calif., this change has opened a window for banks to add expedited payments to their bill-pay services.

Though the survey found that consumers typically adjust their spending in a slowdown, and will likely make fewer last-minute payments, the current economic situation is far from typical.

"Economic times are changing abruptly," James Van Dyke, Javelin's principal and founder, said in an interview Thursday. "Consumers spent on purchases or household needs in one economy and then they find the bill due in another. When that happens, you're essentially outliving your means."

Consumers will go to billers to make last-minute payments if they cannot get this service from banks, Mr. Van Dyke said, and "banks have been really sleepy to get into this game."

To spur adoption by banks, bill-payment vendors are offering them more options.

Online Resources Corp. of Chantilly, Va., integrated expedited payments into its bill-payment platform in April, after offering a test version for more than a year.

David Munger, Online Resources' vice president of product management for banking payment systems, said the integration has made the service available to clients of more than 500 financial institutions.

Since then, about 1% of the payments to billers that allow expedited payments have used the faster service. For billers with higher penalties for late payments, such as mortgage and credit card providers, it has been 2% to 3%, Mr. Munger said.

"We absolutely think the economy is having an impact on consumers' need for expedited payments," he said.

Consumers are also making same-day payments two or more days before the due date, when other methods would have gotten the payment to the biller on time, Mr. Munger said. These consumers are using the service as "insurance," he said, paying the fee to be absolutely certain that the payment arrives when it needs to.

One of the biggest factors in increased consumer adoption has been awareness, Mr. Munger said.

He said Online Resources makes the expedited payments option readily visible and lets consumers choose it with a mouse-click as they make their normal bill payments. This makes the feature prominent without being intrusive, he said. He said Online Resources makes the expedited payments readily visible and lets consumers choose it with a mouse-click as they make their normal bill payments. This makes the feature prominent without being intrusive, he said.

Metavante Technologies Inc. of Milwaukee began offering expedited payments 18 months ago and says it has had a substantial pickup in bank adoption and consumer use over the past five months.

Jeff Lewis, the president of Metavante's ePayments Solutions division, said the number of expedited payments in June topped that of June 2007 by 6% to 10% (he would not provide the total number of expedited payments).

Metavante said that its bank clients typically see 10% to 20% of their customers use the service within the first year after making it available, depending on how it is priced, and 40% of users make more than one payment in the year.

Besides its same-day electronic payment capability, Metavante allows consumers to overnight a paper check to billers, an option that banks charge $15 to $25 to use. Though this costs more than an electronic payment, Mr. Lewis said, "there's a comfort level for consumers" who want to see an online record of a paper check.

Another factor driving expedited payment use is the increasing adoption of paperless bills, Mr. Lewis said. Billers, in an effort to attract consumers to their Web sites, put little information in the e-mail statements they send out. This makes e-mailed bills easier to forget than detailed paper bills, and some people find themselves scrambling to pay them at the last minute, he said.

"When there's not a consistent pattern for consumers, we don't think about it," he said.

Metavante plans to begin offering expedited payments from mobile phones in November, he said.

Last week the CheckFree unit of Fiserv Inc. announced a partnership with M-Com Inc., the U.S. unit of Mobile Commerce Ltd. of Auckland, New Zealand, to provide real-time payments from mobile phones.

Serge van Dam, Mobile Commerce's head of marketing, said this service appeals to consumers who may not pay many bills online. Mobile payment is ideal for "those consumers who typically are worse managers of their cash flow," he said. "The people who are heaviest users of the mobile channel ... can least afford the penalty fees" and would be willing to pay for a less expensive expedited payment to avoid them.

Javelin's Mr. Van Dyke said: "I think this is a sustained opportunity. Banks have so few fee opportunities."

State Commission Tries E-Pay

Posted by Mark Brousseau

PGC starts 'point-of-sale'

The pilot phase for electronic hunting license sales has outlets in York County.
Daily Record/Sunday News

The Pennsylvania Game Commission launched a pilot electronic license sale system -- commonly referred to as "point-of-sale" -- earlier this week, and two of the trial sites are located in York County.

"The new point-of-sale license system is ready to go," PGC executive director Carl G. Roe stated in a news release. "Over the next several weeks and months, we will offer most classes of (hunting) licenses for sale through 15 issuing agent venues. Clearing this pilot phase will be a huge step forward for the point-of-sale system, and our expectation to fully transition to it for the 2009-10 license year."

The trial sites located in York County are the York Country Treasurer's Office, 28 E. Market St., and Artistic Edges, 385 Leaders Heights Road.

To ensure that license buyers are not inconvenienced during the pilot phase, the PGC said that each agent is equipped to automatically switch back to selling paper licenses if necessary.

Point-of-sale, when fully implemented, will enable hunters to swipe their Pennsylvania driver's license through a magnetic reader and all of their personal information will be filled in on the application automatically. Hunters then will be able to select the licenses and stamps they want to purchase.

Nonresidents will have to key-enter the data.

After the first time a hunter purchases a license this way, he or she will be assigned a permanent customer identification number that will be stored in an electronic file. In subsequent years, they will only need to enter changes in the types of licenses or stamps wanted.

"This will not only speed up the license buying process, but it also will remove the burden of having to worry about identify theft," Roe stated. "Once someone purchases a license through point-of-sale, we will no longer ask them for their Social Security number or Hunter-Trapper Education certification, because that data will already be part of the database. Senior lifetime license holders will no longer need to carry the lifetime license ID cards with them."

According to the PGC, the new licenses will be printed on sturdy, weather-resistant yellow material. The harvest tags, which are required for all big game, have perforated holes in them to make it easier to attach the tag to the animal.

Additionally, all personal information on the harvest tags will be completed, so all the hunter will need to do is enter the time, date and place of harvest.

However, during this pilot phase, hunters will not receive harvest report cards, which will continue to be mailed into the agency for the current license year. Instead, they will need to use the replacement harvest report card that appears on page 33 of the 2008-09 Digest that all license buyers receive.

"If the pilot project is a success, we plan to fully implement the electronic license sale system for the 2009-10 license year, which will make license buying easier for our customers, issuing agents and the Game Commission, and will -- for the first time in our history -- provide the agency with a database of its license buyers that will enable us to better communicate with them," Roe stated.

The point-of-sale system is produced by Automated Licensing Systems, a Nashville-based company that is also handling electronic license sales for the Pennsylvania Fish and Boat Commission.

Tuesday, September 23, 2008

Convergence Gets Lukewarm Support

By Mark Brousseau

Despite all the hype around the convergence of payments and document processing, a whopping 88 percent of respondents to a recent TAWPI Question of the Week don’t think that their organization would benefit from a combined payments and document capture platform. Just 12 percent of respondents said that their organization would benefit.

What do you think? Post your comments below.

Monday, September 22, 2008

Surviving Best Practices

Posted by Mark Brousseau

An interesting article from Business Finance magazine on best practices:

The Pragmatist's Guide to Best Practices
by Anand Sanwal
Created 08/18/2008 - 17:11

Are you suffering from best practicism? There is no doubt that best practices can be helpful.

Why wouldn't an organization want to learn from others who've been down a similar path, as this can help to avoid costly mistakes and may yield quicker results. But taken too far, the pursuit of best practices can replace independent thought and actually have deleterious impacts on an organization. When this occurs, an organization is afflicted with what we call best practicism -- the errant belief that replicating other organizations' processes, strategies, and ideas is the route to success.

The Skeptic's Guide to Best Practices
When used in moderation and carefully considered, best practices can be immensely valuable. The key is to have a framework by which to evaluate best practices so that you can determine which are really "best."

There are eight key considerations or questions to use when you are evaluating a best practice:

1. Who is the messenger or advocate, and what is in it for them?

Remember that it pays to be skeptical, as many folks are trying to sell you something along with a best practice. Ask lots of questions and push the vendor on their claims.

2. Is it a well-constructed, multidimensional best practice or one-dimensional silver bullet?

Major organizational issues and challenges are never one-dimensional, so it is a fallacy to believe that complex problems can be solved with simple solutions. If the best practice advocate doesn't have a plan that considers processes, systems, and organizational culture and behavior, it is not sufficiently robust.

3. What is the detailed ROI of the effort, and is it reasonable?

The costs of the effort should be well-detailed and should consider ongoing costs in addition to the upfront costs. Although the ongoing costs may not be precisely known, they should be included using the best information available.

The benefits should also be quantified. Nebulous claims of increased transparency, agility, customer retention, etc., are not sufficient, as these vague claims are impossible to measure and hold people accountable to. Remember that what gets measured gets done. This forces people to think about the specific economic reason they're undertaking the best practice and also lets those reviewing the effort evaluate the reasonableness of these assumptions.

4. Is the opportunity compelling even when I discount the benefits significantly?

Even with an ROI in hand, discount the benefits and increase the costs to see if the results are still compelling. Failure rates for multiyear projects are quite high, especially those that may involve software or technology. If the initiative still seems compelling after discounting, you may be onto something.

5. Is the best practice based on a practitioner's or a consultant's view of the world?

If the best practice has been dreamed up by a consultant, run! If it is based on the work of practitioners who actually built the discipline and understand the organizational complexities of making real change happen, then there may be something of merit in it.

6. In other organizations who've adopted the best practice, who is talking about it?

If you want to understand the power of a best practice, look to see if senior management is talking about it. If the CEO, CFO, CIO, unit president, et al., are talking about it, the effort has gained some momentum and gone beyond a single organization or individual whose pet project it is.

7. How long have other organizations been doing it, and what have the results been? Are the results believable?

Ask lots of questions about the results to understand the methodology that they are using to make the claims about performance. Remember that there are numerous other things going on within an organization at any time that may impact performance. Make sure that the causality they may be indicating makes sense and is credible.

8. Can you keep the employees who may lead this effort working on it for the life of the initiative?

Many best practices require multiple years of effort to realize the benefit. Oftentimes, people who begin the projects get credit for selling the vision and starting the project and then they move on. Then, if the benefits are not realized or the costs spiral upward, the original person is not accountable, as they can claim that they were no longer involved. Therefore, keeping the original visionary tied to the project is important, as it ensures that they really believe in the idea and are comfortable in delivering the benefits they've outlined for the given cost.

Now Separate the Fluff from the Stuff
When you think about all of the factors that drive a business to be a success or failure -- industry, management, talent, market conditions, competition, innovation, customers, vendors, strategy, luck, geographical focus -- it is amazing to think that plucking ideas from other companies and putting them into your own can work universally. But this thinking happens all the time because of the structure and sanity that best practices seem to provide in an increasingly complex, fast-paced, and sometimes insane business world.

For long-term outperformance, organizations would be better served to cure themselves of best practicism and aspire to become the leading practice. Once they've done this, they can take satisfaction in watching others follow the best practices they have developed.

Outsourcing: From Tactical to Strategic

Posted by Mark Brousseau

Interesting article from Business Finance magazine on the evolving role of ousourcing.

Viewing Outsourcing as a Strategic Relationship
by David Gordon
Created 09/05/2008 - 17:25

Regardless of what outsource service providers and company executives may say, outsourcing is all about economics -- not necessarily the economics of labor cost arbitrage and "your mess for less," but the cold reality facing CEOs and CFOs every day, particularly in these turbulent economic times, of how to create and protect shareholder value. Whether we are willing to admit it or not, outsourcing always has a component of cost reduction or containment in the calculus.

Today, however, companies that view outsourcing solely through the lens of finding a way to do a commodity activity for less are missing an important strategic advantage. Companies that exploit outsourcing to the fullest are those using it to drive shareholder value, leveraging outsourcing in multiple ways to capture competitive advantages by supporting market and geographic expansion, delivering improved operating flexibility, and accessing talent.

Yet in PwC's recent global outsourcing survey, less than a third of respondents felt that their arrangements had fully delivered on promised (primarily cost-related) benefits. Even so, a full 91 percent said that they would continue to outsource, regardless of their satisfaction.


As reasons for outsourcing have moved beyond cost-cutting, little else seems to have changed in how companies and providers approach the business relationship. Historically, this relationship has often degenerated into an adversarial one, as customer expectations are not met and service providers struggle to deliver savings and service levels.

A number of companies and service providers have recognized that something's got to give. Slowly but surely, the traditional buyer--seller relationships are beginning to shift to collaborative models. Executives at both customers and service providers understand that outsourcing relationships need to be established based on clearly defined business benefits, shared risks and rewards, and increased transparency with regard to pricing, strategic planning, and joint governance.

To succeed, companies are finding that their outsourcers must fully understand their strategic needs, operational requirements, and culture. A move toward true collaboration is squarely needed in order to navigate the changing outsourcing landscape. According to Gartner, which tracks global outsourcing transactions, the trend toward lower-value individual contracts -- compared to larger "megadeals" of the past -- continues.

These smaller and shorter contracts mean outsourcing arrangements that are more dynamic and complex. Executives in our survey say that while they will continue to use the traditional approach to outsourcing -- relying on a single service provider -- newer models are gaining momentum. Half of the executives said that they expect to increase multisourcing (using more than one provider for a service), while 45 percent plan to increase their use of joint ventures, and 35 percent will ramp up their use of open, public business models.

Unlike traditional single-source transactional outsourcing, these more complex approaches intrinsically require more collaboration. They encompass multiple provider relationships, address both operational and performance management challenges, take innovative approaches to allocating incentives, and often center on intangibles such as intellectual property.

With more than just cost-cutting on the line, managing outsourcing relationships -- whether collaborative or more traditional -- requires considerable attention. In our survey, respondents pointed to deal structuring as the most challenging aspect, with 76 percent rating it as difficult. Other top areas that they would like to see improvement in: managing the transition (75 percent), ongoing management and monitoring (71 percent), strategy development (70 percent), renegotiation (69 percent), and business case development (66 percent).

In a more collaborative arrangement, these factors become even more crucial if both parties are to be rewarded for delivering economic and process enhancements. A strong governance structure shared by provider and client alike is needed. Unlike a traditional vendor relationship, more collaborative approaches seek input from the service provider on how the client operates and input from both the vendor and the business on more effective governance of the relationship. Such an arrangement emphasizes transparency and accountability, as well as results in better integration of the outsourced relationship with the client's organization while balancing the need for flexibility.

Like any strong relationships, those between customers and outsourcers will change and grow.

Collaborative arrangements are successful only inasmuch as they continue to meet current business needs and are well structured to accommodate future objectives. To achieve the benefits from outsourced relationships, businesses should clearly define and articulate their business objectives for outsourcing initiatives. They should also obtain internal buy-in for the business case for outsourcing. An upfront understanding of the drivers and expectations will be critical to effectively selecting the right service provider and structuring and executing the agreement.

Adopting a partnering outlook with a trusted service provider can release the strategic value of the relationship through collaborative behavior, such as sharing data freely, structuring incentives for innovative ways to deliver returns, or, when appropriate, inviting service provider input into operational decisions. It is important to treat an outsourced relationship as an extension of the client's existing organization at multiple levels -- but just with strict, if not
stricter, performance objectives and accountability requirements.

Friday, September 19, 2008

Implications of Fiserv Mobile Banking Announcement

Posted by Mark Brousseau

Fiserv's announcement last week that it was partnering with M-Com to launch a "triple-play" platform for mobile banking and payments is a "headline event" for the market segment. That's according to Virginia Garcia, a senior research director in the Emerging Technologies practice of TowerGroup.

Named Fiserv Mobile Money, the company's new offering will span wireless browser, messaging, and downloadable applications across core banking, Internet banking, and bill payment infrastructures. Garcia's initial observations about what the Fiserv/M-Com alliance will mean for the companies and the overall mobile banking and payments space:

... Fiserv Mobile Money fires a competitive shot over the bow of other core banking and mobile banking/payments players – given that this new offering is now the core banking market's only single-platform triple-play solution that combines banking and payments functionality.

... Fiserv is a heavyweight champion in financial services technology, owning the primary technology relationship with over 6,000 banks and credit unions in the US. But it has been perceived to date as a mobile banking laggard. This alliance will allow Fiserv to gain sophisticated mobile finance capabilities, while giving M-Com instant US market clout.

... Fiserv Mobile Money will further invigorate the still nascent, yet vibrant, mobile finance market by leapfrogging direct competitors with a model enables a trifecta of virtual services: best-of-breed mobile finance, Internet banking, and bill pay.

... Despite the deal's many benefits, Fiserv and M-Com will be challenged to match their sophisticated technology capabilities and pricing to the still nascent needs of the Fiserv customer base, in particular in providing an ASP-based solution.

What do you think? Post your comments below.

Did You Know?

Posted by Mark Brousseau

Consumers save an average of 6.6 pounds of paper each year by switching to online bill payments ... not to mention saving money on stamps and time writing out checks, too (Source: Parenting.com).

Consumers Blast Auto-Pay

Posted by Mark Brousseau

Interesting article from the Herald Tribune on automated payments:

Automated Bill Payments Are a Cinch (Not So Fast)
Published: Saturday, August 30, 2008

A few months ago, in my first column for this newspaper, I extolled the virtues of automated bill payments: Set them up once, let your utilities, phone and credit card companies pull what you owe from your bank account each month and never sit through the drudgery of a bill-paying session again.

And boy, did you let me have it. I heard from a number of readers who thought I was out of my mind for suggesting that they send money out automatically each month or give billers unfettered access to their credit cards and bank accounts. Horror stories poured in, as well as several specific questions and concerns.

So this week, we’ll look at five reasons that people are wary of automating their financial lives this way. But first let’s back up and define precisely what we’re talking about.

Until the 1990s, most of us were stuck writing a whole bunch of checks each month to pay our various bills. Then came the early Web-based bill payment systems, where we’d go to a bank or biller’s Web site and push a few buttons to move money to the right places.

Only more recently, however, has it become possible to pay each bill every month without lifting a finger. There are three basic ways to do this. You can give each biller permission to pull the full amount from your bank account. You can use the online bill system at your bank to push payments out automatically each month. Or you can charge every bill to your credit card and give only that card company permission to pull money from your bank account when the credit card bill is due.

Each of these methods has its potential shortcomings, which will become clear as we march through the hiccups that can occur when automating your payments.

ERRORS Some people fear giving companies the ability to draw money from their bank accounts because they worry about mistakes. If a biller takes thousands of dollars more from their account than they should, it could lead to overdraft fees and a huge hassle trying to get the money back.

So how often does this happen? Nacha — the Electronic Payments Association, a nonprofit association that oversees the network that automated payments travel on, says the error rate is 38 for every 100,000 bill payments. This figure counts mistakes that banks report but doesn’t include problems that consumers solve directly through the billers. (Nacha once stood for National Automated Clearing House Association; automated bill payments are one of many kinds of A.C.H. transactions.)

If an error occurs, according to Elliott C. McEntee, Nacha’s chief executive, the association’s rules, which all banks that deal in A.C.H. payments follow, require banks to automatically credit customer accounts for the mistake.

Consumers get the credit as long as they inform the bank of the problem within 15 days of receiving the bank statement with the error on it. People who miss that deadline still have recourse under federal rules, which give consumers 60 days to report the error, but the credit could be provisional at that point until the bank determines who’s responsible for the error.

Are customers quickly made whole all of the time? Probably not, because banks may neglect to follow the rules and their customers may not read their bank statements quickly or carefully. But if there’s a problem, go to your bank first and request a credit before you complain to the biller. Mr. McEntee suggests calling your bank rather than talking to a teller, because phone representatives should have scripts that prompt them to issue the credit.

If you’re charging every possible bill to your credit card, you’ll have an opportunity to catch the mistakes on the monthly card statement before you pay the bill. Then, you’re vulnerable only to the card company itself pulling the wrong amount of money out of your bank account. Also, you can earn lots of rewards from the card company. Just be sure to pay the bill in full each month, lest interest wipe out the value of the freebies.

One other thing to keep in mind: While billers make plenty of errors, consumers probably make even more. People forget to pay, pay late or pay the wrong amount. Part of the point of automation is to protect the mistake-prone from themselves.

SERVICE THAT WON’T END For months after John Wald, now a finance professor at the University of Texas, San Antonio, moved, his local phone company in Pennsylvania kept drawing money out of his bank account, even though he had canceled the service.

His bank was able to put a stop to the withdrawals but did not issue any temporary credit for the money that was already gone. It took a year to get the money back from the phone company, and now he steers clear of automated payments.

Stopping the automated payment, at least, may be easier if you’ve set it up through your bank’s online bill-paying system.

“Rather than authorizing a biller to take money out and losing total control, we give you that control back,” said Mary Beth Lawson, director of product management for CheckFree, a provider of online bill payment systems. Customers sign up on the bank’s Web site, not CheckFree’s.

CheckFree sometimes handles customer service for banks, too, and can get the biller on a conference call with a customer to try to resolve refund requests and other mix-ups.

EXPIRED CREDIT CARDS One potential problem with using credit cards to pay your bills each month is that they expire. Terry Perkins, an information technology consultant in Morristown, N.J., ran into this problem with Verizon two years ago. She said that she hadn’t noticed the lack of a charge on her credit card statement and that the company hadn’t sent any bill, warning or reminder that it needed the new date until a notice turned up in the mail saying her phone was about to be cut off.

“You get this really cold, intemperate letter where you can just infer from it that you must be a dirtbag,” she said. “I finally just said forget it, you guys are never going to have this privilege again, where you have access to my credit card.”

Bob Elek, a Verizon spokesman, said he couldn’t comment on Ms. Perkins’ situation but that the company can now get the new expiration date without a customer’s help 90 percent of the time.

Otherwise, the company calls the person’s home and sends e-mail messages to try to get it.

Indeed, Visa and MasterCard have programs that allow participating card companies and merchants to get new expiration dates automatically so they can continue customers’ automatic bill payments. Here’s hoping that becomes standard operating procedure. Until it does, you should put in a round of calls to billers around expiration time to make sure they have the new expiration date.

SECURITY Are you risking identity theft or other problems by giving so many companies access to your credit card numbers or bank accounts each month? Some people still think so.

But Bruce Cundiff, director of payments research and consulting for Javelin Strategy and Research, says the nonautomated approach is more problematic. If you’re paying bills one by one each month via your bank’s Web site, you need to worry about whether anyone has installed software on your computer that would capture user names and passwords. And not having paper statements and checks floating around that could be stolen from the mail is a plus as well.

COMPLACENCY If you’re not careful, automated bill paying can easily lull you into believing that everything is taken care of and no vigilance is needed. Scott Cole, a television editor for CBS who lives in Jersey City, said that his almost daily ritual of checking Quicken and then pushing the button to pay the bills once each month keeps him aware of each payment. It also forces him to think about whether the cost for any particular service has gotten unreasonably high.

Mr. McEntee, of Nacha, does have 17 automatic deductions taken from his bank account each month, but he keeps a list of them handy and then checks them off one by one with his bank statement each month.

I still think it’s possible to achieve Mr. Cole’s level of awareness while having Mr. McEntee’s volume of automated payments. Keep a cushion of cash in your checking account if at all possible to avoid unexpected overdrafts and jump on any errors if you’re unlucky enough to experience them.

In essence, the first principle of the automated payment is this: If you simply set it and forget it, you’ll probably regret it.

Friday, September 12, 2008

E-Commerce Tips

Posted by Mark Brousseau

Keep Your Online Transactions Safe
by Sasha Segall
From Kiplinger's Personal Finance magazine, September 2008

1. Update your Web browser to the latest version and look for a green address bar that indicates extensive identity-verification checks.

2. Review each site's privacy policy and make sure it will not share your information.

3. Before entering credit-card information, check that the page's URL changes to "https"; the s stands for secure (for instance, https://www.kiplinger.com/orders/magazine).

4. Look for a little padlock icon by the status bar or next to the URL, symbolizing a Secure Sockets Layer protocol, which encrypts transmitted data for privacy.

5. Be skeptical of Web sites with grammatical errors, misspellings or faulty links.

Fiserv Targets Mobile Payments

Posted by Mark Brousseau

Some interesting news from Fiserv:

Fiserv, Inc. launched Fiserv Mobile MoneySM, what it calls the industry's most complete mobile banking and payments solution, because it supports consumers on all three mobile access modes - short messaging service, (SMS), wireless application protocol, (WAP), and downloaded mobile applications, offers online and offline enrollment capabilities and integrates with core banking, online banking and electronic payments systems. The new solution, available for the first time today, builds upon existing Fiserv mobile banking options already in the market and adds a strategic technology to help all segments of financial intuitions.

Powered by technology from New Zealand-based Mobile Commerce Limited (M-Com), Fiserv Mobile Money enables organizations to reach more consumers through its native support for SMS, WAP, and downloaded mobile applications. In addition, the solution is allows financial institutions and billing organizations to drive enrollment of offline customers to a more profitable mobile banking relationship. Consumers can enroll via a mobile device, at a branch, ATM or customer contact center, as well as via the online channel. Fiserv will also support certain marketing campaigns and research aimed at driving adoption and usage within this emerging channel.

"Mobile banking holds great promise as a unique channel that offers customers the ability to manage their money anywhere, anytime, while enticing new customers and making existing customers more loyal," said James Van Dyke, president and founder of Javelin Strategy & Research. "We see 2008 as a pivotal year for the emergence of mobile banking and payments, particularly as more end-to-end, enterprise solutions start to take hold in the marketplace."

Fiserv's scalable mobile banking and payments solution can integrate with a variety of core banking systems, online banking systems and electronic payments systems. It is designed to leverage a financial institution's or biller's existing online security infrastructure, including existing credential management capabilities. In addition, Fiserv Mobile Money offers consolidated customer care and reporting across both the online and mobile channels, potentially lowering the total cost of ownership and enabling a broader view of the customer's needs when they contact the financial institution for service or support.

"This is a great example of Fiserv 2.0; using resources across our business units to develop innovative products that help our clients achieve best-in-class results. Fiserv Mobile Money is the result of hard work from our integrated teams representing both Fiserv and CheckFree. We are continuing our mission to be the leading provider of technology products and services to the financial services industry, bringing the best solutions to this emerging channel," said Jeffery Yabuki, Fiserv President and Chief Executive Officer.

Financial institutions will have the flexibility to deploy the Fiserv mobile banking and payments solution as a hosted solution or as software that can be managed and run in-house. The solution is available today via an in-house solution for the top 200 financial institutions. A hosted version is expected by mid-2009.

"Fiserv Mobile Money helps financial institutions optimize customer relationships either through deepening existing online banking relationships or through driving offline customer relationships to a more profitable mobile banking and payments relationship," said Steve Olsen, Fiserv group president, Internet Banking and Electronic Payments. "This ultimately helps institutions of all sizes to maximize their mobile return-on-investment."

To that end, Fiserv Mobile Money's multi-channel enrollment capabilities have proven effective as a means to attract more offline customers to the mobile channel, which has a lower cost to serve than other channels. For example, a Fortune 500 New Zealand bank that currently uses the M-Com solution, annually saves up to $30 per customer when it drives these customers from an offline relationship with the bank to a mobile banking relationship. The bank achieves this result even though more than 40 percent of its customers are not online banking users.

Fiserv Mobile Money runs on established mobile banking and payment technology from M-Com, whose mobile solutions are used by some of the largest financial institutions in the world, including Washington Mutual, Inc., ANZ Banking Group, Westpac Banking Corporation, Electronic Transaction Services Limited (Paymark) and GE Money, among others.

"This strategic alliance combines Fiserv's strong leadership in payments processing, innovation, operational excellence and execution with M-Com's proven mobile banking and payments technology and innovation," said Adam Clark, founder and chief executive officer of M-Com. "Together, we will provide the most complete solution in the industry, giving financial institutions and billing organizations a path toward unlocking the promise of mobile payments."

In addition, key personnel from Fiserv and M-Com are working together in the Fiserv campus in Norcross, Ga., to develop and deliver the next generation product - the industry's first single-platform, scalable mobile banking and payment solution that integrates seamlessly with online banking, bill payment and core banking systems.

The State of Contactless Payments

Posted by Mark Brousseau

An interesting article from Contactless News:

Contactless Payments: Burgeoning or Struggling?
By Andy Williams, Contributing Editor

The state of the contactless payments industry is up for debate depending on whom you ask. Recent issuance statistics have led some to claim victory, while others have interpreted the same numbers in a much more negative manner. “You are definitely going to get a glass half full glass half empty difference,” says Randy Vanderhoof, executive director of the Smart Card Alliance.

Javelin Strategy, a Pleasanton, Calif.-based research group, released a report in the spring stating that contactless technology hasn’t taken off as fast as many thought it would. Researchers don’t agree on how many contactless cards are out there – in the U.S. or even throughout the world – possibly because of the reluctance by credit card companies to release precise country-by-country figures.

MasterCard International reported in the last quarter that 37 million contactless cards have been issued in 24 countries with 122,000 merchants accepting the card, says Cathleen Conforti, MasterCard’s senior vice president for Global PayPass. This is up from the 28 million cards and 109,000 merchants reported a quarter earlier. But the company won’t divulge how many cards have been issued in any specific country, nor how many contactless transactions have been performed.

Others are making guesses though. George Peabody, director of emerging technologies for Mercator Advisory Group, said that 10% of contactless cards have been used to make contactless payments. Peabody made the comments at CTST earlier this year.

In order for contactless payments to take off, the card issuers and networks will have to offer merchants incentives to deploy contactless payment terminals, the Javelin report theorizes.

If industry-wide cooperation occurs, Javelin predicts that 57 million consumers will be using chip-embedded credit cards to make contactless payments by 2013, which is more than double the 24.8 million this year.

Bruce Cundiff, payments research director at Javelin, says contactless payments are embroiled in an “economic battlefield.” Merchants don’t see the point in upgrading their point-of-sale terminals when they might not see any additional revenue.

“We’ve reached an impasse in terms of merchant locations and even those announcing, like Best Buy, are subsidized by one or two of the large card networks,” Cundiff says. “More importantly, how are you going to make the case to millions of merchant locations that will affect their POS terminals when you don’t have millions of cardholders coming in?”

For contactless to take off, the focus needs to remain on setting up the infrastructure to accept contactless payments, he suggests. The Javelin report added a caveat to its predication that there will be 57 million contactless cards in use by 2013, noting that the total “could slip substantially – to a comparatively stagnant 34 million” if more isn’t done to build up a contactless infrastructure.

Others are far less pessimistic
Vanderhoof calls the Javelin study “pretty pessimistic. We keep hearing reports from the card manufacturers that orders are up and banks saying that they are continuing their rollouts and are reissuing expired cards, and that the merchant numbers have doubled in the last year.”

The technology also has a positive impact on the retailers who accept it, Conforti says. While she won’t disclose the number of payments, she says that merchants have received a sales lift when they introduce contactless. “What we’re seeing is an increase in spending from 28% to 40% at merchants,” she says.

The sales increase is due to lines moving quicker, Conforti says. “If the line isn’t moving, customers will leave,” she adds. “That’s a missed revenue opportunity. A reduction in transaction time, which contactless offers, translates into more revenue and increased sales.”

But retailers might not want this information out there. “The merchants don’t want to go on record talking about it,” Vanderhoof says. “If they tell the world that everyone loves contactless, they’re only encouraging competitors to do a ‘me too.’ If it was really bad, they’d probably be telling everyone how bad it is.”

Cundiff says that in order for merchants to get on the contactless bandwagon they need to know that they will see some return on their investment. “A lot of merchants look at the card industry and see a payment mechanism where there’s a lot of loyalty between cardholder and the card,” Cundiff says. “The card networks need to prove to merchants that it’s about a relationship they can enhance with their own customers.”

MasterCard’s consumers have been positive. Conforti points to surveys that show nearly half would use a contactless card if their bank offered it. “Our customers love it. We’ve done consumer benchmark studies for 2006 and 2007 among those who have received a contactless card and what we see is that 90% were satisfied, 87% say it exceeds expectations and 96% will continue to use the card.”

Vanderhoof says awareness of contactless technology is up. “In a survey last year (2007), some 25% were aware of contactless payments. When we did the survey in 2006, we only got 15%, so the awareness has grown rapidly in the last two years,” he says.

Another report the Smart Card Alliance did with Javelin also showed that consumers were indeed using their contactless payment cards, Vanderhoof says. “More than half of the cardholders (57%) have used their contactless credit card or debit card at least once,” he says. “So if you use 35 million as your card base, than that equals about 20 million people. If that were 20 million people using anything in any other country it would be a huge adoption. But in the U.S., because there’s so many cards out there, it will take awhile before percentages become significant.”

More than just a placeholder for mobile payments
Contactless infrastructure can also be used to process payments made via NFC, which some consider the end game. “Tap-and-go contactless payments will pave the way for the day when cell phones and other devices will become the consumer’s electronic wallet, packed with all their credit cards, merchant cards, coupon offers, and more,” Cundiff says.

But, as the Javelin report points out, that day will be delayed until the players – card networks, financial institutions, mobile carriers, merchants, and handset manufacturers – treat the field as a symbiotic ecosystem, he says. “I think (NFC is) an opportunity for everyone in that ecosystem, but it’s also something where you can’t snap your fingers and it happens.”

NFC has potential, but Conforti doesn’t want to jump the gun. “I don’t think contactless is a placeholder for NFC,” she says. “It’s all about consumer choice. Mobile will be an important device for payment because everyone has a phone and consumers do like using mobile phones for payments. But mobile is a different discussion.”

Vanderhoof would rather focus on the now. “(I don’t believe) contactless is just an interim step and mobile payment is the next big thing,” he says. “Don’t get me wrong, I am bullish on mobile, but I am more interested in looking at the present payments market and what consumers have to choose from today … contactless card adoption is very healthy and still growing strong.”

Mobile payments will also have obstacles to overcome. “The mobile phone is offering a lot of attractive capabilities to the payment space because it can do so many more things, (but) we have a huge percentage of the population that wants to separate their mobile devices from cash,” says Vanderhoof. “While it will appeal to a segment, cards have a long life ahead of them. (Many) consumers will be more comfortable with what they carry in their wallet or purse than what they have attached to their hips.”

The future for contactless payments?
As to the future of contactless technology, it seems many believe that there is no turning back. Smart Card producer Oberthur, citing strong progress in the contactless card markets, went so far as to name 2008 “the year of the smart card.”

“We are beyond the point of no return and little by little institutions will grow the portfolio that uses contactless,” says Martin Ferenczi, CEO at Oberthur Technologies of America.
It’s a new technology and it takes time to adapt, adds Ferenczi. “It took five years for Apple to sell 100 million iPods. Today, the market is 35 million contactless cards and we’re three years down the road. We are still in the early days.”

Tuesday, September 9, 2008

Gift Cards and the Economy

Posted by Mark Brousseau

Interesting article from Kiplinger's Personal Finance on gift cards:

Got a Gift Card? Use It or Lose It
Some bankrupt retailers honor them, but don't count on it.

By Joan Goldwasser From Kiplinger's Personal Finance magazine, September 2008

Gift cards totaling about $66 billion will be tucked into birthday, wedding and holiday cards this year. According to Brian Riley, TowerGroup's research director for bank cards, roughly one-third will be spent within 90 days and another third within six months. Some $20 billion worth will linger in drawers for months.

Delayed gratification in this case could be a mistake. Retailers are struggling in the current economy, and if a gift-card issuer files for bankruptcy, there's a good chance your card will become worthless.

Although bankrupt companies have assets, which are distributed to the firm's creditors, your status as an unsecured creditor puts you in line behind banks and other secured creditors. They will receive 100% of their investment before you get a dime. If you get anything at all, it's likely to be small, perhaps 5 cents on the dollar.

Sometimes a firm will ask a bankruptcy judge to let it honor gift cards. But don't count on that happening.

Several retailers have filed for bankruptcy recently or appear dangerously close. Gift cards from The Sharper Image are worthless; ditto for those of The Bombay Company.

Lillian Vernon, the once-popular catalog and online retailer, was sold to Current USA, which markets address labels, scrapbooking supplies and other stationery products. Current is accepting Lillian Vernon certificates at face value.

Linens 'n Things is also honoring cards for the full amount. So are Movie Gallery and Hollywood Video, just emerged from bankruptcy.

Bankruptcy rumors are swirling around Circuit City. Customers should redeem its cards pronto.

Wednesday, September 3, 2008

Banks Want Payments Hubs

By Mark Brousseau

An eye-popping 85 percent of bank treasury and operations executives agree that gathering and compiling information across multiple payment systems is difficult, according to a survey by CheckFree, a Fiserv company. Half of the respondents agreed that it was difficult and another 35 pecent of respondents strongly agreed. Fifteen percent said they disagreed. Most respondents would replace their existing payments infrastructures with hubs, if possible. What do you think? Tell us below.

More B2B Transactions Go Electronic

By Mark Brousseau

More signs that paper checks are losing their grip on business-to-business transactions. Some 56 percent of treasurers, CFOs and other senior finance executives say they use p-cards and see reducing administrative costs and time as top benefits, according to Treasury & Risk’s annual cash management survey. Meantime, 55 percent of respondents to the survey said they handled more than 80 percent of their business online.

What's happening at your organization?

Post your comments below.

Tuesday, September 2, 2008

Benefits of Shared Services

By Mark Brousseau

Implementing a shared services approach to payments processing and clearing can help organizations build value across the enterprise, Mario Villarreal (mvillarreal@usdataworks.com), president and COO of US Dataworks said during a presentation at the 2008 TAWPI Forums & Expo in Orlando last week. With a shared services approach, organizations can process more payment types, identify new payment channels, and continue adding functionality as the industry evolves, Villarreal told attendees.

“Operations typically consist of both platform and application silos,” Villarreal said. Platform silos inhibit ability to integrate customer, bank and payment data across multiple payment methods, he noted, while application silos increase costs and operations risk due to redundant processing. In either case, the cost is high to adapt and integrate legacy systems.

“There are various reasons for these silos, but at the end of the day, they inhibit an organization’s ability to integrate valuable payments data,” Villarreal explained.

Villarreal thinks the endgame solution is for organizations to implement a shared services payment strategy; this strategy would converge around all of the types of payments that an organization might have, whether they are checks, ACH, mobile or wire. Through this framework, all payments would converge into a single payments processing platform, and tools could be used to make decisions as to the best way to clear these transactions.

Villarreal said a shared services approach offers key advantages, including reduced risk, improved compliance, better technology standardization, a single source for real-time reporting and analytics, streamlined operations costs, and future road-mapping. “There are significant benefits here from the data that is inherent in all payments,” Villarreal noted.

Has your organization implemented an enterprise payments strategy?

Post your comments below.