Wednesday, December 9, 2009

The Case for a Technology Refresh

Posted by Mark Brousseau

In spite of the economy, this might be a good time for organizations to refresh their technology infrastructure. Doug Myers (, Creditron's vice president of sales and business development, explains:

If your payments processing department's performance isn't up to snuff, it may be because you spend too much time and money maintaining and managing your existing systems, and not enough on investments in new technologies. Spending money now to refresh your payments infrastructure could pay big dividends long-term and better position your organization for the economic recovery.

The fact is, many organizations rely on inefficient and outdated equipment to process their payments. Many of these systems were installed in the run-up to Y2K. As evidence, 72 percent of attendees to a recent Creditron Webinar stated that their legacy remittance processing system was between eight and ten years old. This means they were installed long before Check 21, remote deposit capture, the growth of Accounts Receivable Check Conversion, or the maturation of imaging at mail extraction.

This type of outdated technology can compromise cost efficiency and business productivity.

To this point, TAWPI's 2009 Payments Benchmarking Study found that more billers reported that their unit costs have increased over the past year than those that reported declines. This rise in costs is in spite of the intense focus at most organizations to drive down costs. What's more, billers who responded to the survey reported that they have seen some decline in quality over the past year. The study reported that the chief culprit for this decline in quality is older equipment that needs updating.

Moreover, 36 percent of attendees to the Creditron Webinar said the biggest challenge with their legacy remittance system was the steep maintenance fees and high number of manual processes it requires. Another 18 percent of Webinar attendees cited poor software and hardware reliability, and lack of Check 21 capabilities as the biggest issues with their existing remittance processing system.

But this old technology may be costing operations managers even more than they realize. Dig deeper and they will likely find other ways that their antiquated technology is hampering their bottom line:

• Large footprint for outdated scanners
• Expensive scanner supplies and consumables
• Lack of redundancy for scanners
• Antiquated or inflexible software workflows
• Limited new hardware and software features
• No ability to consolidate paper and electronic payment streams

So what's an organization to do? One option is to outsource its payments processing. But this requires a leap of faith that a third-party provider can match the levels of quality and timeliness currently achieved by an organization's in-house operation. This isn't likely. And most companies realize it: despite a brutal economy, there has been a decrease this year in the number of RFPs issued by billers looking to outsource payments processing. Another option is to do nothing different. While avoiding capital investment, this option does nothing to address an operation's rising unit costs or the potential of unsupported equipment. A third option is to try upgrading the operation's existing infrastructure. This option is likely to disappoint organizations across the board: it requires capital investment, but only provides limited benefits in terms of functionality, efficiency and cost control.

Clearly, the best option is a refresh of the organization's payments processing infrastructure. In addition to significant savings on hardware maintenance and supplies, a compelling business case for a technology refresh can built on anticipated benefits from automated mail extraction, image inquiry, hot file capabilities, courtesy and legal amount recognition, Check 21 as a Service, and cashiering.

With a technology refresh, companies can slash processing costs, improve access to working capital, provide a foundation for future business needs, and eliminate the risk of equipment obsolescence.

Here's a real-world example: a utility that processes an average of 3,700 payments a day would save more than $900,000 over five years by refreshing its legacy payments infrastructure with an end-to-end solution that includes cashiering, automated mail extraction, an image-based remittance solution, and Check 21. What's more, the utility would significantly improve its access to working capital.

With an eye-popping business case like this, it's little wonder that 6 percent of attendees to the recent Creditron Webinar stated that they plan to replace their legacy remittance processing system in the next six months, while another 6 percent of attendees said they plan to do so in the next 12 months.

So, don't let low payments processing performance be a problem of your own making.

By choosing to invest in new technology in the short-term, you can keep your operations costs low, address current and future business needs, and be in a better position to outperform your peers.