Moving Money-Treasury Management Group looks to Tackle Remote Capture

by Harvey Spencer contributing editor and published in TAWPI's TODAY Magazine click here for a complimentary subscription to TODAY.

Back in 1980 when I worked for NCR in Dayton, OH, I was responsible for implementing one of the early PC based Treasury Workstations. This software kept track of a company’s investments and then dialed the corporation’s bank accounts before the Treasurer arrived. By the time he arrived at 8:00 am, he had a complete cash position laid out and could make investment decisions faster. We were going to sell this to the banks so that they could sell them to their customers. As my Beta site, I installed this into NCR’s Treasury Department – then a $5 billion company – and the Treasurer reckoned that he gained two basis points in the market through having faster access to this information a lot of money. This all came back to me as I contemplated the impact of Check 21 and the push to install Remote Capture systems by Banks in corporations. As with Remote Capture, the banks thought that since the Treasury Workstation would give better control to their customers, they could create a closer liaison with them by selling these systems. This proved fallacious as large corporations, such as NCR, wanted to control their own relationships and did not want the banks’ systems in their Treasury areas. We are now seeing the same scenario played out –the banks want to put remote capture stations into corporations.

They cite the major reasons as being:

_ Improved Float Elimination of transportation/courier costs
_ Branch Account Consolidation
_ Fewer Processing Errors
_ Convenience and Safety

These are clear benefits, and from the bank’s viewpoint it saves
major costs, since their customer is effectively performing the
expensive proof and encode operation instead of them. However,
the problem with this approach is that it ignores the needs of the
corporation. What happens if the company wants to change its
major banking supplier? Must it return its Remote Capture system?
While I think that Remote Capture as supplied by Banks will be
successful in the SMB market, I doubt that it will fly in large corporations
over the longer term. As with the Treasury Workstation,
large corporations will want their own systems and will use the X9
standards to deliver standardized images to the banks they choose
or to a 3rd party service.

Clearly, they will vary this in order to:

_ Reduce costs
_ Reduce bank accounts
_ Optimize cutoff times
_ Improve float

The banks will compete fiercely on this, but they now have a different playing
field from the traditional paper based one. For instance at – a Kansas bank – told me that they had extended their Check 21 today value cutoff to 6:00 pm Central
Time. Well that is fine if you on the East Coast, but if you are in California,
it is 4:00 pm – not much better than traditional times and a West Coast bank who makes their cut-off at 6pm gives East Coast companies up until 9:00 pm to deposit their check images. Services are appearing to facilitate this flexibility and decide how best to clear items. For example CheckFree introduced a service to enable automated clearing decisions to be made in order to leverage the new NACHA BOC rules which allow a small quantity of business checks to be cleared through lower cost ACH. SWIFT – used by banks to enable the secure movement of transactions internationally which corporations could only access through bank partnerships announced an enhanced Corporate Access capability named SCORE, which allows publicly listed corporations to electronically interact with a closed group of participating financial organizations. It is slowly reducing banking control. In addition, Remote Capture effectively means that a two-step operation must be performed:

1. Scan and balance the payments sending the check images
and cash letter to the bank
2. Post the payment to the AR system

It seems that it would be much more effective to integrate the posting with the capture. Two solutions I saw were Remitco, which is offering customized solutions to enable this integration, and, Creditron, a small Canadian that company has integrated into Microsoft Dynamics (formerly Great Plains). Trintech, specializing in transaction verification, is expanding into integration. From the perspective of TAWPI members, this seems like an emerging opportunity. On one side we have Invoice or AP processing starting to be installed – these systems, particularly when linked with procure-to-pay solutions allow far better and faster management of outgoing payments. On the other side we have Remittance or AR which is changing with the advent of remote capture, ARC and Check 21 and is becoming more integrated and distributed. Together the Corporate Treasurer can gain better and faster control over both the outgoing and incoming cash. At present, most Treasurers get end of day cash reporting – but more advanced companies are getting intra-day reporting. The business future will require real-time reporting but that is some way off according to Bent Benjaminsen, Senior Vice President Strategic Initiatives at Avantgard, a subsidiary of Sungard Systems. Linking AP and AR systems provides potentially huge benefits to major corporations and it seems that many AP and AR inputs will continue to be paper based. Like the Treasury Workstations of old, the bank controlled Remote Capture solution will not hold up in
major corporations, but its adoption will open doors to systems from those companies who capture paper and integrate with the AR systems as well as order-to-cash. But I predict that those who can provide integration of both AP and AR systems automation will be the big winners.