By Mark Brousseau
The recent economic volatility has got many people wondering whether lockbox providers are seeing a change in demand. To find out, I asked three lockbox industry veterans.
John Mintzer (john.d.mintzer@citizensbank.com), vice president at Citizens Bank, said interest in outsourced remittance processing continues to be steady even during the most recent economic volatility.
“Remittance processing is similar to the gaming industry in that the demand for remittance services doesn’t necessarily retrench or diminish during difficult economic times,” Mintzer explained. “However, the comparison stops there. While the client of the casino takes on more risk in the pursuit of wealth – capital – the remittance processing client is looking to reduce risk in the pursuit of protecting its capital.”
Customers with in-house lockboxes continue to evaluate whether it makes more sense to outsource, Mintzer told me. “There is significant appeal to outsourcing, because it simplifies the budgeting process by boiling the expense down to a per item basis. This eliminates the need to worry about changing labor costs, software and hardware upgrades, and the significant expense associated with business continuity.”
Steven Nugent (steven.nugent@firstdata.com), director, product management, at First Data Corp. doesn’t believe that economic factors have influenced the market’s interest in outsourcing as much as the ever-increasing unit cost per item due to electronic migration. “Companies have historically measured the value proposition of an outsourced lockbox against internal pressure to achieve margin goals,” Nugent told me. “It would surprise me if most in-house processors weren’t contemplating outsourcing prior to the latest economic downturn.”
Ron Victor (ronald.j.victorjr@jpmchase.com), vice president, Receivables Product Management for JPMorgan Chase, said his bank is seeing a decline in B2B check volumes of approximately 4 percent in the first quarter. “In my opinion, the key factors are the economic downturn, remote capture adoption [which flows into a separate P&L at JPMC] and electronic payment adoption.”
Victor added that the economic downturn certainly places a greater focus on intra-day collaboration (exceptions repair, data augmentation, invoice matching), straight-through processing, and remote deposit capture. “One key thing we have found is that the on-line user experience and ease of browser use are important to customer satisfaction,” he said.
Nugent also sees a stronger focus among billers on working capital management. “Value-added services designed to decrease time-in-process, such as intra-day exceptions processing and remote payment capture, take center stage in almost every conversation we have,” Nugent said. “Many of the payments processed through these channels carry a disproportionately higher dollar average. Image cash letter has become a standard for accelerating the back end.”
Mintzer, who will be a panelist with Nugent and Victor at TAWPI’s Payments in Transition conference this month in Las Vegas, added that his bank’s existing remittance customers continue to focus on line item processing charges. Some wholesale lockbox customers, as an example, are evaluating whether they can transition to retail lockbox services to reduce per item costs. “In some cases, this can work,” Mintzer said. “But there are many factors that need to be considered, including the return rate of the remittance coupon and the ability of the customer to absorb the upfront programming charges,” he explained.
What are you seeing? Post your comments.
Wednesday, April 2, 2008
3 Key Trends In Remote Capture
By Mark Brousseau
Financial institutions have growth opportunities in implementing check imaging and remote deposit capture solutions as more customers request the services and, as the banks themselves, search out new opportunities for expansion. That’s according to Andy Lawrence, Worldwide Solutions Business Manager, Document Imaging, Graphic Communications Group, Eastman Kodak Company.
“Today’s challenging credit and mortgage environments are narrowing profit margins in both loan and deposit portfolios,” Lawrence told me. “Banks are looking to improve operational efficiency in dealing with the aforementioned and that is also fueling interest in check imaging and remote deposit capture.”
Lawrence said there are three significant trends occurring in the remote capture marketplace today.
First, small to medium-sized banks are increasingly signing up as clients to outsourced or hosted services for check imaging and remote deposit capture. There are many reasons for this, Lawrence noted; however, the prime reason has much to do with organizational philosophy. That necessitates answering a fundamental question: Does an organization have the scope within its resources to implement and maintain a remote deposit capture solution or does it want to concentrate resources on its core business, that of banking?
“Certainly, costs enter the picture in terms of affording dedicated IT resources and capital investments in hardware and software,” Lawrence noted. “So, too, business growth opportunities enter the decision process. We’re seeing small to medium sized banks use hosted services to expand their business without building and staffing new branches. Regardless if the system is in house or hosted, banks of all sizes have quickly realized that offering check imaging and remote deposit capture solutions to customers has enabled them to grow business cost effectively.”
Lawrence said Kodak also is beginning to see that small and medium size business are seeking to buy remote deposit capture solutions directly from vendors versus sourcing them exclusively through banks as was the case in the initial Check 21 push. While banks are anxious to reach beyond their own client base, the reality is that they are limited by the scale of their sales organization and ability to implement and service solutions, Lawrence explained. In fact, he claims bank adoption has been widespread but client adoption has been limited and is almost at a standstill.
“We realized that this would happen,” Lawrence said. “To prepare for it, Kodak has been expanding application knowledge and market presence for the last three years. In effect, Kodak is playing the role of matchmaker by driving awareness and leveraging our relationships with businesses to bring clients to banks with which we’ve partnered.”
The last trend Lawrence noted involves capture technology itself, and the disruption being caused in the market by businesses requesting to use document scanner platforms for remote deposit capture. “These businesses do not require MICR and want to optimize return on investment in document scanners through using one scanning platform for financial transactions and business documents,” Lawrence said. “Doing so can lead to equipment cost savings, reduced training requirements and streamlined process flow.”
Lawrence said that in the four years since Congress passed the Check Clearing Act for the 21st Century Act enabling check scanning and remote deposit capture, the industry has moved from early adopters of the technology marketing the service to a few major customers to growing acceptance by all sizes of banks and customers.
Trends in hosted services, businesses purchasing remote deposit capture solutions directly from vendors and the ability to scan checks via document scanners will only accelerate the interest and pace of adoption in the market for Check 21 solutions, he predicted.
What do you think? E-mail me at m_brousseau@msn.com.
Financial institutions have growth opportunities in implementing check imaging and remote deposit capture solutions as more customers request the services and, as the banks themselves, search out new opportunities for expansion. That’s according to Andy Lawrence, Worldwide Solutions Business Manager, Document Imaging, Graphic Communications Group, Eastman Kodak Company.
“Today’s challenging credit and mortgage environments are narrowing profit margins in both loan and deposit portfolios,” Lawrence told me. “Banks are looking to improve operational efficiency in dealing with the aforementioned and that is also fueling interest in check imaging and remote deposit capture.”
Lawrence said there are three significant trends occurring in the remote capture marketplace today.
First, small to medium-sized banks are increasingly signing up as clients to outsourced or hosted services for check imaging and remote deposit capture. There are many reasons for this, Lawrence noted; however, the prime reason has much to do with organizational philosophy. That necessitates answering a fundamental question: Does an organization have the scope within its resources to implement and maintain a remote deposit capture solution or does it want to concentrate resources on its core business, that of banking?
“Certainly, costs enter the picture in terms of affording dedicated IT resources and capital investments in hardware and software,” Lawrence noted. “So, too, business growth opportunities enter the decision process. We’re seeing small to medium sized banks use hosted services to expand their business without building and staffing new branches. Regardless if the system is in house or hosted, banks of all sizes have quickly realized that offering check imaging and remote deposit capture solutions to customers has enabled them to grow business cost effectively.”
Lawrence said Kodak also is beginning to see that small and medium size business are seeking to buy remote deposit capture solutions directly from vendors versus sourcing them exclusively through banks as was the case in the initial Check 21 push. While banks are anxious to reach beyond their own client base, the reality is that they are limited by the scale of their sales organization and ability to implement and service solutions, Lawrence explained. In fact, he claims bank adoption has been widespread but client adoption has been limited and is almost at a standstill.
“We realized that this would happen,” Lawrence said. “To prepare for it, Kodak has been expanding application knowledge and market presence for the last three years. In effect, Kodak is playing the role of matchmaker by driving awareness and leveraging our relationships with businesses to bring clients to banks with which we’ve partnered.”
The last trend Lawrence noted involves capture technology itself, and the disruption being caused in the market by businesses requesting to use document scanner platforms for remote deposit capture. “These businesses do not require MICR and want to optimize return on investment in document scanners through using one scanning platform for financial transactions and business documents,” Lawrence said. “Doing so can lead to equipment cost savings, reduced training requirements and streamlined process flow.”
Lawrence said that in the four years since Congress passed the Check Clearing Act for the 21st Century Act enabling check scanning and remote deposit capture, the industry has moved from early adopters of the technology marketing the service to a few major customers to growing acceptance by all sizes of banks and customers.
Trends in hosted services, businesses purchasing remote deposit capture solutions directly from vendors and the ability to scan checks via document scanners will only accelerate the interest and pace of adoption in the market for Check 21 solutions, he predicted.
What do you think? E-mail me at m_brousseau@msn.com.
Tuesday, April 1, 2008
Managing Lockbox Relationships
By Mark Brousseau
Developing a strong working relationship with your lockbox provider is critical to the success of any payments outsourcing initiative, says Craig Bjork (cbjork@cds-global.com), director, account & business development, Data Capture Services, at CDS Global.
As a first step, Bjork recommends that billers make sure that their business rules are well documented and clearly understood by their lockbox provider. To be sure everyone is on the same page, ask the lockbox provider to share a copy with you. Review these business rules with your provider to understand why things are done a particular way, and what benefits they provide. If you hear, “I’m not sure,” or “We’ve always done things this way,” you’ve probably found a process that needs changing. “But don’t concern yourself too much with how the work gets done,” Bjork warns. “It is the results that you should worry about.”
Similarly, billers should make sure that their contract or service agreement is specific, and that they understand all of the billing points and how volumes are derived, Bjork explained.
In addition, whenever billers change their forms or remittance documents, they should give their lockbox provider an opportunity to adequately review and test them, Bjork said. “And listen to your lockbox provider’s comments and recommendations,” he said. “Documents that create issues in lockbox processing can also create exceptions and posting delays.”
Bjork noted that lockbox providers may want ‘perfect world’ scenarios, but this might not work for the biller. “Work with your lockbox provider to find the best solution for both parties,” Bjork said. “Everyone’s goal should be the same: timely and accurate processing.”
Bjork also recommends that billers visit their lockbox provider’s facility, to build personal relationships with the people servicing their accounts, and to see firsthand how their work will be processed. And know the chain of command for your provider. You also want to get at least two alternate contacts so you have options if your primary contact is unavailable.
Any strategies you would like to share? E-mail me at m_brousseau@msn.com.
Developing a strong working relationship with your lockbox provider is critical to the success of any payments outsourcing initiative, says Craig Bjork (cbjork@cds-global.com), director, account & business development, Data Capture Services, at CDS Global.
As a first step, Bjork recommends that billers make sure that their business rules are well documented and clearly understood by their lockbox provider. To be sure everyone is on the same page, ask the lockbox provider to share a copy with you. Review these business rules with your provider to understand why things are done a particular way, and what benefits they provide. If you hear, “I’m not sure,” or “We’ve always done things this way,” you’ve probably found a process that needs changing. “But don’t concern yourself too much with how the work gets done,” Bjork warns. “It is the results that you should worry about.”
Similarly, billers should make sure that their contract or service agreement is specific, and that they understand all of the billing points and how volumes are derived, Bjork explained.
In addition, whenever billers change their forms or remittance documents, they should give their lockbox provider an opportunity to adequately review and test them, Bjork said. “And listen to your lockbox provider’s comments and recommendations,” he said. “Documents that create issues in lockbox processing can also create exceptions and posting delays.”
Bjork noted that lockbox providers may want ‘perfect world’ scenarios, but this might not work for the biller. “Work with your lockbox provider to find the best solution for both parties,” Bjork said. “Everyone’s goal should be the same: timely and accurate processing.”
Bjork also recommends that billers visit their lockbox provider’s facility, to build personal relationships with the people servicing their accounts, and to see firsthand how their work will be processed. And know the chain of command for your provider. You also want to get at least two alternate contacts so you have options if your primary contact is unavailable.
Any strategies you would like to share? E-mail me at m_brousseau@msn.com.
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