By Glenn Wheeler, president, Viewpointe Clearing, Settlement & Association Services, Viewpointe
Is the check dead? You might hear a near-unanimous “yes” to that question; or as others might say more accurately, check usage is simply on a long decline. While check usage has been dwindling in recent years, to paraphrase Mark Twain, the reports of its death are greatly exaggerated. A recent study shows a sizeable segment of the market still writes checks.
As The 2010 Federal Reserve Payments Study, which looks at noncash payments in the U.S. from 2006 through 2009, indicates electronic payments are quickly outstripping check payments; yet checks have remained a significant payment instrument – to the tune of $31.6 trillion in value paid in 2009. While businesses far outweigh consumers in the total dollar value of the checks paid, consumers overall continue to write more checks, according to the findings. And, the study found that while the number of checks written overall has declined more than 7 percent from 2006 to 2009, the volume of consumer-to-consumer check payments has actually grown in that same time period, from 2.2 billion to 2.4 billion.
Where is the consumer-to-consumer check-writing trend heading? Despite its overall decline, there are those who continue to see the value in this traditional payment method. A January New York Times story, Social Security and Welfare Benefits Going Paperless, about the U.S. government’s decision to pay benefits electronically, chronicled how the elderly have continued to opt to receive old-reliable checks versus the government’s proposed electronic deposit of social security payments.
While this one segment of the population alone will not keep checks going indefinitely, technology might encourage some of the smartphone-wielding segment of the population to continue circulating them. According to a recent American Banker article, For Mobile Deposit, Banks Choose Speed-to-Market Over Simplicity, banks are rushing ahead with mobile check deposit technology at the behest of their customers who are using the technology to deposit checks without having to step foot in a bank.
As electronic payments technology continues to evolve – from mobile payment apps to “tap-and-pay” payments using near field communications (NFC), financial institutions and their customers can easily move into a new payments world. Embracing the budding technology will, no doubt, bring new challenges, but with ease of use and the promise of potential growth to the financial institution’s bottom line it could be a worthwhile investment.
Even in our digital age, the old-fashioned check may still stand up as a viable complement to the technologically advanced payment methods.
What do you think?
Showing posts with label Check 21. Show all posts
Showing posts with label Check 21. Show all posts
Tuesday, May 17, 2011
Wednesday, April 6, 2011
Same-day ACH suffering from “chicken and the egg” syndrome?
By Mark Brousseau
With remote deposit capture continuing to enjoy strong growth, some attendees at this week’s NACHA Payments conference in Austin, Texas, were left wondering what has become of same-day Automated Clearing House (ACH) transactions – the hottest (and arguably most controversial) topic at NACHA Payments a few years back. The answer may be sobering for those who thought same-day ACH would be a clearly more appealing alternative to the same-day availability afforded by remote capture.
“The lack of same-day availability has always been a weakness of ACH,” notes Affirmative Technologies Chief Technology Officer George Bassous.
“Same-day ACH should be a magic bullet when it comes to turning back the rising volume of deposits made via Check 21 remote capture,” he says. “After all, Check 21 remote capture is a case of moving forward by taking two steps back: in order to get same-day availability, it requires the biller to continue dealing with checks.”
Bassous says there are a lot of advantages to same-day ACH. Chief among them, he said, is the ability to know much sooner whether a transaction is being returned. “Virtually any biller would be very interested in same-day ACH,” Bassous claimed.
So why hasn’t same-day ACH had better traction, much less driven back the growth of Check 21 remote capture transactions? “The issue is that the systems used by the ACH banks – particularly large ones – are so tied into old technology that when something new like same-day ACH comes along, they can’t do anything about it. This is the same issue that Secure Vault Payments is having. The situation with same-day ACH is a classic case of ‘chicken and the egg,’” Bassous explained.
Bassous doesn’t buy the argument that some banks won’t offer same-day ACH because they are afraid of cannibalizing their lucrative wire transfer volumes: “I haven’t heard that from banks and I think cards would be the bigger threat there.”
The bottom line is that many banks are not set-up for same-day ACH.
What do you think?
With remote deposit capture continuing to enjoy strong growth, some attendees at this week’s NACHA Payments conference in Austin, Texas, were left wondering what has become of same-day Automated Clearing House (ACH) transactions – the hottest (and arguably most controversial) topic at NACHA Payments a few years back. The answer may be sobering for those who thought same-day ACH would be a clearly more appealing alternative to the same-day availability afforded by remote capture.
“The lack of same-day availability has always been a weakness of ACH,” notes Affirmative Technologies Chief Technology Officer George Bassous.
“Same-day ACH should be a magic bullet when it comes to turning back the rising volume of deposits made via Check 21 remote capture,” he says. “After all, Check 21 remote capture is a case of moving forward by taking two steps back: in order to get same-day availability, it requires the biller to continue dealing with checks.”
Bassous says there are a lot of advantages to same-day ACH. Chief among them, he said, is the ability to know much sooner whether a transaction is being returned. “Virtually any biller would be very interested in same-day ACH,” Bassous claimed.
So why hasn’t same-day ACH had better traction, much less driven back the growth of Check 21 remote capture transactions? “The issue is that the systems used by the ACH banks – particularly large ones – are so tied into old technology that when something new like same-day ACH comes along, they can’t do anything about it. This is the same issue that Secure Vault Payments is having. The situation with same-day ACH is a classic case of ‘chicken and the egg,’” Bassous explained.
Bassous doesn’t buy the argument that some banks won’t offer same-day ACH because they are afraid of cannibalizing their lucrative wire transfer volumes: “I haven’t heard that from banks and I think cards would be the bigger threat there.”
The bottom line is that many banks are not set-up for same-day ACH.
What do you think?
Thursday, February 17, 2011
Banks should get back to the boring
Posted by Mark Brousseau
As the world closes in on the three-year mark of the beginning of the global financial crisis, one expert believes that it’s not enough to rely on new regulations to prevent future disasters — a fundamental change in mindset is required.
Rex Ghosh, a Harvard PhD economist who has worked in the financial markets for more than 20 years, currently with the International Monetary Fund, believes that the very culture of the financial sector needs to shift back to basics as the economy limps out of recession.
“The global financial crisis, marked by the bankruptcy of Lehman Brothers in September 2008, has taken an enormous economic, financial, and social toll,” said Ghosh. “Both in the United States and abroad, regulations, laws, and practices are being changed to help ensure that such crises do not recur. But these regulations — running to the thousands of pages — are enormously complex. It may be years before they are all adopted and absorbed into the daily lives of those in the financial sector. The real prevention rests in the notion that leaders need to work toward changing the very culture of the sector to rely on more fundamental and basic practices based in prudence and responsibility.”
Ghosh would like to see the financial sector learn the following lessons in 2011:
... For the Federal Reserve -- Central banks such as the Fed should not only look at goods price inflation, but also at important asset prices, such as the stock market and housing sectors. It also needs to be more mindful of lending and credit booms, especially in the face of weakening credit standards. That’s what paved the road to hell three years ago. We do not want to repeat that option again. Traditional monetary policy tools (like the Fed’s interest rate) may need to be bolstered by counter-cyclical capital requirements (requiring banks to hold more capital in “boom” times).
... For Banks -- Boring is good. Banks should get used to being a much smaller proportion of the economy, like it was before the 1990s. Bankers should also be aware of credit and counterparty risks. They need to know who they’re doing business with, know to whom they are lending and not rely solely on credit ratings.
... For Regulators – They need to watch the kids and the cookie jar. They should not count on banks to manage their risks prudently. They should think seriously about “tail risks” — just because something has not happened before, such as a nation-wide decline in house prices, doesn’t mean it cannot happen in the future.
“These are not incredibly difficult precepts,” Ghosh added. “The short answer is that the Fed needs to broaden its view of what constitutes inflation, banks need to look past the paperwork and avoid risk, and regulators need to realize their jobs don’t end with the passage of new rules. For every regulation created, there are 50 new ways created to get around it. We need to realize that the practices of the past won’t go away until we match the letter of the regulations with the culture of the financial sector.”
What do you think?
As the world closes in on the three-year mark of the beginning of the global financial crisis, one expert believes that it’s not enough to rely on new regulations to prevent future disasters — a fundamental change in mindset is required.
Rex Ghosh, a Harvard PhD economist who has worked in the financial markets for more than 20 years, currently with the International Monetary Fund, believes that the very culture of the financial sector needs to shift back to basics as the economy limps out of recession.
“The global financial crisis, marked by the bankruptcy of Lehman Brothers in September 2008, has taken an enormous economic, financial, and social toll,” said Ghosh. “Both in the United States and abroad, regulations, laws, and practices are being changed to help ensure that such crises do not recur. But these regulations — running to the thousands of pages — are enormously complex. It may be years before they are all adopted and absorbed into the daily lives of those in the financial sector. The real prevention rests in the notion that leaders need to work toward changing the very culture of the sector to rely on more fundamental and basic practices based in prudence and responsibility.”
Ghosh would like to see the financial sector learn the following lessons in 2011:
... For the Federal Reserve -- Central banks such as the Fed should not only look at goods price inflation, but also at important asset prices, such as the stock market and housing sectors. It also needs to be more mindful of lending and credit booms, especially in the face of weakening credit standards. That’s what paved the road to hell three years ago. We do not want to repeat that option again. Traditional monetary policy tools (like the Fed’s interest rate) may need to be bolstered by counter-cyclical capital requirements (requiring banks to hold more capital in “boom” times).
... For Banks -- Boring is good. Banks should get used to being a much smaller proportion of the economy, like it was before the 1990s. Bankers should also be aware of credit and counterparty risks. They need to know who they’re doing business with, know to whom they are lending and not rely solely on credit ratings.
... For Regulators – They need to watch the kids and the cookie jar. They should not count on banks to manage their risks prudently. They should think seriously about “tail risks” — just because something has not happened before, such as a nation-wide decline in house prices, doesn’t mean it cannot happen in the future.
“These are not incredibly difficult precepts,” Ghosh added. “The short answer is that the Fed needs to broaden its view of what constitutes inflation, banks need to look past the paperwork and avoid risk, and regulators need to realize their jobs don’t end with the passage of new rules. For every regulation created, there are 50 new ways created to get around it. We need to realize that the practices of the past won’t go away until we match the letter of the regulations with the culture of the financial sector.”
What do you think?
Saturday, February 5, 2011
Are we approaching the "tipping point" for ebill usage?
Posted by Mark Brousseau
When will eBills be more widely used than traditional paper bills? A recent study suggests it might only be five years down the road.
The study conducted by NACHA’s Council for Electronic Billing and Payment (CEBP) and PayItGreen suggests that eBilling – or the electronic delivery of a bill to a customer – is gaining momentum across business industries with more billers expected to come online in 2011 and 2012. The NACHA CEBP and PayItGreen study, completed by Blueflame Consulting in January 2011, quantified the size of the eBill market, indicating that a total of 5.1 billion eBills were delivered in 2010 alone. However, some consumers are moving to adopt eBills more slowly than anticipated.
“After easily converting the ‘early adopters’ to eBills, billers are realizing that the second and third tiers of consumers will take more time to convince,” said Ed Bachelder, director of research for Blueflame Consulting. “However, billers across a broadening range of markets and sizes see eBill adoption as an important program for their companies, and have shown commitment to continuing to try to convert their customers.”
Nine of 10 of the companies surveyed rate eBill adoption to be a significant opportunity for their organizations. Cost-savings serves as a major driver for companies, with projected savings falling between 40 and 50 cents per bill. Another motivating factor, billers also said eBill customers are more satisfied customers and are easier to retain. Collectively, participants in the study distribute 735 million bills in a typical month, which is approximately 25 percent of all bills nationwide.
“eBills have not reached their full potential, but they’re gaining momentum,” said Janet O. Estep, president and CEO of NACHA — The Electronic Payments Association. “With companies’ long-term commitment to converting their customers to electronic bill presentment, we see adoption gaining momentum.”
Of those surveyed, universities had the most successful eBilling programs by far. Most universities can mandate eBilling for their students or use a customer opt-out approach rather than an opt-in approach.
“Most billers ask their customers to opt-in to the eBilling program,” said Bachelder. “Companies could increase their eBill participation dramatically by changing their new customer enrollment to an opt-out approach. Our study suggests that only 10 percent of customers who have Internet access would choose to opt-out once they experienced eBilling. Study participants identified one obstacle to eBilling is that the sign-up process is often too time-consuming for customers. An opt-out program would simplify that step.”
Participants in the study agree that more customer education is needed about how eBilling works, the security involved, and how significant paper reduction is to improving the environment.
“Once customers truly understand eBilling, they respond positively for a number of reasons,” said Estep. “Convenience is key, and environmental messaging continues to be a supporting motivator for eBill adoption.”
What do you think?
When will eBills be more widely used than traditional paper bills? A recent study suggests it might only be five years down the road.
The study conducted by NACHA’s Council for Electronic Billing and Payment (CEBP) and PayItGreen suggests that eBilling – or the electronic delivery of a bill to a customer – is gaining momentum across business industries with more billers expected to come online in 2011 and 2012. The NACHA CEBP and PayItGreen study, completed by Blueflame Consulting in January 2011, quantified the size of the eBill market, indicating that a total of 5.1 billion eBills were delivered in 2010 alone. However, some consumers are moving to adopt eBills more slowly than anticipated.
“After easily converting the ‘early adopters’ to eBills, billers are realizing that the second and third tiers of consumers will take more time to convince,” said Ed Bachelder, director of research for Blueflame Consulting. “However, billers across a broadening range of markets and sizes see eBill adoption as an important program for their companies, and have shown commitment to continuing to try to convert their customers.”
Nine of 10 of the companies surveyed rate eBill adoption to be a significant opportunity for their organizations. Cost-savings serves as a major driver for companies, with projected savings falling between 40 and 50 cents per bill. Another motivating factor, billers also said eBill customers are more satisfied customers and are easier to retain. Collectively, participants in the study distribute 735 million bills in a typical month, which is approximately 25 percent of all bills nationwide.
“eBills have not reached their full potential, but they’re gaining momentum,” said Janet O. Estep, president and CEO of NACHA — The Electronic Payments Association. “With companies’ long-term commitment to converting their customers to electronic bill presentment, we see adoption gaining momentum.”
Of those surveyed, universities had the most successful eBilling programs by far. Most universities can mandate eBilling for their students or use a customer opt-out approach rather than an opt-in approach.
“Most billers ask their customers to opt-in to the eBilling program,” said Bachelder. “Companies could increase their eBill participation dramatically by changing their new customer enrollment to an opt-out approach. Our study suggests that only 10 percent of customers who have Internet access would choose to opt-out once they experienced eBilling. Study participants identified one obstacle to eBilling is that the sign-up process is often too time-consuming for customers. An opt-out program would simplify that step.”
Participants in the study agree that more customer education is needed about how eBilling works, the security involved, and how significant paper reduction is to improving the environment.
“Once customers truly understand eBilling, they respond positively for a number of reasons,” said Estep. “Convenience is key, and environmental messaging continues to be a supporting motivator for eBill adoption.”
What do you think?
Thursday, January 27, 2011
The branch is dead -- long live the branch
By Vijay Balakrishnan of StratEx LLC
That we live in a wired (or perhaps more appropriately, a wireless) world is an oft repeated truism. As I work on this post, I am using the Internet. My mobile phone just beeped with a text message. An intrepid bunch of schoolmates are using Facebook to organize a high school reunion half a planet away. Reunion after how many years, you say? Well, let's just say it is enough for many grey hairs.
If the drumbeat of news is to be believed, consumers are leaping en masse to interacting with their financial institutions through mobile phones and other remote channels. You can now snap a picture of a check with your phone and deposit it in your bank from anywhere in the world. Remote Deposit Capture (RDC) allows businesses and consumers to scan checks from the comfort of their offices or family rooms, and zap across images for deposit. The perfect storm of convenience and technology should mean that very few people visit their neighborhood branch anymore, right? Wrong!
An item (no pun, honest!) in The 2010 Federal Reserve Payments Study caught my eye. Yes, the number of checks written has declined from about 30 billion to 24.4 billion. However, only 13 percent of checks deposited were received by financial institutions as images. That means a respectable 87 percent of checks were deposited physically. So, despite all the noise about check deposits getting virtualized, there still is a healthy number of people walking into branches to make deposits.
Now, your take on the physical branch versus self-service debate will dictate whether you see this glass half full or half empty of your beverage of choice. Proponents of RDC will point to the enormous growth potential in the remaining 87 percent. The same percentage will be looked at by some retail bankers as rationale to invest in branches.
At the risk of being a fence sitter (come to think of it, sitting on an actual fence can be acutely uncomfortable), let me say that both views are correct. RDC will continue its growth, albeit at its present course and speed- I don't see a "big bang" transformation in that direction. I do, however, see an opportunity for investment in technologies like teller capture and enhanced training for tellers to go beyond their current role as deposit takers. Teller capture uses technology to capture images, proof, and balance deposits at the teller station. It reduces keystrokes and data entry errors. It also provides more "heads up" time for tellers to interact with customers, where additional training can enhance the customer experience.
Transformation is a funny thing. Just when you think the new and different will swamp the world, something from the hoary past reaches out to remind us of its existence. Success will go to those who craft strategies to leverage both.
Vijay Balakrishnan is president of StratEx LLC. He can be reached at 770-598-5747.
That we live in a wired (or perhaps more appropriately, a wireless) world is an oft repeated truism. As I work on this post, I am using the Internet. My mobile phone just beeped with a text message. An intrepid bunch of schoolmates are using Facebook to organize a high school reunion half a planet away. Reunion after how many years, you say? Well, let's just say it is enough for many grey hairs.
If the drumbeat of news is to be believed, consumers are leaping en masse to interacting with their financial institutions through mobile phones and other remote channels. You can now snap a picture of a check with your phone and deposit it in your bank from anywhere in the world. Remote Deposit Capture (RDC) allows businesses and consumers to scan checks from the comfort of their offices or family rooms, and zap across images for deposit. The perfect storm of convenience and technology should mean that very few people visit their neighborhood branch anymore, right? Wrong!
An item (no pun, honest!) in The 2010 Federal Reserve Payments Study caught my eye. Yes, the number of checks written has declined from about 30 billion to 24.4 billion. However, only 13 percent of checks deposited were received by financial institutions as images. That means a respectable 87 percent of checks were deposited physically. So, despite all the noise about check deposits getting virtualized, there still is a healthy number of people walking into branches to make deposits.
Now, your take on the physical branch versus self-service debate will dictate whether you see this glass half full or half empty of your beverage of choice. Proponents of RDC will point to the enormous growth potential in the remaining 87 percent. The same percentage will be looked at by some retail bankers as rationale to invest in branches.
At the risk of being a fence sitter (come to think of it, sitting on an actual fence can be acutely uncomfortable), let me say that both views are correct. RDC will continue its growth, albeit at its present course and speed- I don't see a "big bang" transformation in that direction. I do, however, see an opportunity for investment in technologies like teller capture and enhanced training for tellers to go beyond their current role as deposit takers. Teller capture uses technology to capture images, proof, and balance deposits at the teller station. It reduces keystrokes and data entry errors. It also provides more "heads up" time for tellers to interact with customers, where additional training can enhance the customer experience.
Transformation is a funny thing. Just when you think the new and different will swamp the world, something from the hoary past reaches out to remind us of its existence. Success will go to those who craft strategies to leverage both.
Vijay Balakrishnan is president of StratEx LLC. He can be reached at 770-598-5747.
Thursday, December 23, 2010
Municipalities eager to automate RP
Posted by Mark Brousseau
Municipal governments are showing strong interest in purchasing automated remittance solutions, and it appears that the sluggish economy -- and its impact on municipal budgets -- is the primary reason, according to Tony Rapaglia, regional manager for Creditron (trapaglia@creditron.com). Municipalities are looking to automate functions such as tax and utility payment processing, Rapaglia explains, adding that he expects the strong demand to carry over into the new year.
"Especially after the recent elections, municipalities are extremely conscious about the amount of money they are spending on back-office functions such as remittance processing," Rapaglia says. "Many are focused like a laser-bean on cutting costs and improving service to taxpayers. They recognize that they can pass along any savings from more efficient processing to their taxpayers."
So why is remittance processing, in particular, getting so much attention from municipalities?
For starters, Rapaglia notes that automated remittance processing frees up municipal workers to focus on other activities -- which is critical as they look to become more taxpayer-focused and make do with less staff. Automated remittance processing also helps municipalities make deposits much quicker, delivering immediate gains in funds availability. Even greater gains are on tap for those municipalities that deposit items electronically to their banks via Check 21. And municipalities are drawn to the improved security that an automated remittance system provides compared to paper processes. "In an automated environment, less people handle the checks, and there's less opportunity to lose them," Rapaglia explains, noting a recent case where a courier misplaced paper checks.
"Municipal budgets are certainly tight, but more of them are recognizing that they can achieve big savings by spending relatively little money on an automated remittance system," Rapaglia concludes.
Municipal governments are showing strong interest in purchasing automated remittance solutions, and it appears that the sluggish economy -- and its impact on municipal budgets -- is the primary reason, according to Tony Rapaglia, regional manager for Creditron (trapaglia@creditron.com). Municipalities are looking to automate functions such as tax and utility payment processing, Rapaglia explains, adding that he expects the strong demand to carry over into the new year.
"Especially after the recent elections, municipalities are extremely conscious about the amount of money they are spending on back-office functions such as remittance processing," Rapaglia says. "Many are focused like a laser-bean on cutting costs and improving service to taxpayers. They recognize that they can pass along any savings from more efficient processing to their taxpayers."
So why is remittance processing, in particular, getting so much attention from municipalities?
For starters, Rapaglia notes that automated remittance processing frees up municipal workers to focus on other activities -- which is critical as they look to become more taxpayer-focused and make do with less staff. Automated remittance processing also helps municipalities make deposits much quicker, delivering immediate gains in funds availability. Even greater gains are on tap for those municipalities that deposit items electronically to their banks via Check 21. And municipalities are drawn to the improved security that an automated remittance system provides compared to paper processes. "In an automated environment, less people handle the checks, and there's less opportunity to lose them," Rapaglia explains, noting a recent case where a courier misplaced paper checks.
"Municipal budgets are certainly tight, but more of them are recognizing that they can achieve big savings by spending relatively little money on an automated remittance system," Rapaglia concludes.
Tuesday, September 14, 2010
4 Reasons Government Entities may adopt Integrated Payments Hubs
Posted by Mark Brousseau
If you think your operations budgets are tight, try managing payments processing for a government entity. Badly stung by declining tax revenues, most state, county and municipal governments have squeezed their operations budgets dry. And it couldn't have come at a worse time for government operations managers: like their counterparts in the private sector, governments are struggling with how best to adapt their operations to declining check volumes and emerging payments channels.
Leilani Doyle (ldoyle@usdataworks.com), product manager at Houston-based US Dataworks (www.usdataworks.com), believes government entities may find a solution in so-called enterprise payments hubs (or integrated payments hubs), which consolidate paper-based and electronic payments into a single platform, in turn, streamlining processing and eliminating operations silos.
About one-quarter (22.2 percent) of all government entities that responded to a recent IAPP-TAWPI survey indicated that they have implemented an enterprise payments hub to consolidate paper and electronic payments. The responses from state revenue agencies nearly mirror the overall findings for this question, with 21.4 percent indicating that they have implemented an enterprise payments hub. Non-revenue state agencies and county government entities have made a little more progress in this area, with 33 percent of (non-revenue) state agencies indicating that they have implemented an enterprise payments hub, and 40 percent of county government entities (by far the highest adoption rate among the groups tracked) stating that they have implemented an enterprise payments hub.
Doyle says 4 factors could drive faster growth of enterprise payments hubs among governments:
1. Declining paper volumes. As government agencies achieve success with electronic payments, their existing paper-centric infrastructure becomes obsolete. "Paper will not go away any time soon, but there's no need to maintain equipment and applications designed to manage large volumes of paper payments," Doyle explains. "Moving forward, government entities will need an integrated payments platform that can scale up or down as needed. This type of payments processing platform operates like a utility that can be easily adjusted to changing payment types and volumes."
2. Focus on serving constituents. Implementing an integrated payments hub enables government entities to provide better service to their constituents, Doyle explains. Research can be performed from a single location. Posting is more accurate. And check images can be retrieved instantly.
3. Push to reduce bank fees and operations costs. With an integrated payments hub, government entities can consolidate their bank deposit files, putting them in a stronger position for negotiating bank fees. Inside government operations, an integrated payments hub helps government entities increase overall staff productivity by not requiring them to learn different applications for processing each payment type. Similarly, reports for staffing and efficiency can be produced from a single system, streamlining the generation of Key Performance Indicators each agency must produce.
4. Lower capital expenditures and ongoing costs. With the emergence of enterprise payments solutions that offer a Software-as-a-Service (SaaS) or hosted delivery model, government agencies can replace their aging systems with little to no upfront cost. This is a creative way to allow agencies without the budgeted dollars to replace antiquated legacy systems, Doyle says. "SaaS services also provide an added layer of security and compliance protection, starting with PCI compliance and SAS-70. This can significantly reduce risks and audit costs for government agencies." What’s more, leveraging a SaaS or hosted delivery model means government entities can offload the management of their IT infrastructure. This not only saves money, but also allows government entities to better focus on their core competency -- serving taxpayers. And this may be the biggest benefit of all.
It's for these reasons that Doyle thinks government entities may adopt integrated payments hubs.
What do you think?
If you think your operations budgets are tight, try managing payments processing for a government entity. Badly stung by declining tax revenues, most state, county and municipal governments have squeezed their operations budgets dry. And it couldn't have come at a worse time for government operations managers: like their counterparts in the private sector, governments are struggling with how best to adapt their operations to declining check volumes and emerging payments channels.
Leilani Doyle (ldoyle@usdataworks.com), product manager at Houston-based US Dataworks (www.usdataworks.com), believes government entities may find a solution in so-called enterprise payments hubs (or integrated payments hubs), which consolidate paper-based and electronic payments into a single platform, in turn, streamlining processing and eliminating operations silos.
About one-quarter (22.2 percent) of all government entities that responded to a recent IAPP-TAWPI survey indicated that they have implemented an enterprise payments hub to consolidate paper and electronic payments. The responses from state revenue agencies nearly mirror the overall findings for this question, with 21.4 percent indicating that they have implemented an enterprise payments hub. Non-revenue state agencies and county government entities have made a little more progress in this area, with 33 percent of (non-revenue) state agencies indicating that they have implemented an enterprise payments hub, and 40 percent of county government entities (by far the highest adoption rate among the groups tracked) stating that they have implemented an enterprise payments hub.
Doyle says 4 factors could drive faster growth of enterprise payments hubs among governments:
1. Declining paper volumes. As government agencies achieve success with electronic payments, their existing paper-centric infrastructure becomes obsolete. "Paper will not go away any time soon, but there's no need to maintain equipment and applications designed to manage large volumes of paper payments," Doyle explains. "Moving forward, government entities will need an integrated payments platform that can scale up or down as needed. This type of payments processing platform operates like a utility that can be easily adjusted to changing payment types and volumes."
2. Focus on serving constituents. Implementing an integrated payments hub enables government entities to provide better service to their constituents, Doyle explains. Research can be performed from a single location. Posting is more accurate. And check images can be retrieved instantly.
3. Push to reduce bank fees and operations costs. With an integrated payments hub, government entities can consolidate their bank deposit files, putting them in a stronger position for negotiating bank fees. Inside government operations, an integrated payments hub helps government entities increase overall staff productivity by not requiring them to learn different applications for processing each payment type. Similarly, reports for staffing and efficiency can be produced from a single system, streamlining the generation of Key Performance Indicators each agency must produce.
4. Lower capital expenditures and ongoing costs. With the emergence of enterprise payments solutions that offer a Software-as-a-Service (SaaS) or hosted delivery model, government agencies can replace their aging systems with little to no upfront cost. This is a creative way to allow agencies without the budgeted dollars to replace antiquated legacy systems, Doyle says. "SaaS services also provide an added layer of security and compliance protection, starting with PCI compliance and SAS-70. This can significantly reduce risks and audit costs for government agencies." What’s more, leveraging a SaaS or hosted delivery model means government entities can offload the management of their IT infrastructure. This not only saves money, but also allows government entities to better focus on their core competency -- serving taxpayers. And this may be the biggest benefit of all.
It's for these reasons that Doyle thinks government entities may adopt integrated payments hubs.
What do you think?
Saturday, September 4, 2010
Why Can't Tellers be Sellers?
By Vijay Balakrishnan, president of StratEx, LLC (vijay.balakrishnan90@gmail.com)
Stepping into a debate that is as old as retail banking is perhaps unwise. There are passionate adherents ranged on both sides of the question. To some, the issue is not whether, but should tellers be sellers?
The question brings the raison d'etre of the retail branch network into sharp relief. Are branches retail storefronts with the primary mission to enhance customer relationships, or are they collection points for myriad transactions processed by centralized back office operations centers? Is the driving imperative one of customer intimacy, or does operational efficiency rule the roost?
A tilt towards operational efficiency has traditionally driven retail banking, with occasional overtures to the selling side of the equation. These overtures, however, tend to be fleeting, and with few exceptions, have not survived beyond some concerted marketing and employee incentive programs.
To understand why the push towards serving and selling the customer has not been sustainable, consider a few points. Making check deposits is by far the main reason customers visit a branch. When they do visit, the teller is the person they most often interact with. Regardless of all the training and incentives that may have been put in place, consider what tellers actually do. They are heads down punching numbers into keyboards (try counting the number of teller keystrokes the next time you're in a branch). They have barely enough time to complete the data entry and squeeze out a quick thank you before the next customer is at their window. Imagine a Neimann Marcus salesperson wordlessly packing what you've picked out and intently ensuring that the bow on the package is just right! Yes, the analogy is not quite right- but you get the picture.
So despite many a marketing push, it is the fundamental transaction tether that yanks the teller back into the role of a frontline operations clerk- the first cog in the vast infrastructure that we put in place to process paper checks, featuring planes, trains, automobiles and giant "paper factories".
There is an alternative, courtesy the legislative cover of Check 21 and advances in imaging and recognition technology. Teller Capture allows the teller to drop the entire deposit into a small foot print scanner and interact heads up with the customer, while an imaging application reads all the necessary information, ensures the transaction is balanced, and prints out a receipt when done. Teller Capture eliminates teller induced data entry errors, and also catches math errors up front. This "ready-to-post" transaction at the very beginning of the deposit stream results in major efficiency savings further down the value chain. It is as close to straight-through-processing as one can get in the check world.
"Not so fast," say some. "You want to make my tellers into check operators?" The reality is that the opposite is true. There is now evidence of major savings in teller time per deposit, including data from a Top 5 U.S. bank of having reduced keystrokes from 75 to 5!
"What about the cost of a scanner and software at every station?" challenge others. "It is really difficult to integrate these capture applications with teller systems." The cost per node for both hardware and software is steadily declining, making it well worth the while to examine the return on investment. The hard numbers on transportation savings, back office labor elimination, and funds availability make it interesting- leave alone the soft benefits in customer service and added sales. Capture systems are also increasingly being integrated into teller systems, both by teller vendors that have acquired check-capture technology, and pure play check imaging vendors that have certified their applications with leading teller vendors.
Coming back to the tellers-to-sellers paradigm, what do you do with the saved time? Do you use it to push even more transactions through? Do you have tellers refer customers to other branch personnel based on prompts from an integrated CRM system? Or do you have tellers take on more of a sales and service role themselves? Those are decisions that will be driven by your overarching strategic intent. Do you want tellers to be sellers in the first place? As you ponder that question, you may want to look at teller capture as an opportunity to cut the transaction tether that keeps pulling you back, yo-yo-like, to the paper factory of another era.
What do you think?
Stepping into a debate that is as old as retail banking is perhaps unwise. There are passionate adherents ranged on both sides of the question. To some, the issue is not whether, but should tellers be sellers?
The question brings the raison d'etre of the retail branch network into sharp relief. Are branches retail storefronts with the primary mission to enhance customer relationships, or are they collection points for myriad transactions processed by centralized back office operations centers? Is the driving imperative one of customer intimacy, or does operational efficiency rule the roost?
A tilt towards operational efficiency has traditionally driven retail banking, with occasional overtures to the selling side of the equation. These overtures, however, tend to be fleeting, and with few exceptions, have not survived beyond some concerted marketing and employee incentive programs.
To understand why the push towards serving and selling the customer has not been sustainable, consider a few points. Making check deposits is by far the main reason customers visit a branch. When they do visit, the teller is the person they most often interact with. Regardless of all the training and incentives that may have been put in place, consider what tellers actually do. They are heads down punching numbers into keyboards (try counting the number of teller keystrokes the next time you're in a branch). They have barely enough time to complete the data entry and squeeze out a quick thank you before the next customer is at their window. Imagine a Neimann Marcus salesperson wordlessly packing what you've picked out and intently ensuring that the bow on the package is just right! Yes, the analogy is not quite right- but you get the picture.
So despite many a marketing push, it is the fundamental transaction tether that yanks the teller back into the role of a frontline operations clerk- the first cog in the vast infrastructure that we put in place to process paper checks, featuring planes, trains, automobiles and giant "paper factories".
There is an alternative, courtesy the legislative cover of Check 21 and advances in imaging and recognition technology. Teller Capture allows the teller to drop the entire deposit into a small foot print scanner and interact heads up with the customer, while an imaging application reads all the necessary information, ensures the transaction is balanced, and prints out a receipt when done. Teller Capture eliminates teller induced data entry errors, and also catches math errors up front. This "ready-to-post" transaction at the very beginning of the deposit stream results in major efficiency savings further down the value chain. It is as close to straight-through-processing as one can get in the check world.
"Not so fast," say some. "You want to make my tellers into check operators?" The reality is that the opposite is true. There is now evidence of major savings in teller time per deposit, including data from a Top 5 U.S. bank of having reduced keystrokes from 75 to 5!
"What about the cost of a scanner and software at every station?" challenge others. "It is really difficult to integrate these capture applications with teller systems." The cost per node for both hardware and software is steadily declining, making it well worth the while to examine the return on investment. The hard numbers on transportation savings, back office labor elimination, and funds availability make it interesting- leave alone the soft benefits in customer service and added sales. Capture systems are also increasingly being integrated into teller systems, both by teller vendors that have acquired check-capture technology, and pure play check imaging vendors that have certified their applications with leading teller vendors.
Coming back to the tellers-to-sellers paradigm, what do you do with the saved time? Do you use it to push even more transactions through? Do you have tellers refer customers to other branch personnel based on prompts from an integrated CRM system? Or do you have tellers take on more of a sales and service role themselves? Those are decisions that will be driven by your overarching strategic intent. Do you want tellers to be sellers in the first place? As you ponder that question, you may want to look at teller capture as an opportunity to cut the transaction tether that keeps pulling you back, yo-yo-like, to the paper factory of another era.
What do you think?
Friday, July 30, 2010
The evolution of remote capture
By Wally Vogel (www.wvogel@creditron.com)
When remote deposit capture (RDC) first burst onto the scene, it was billed as a way for companies to eliminate daily trips to the bank. Today, reducing the time and costs associated with depositing checks is still a key factor in the adoption of the technology. But application of the technology has also evolved into a compliment to remittance processing, such as a way for far-flung sales agents to capture check images more quickly – helping to drive faster funds availability and enhanced service.
RDC is a product of The Check Clearing for the 21st Century Act (“Check 21”), a federal law enacted in 2004 that allows billers to electronically capture and transmit (via X9.37 file format) images of checks to their financial institution for clearing. Integrated balancing and automated character recognition tools assist billers in building balanced deposits. Once deposits are transmitted, original checks are truncated (retained) and eventually destroyed. Upon receipt of the file, the bank validates the items, performs any necessary corrections, and creates an image cash letter (or ICL) for deposit.
A Compliment to Remittance Processing
It didn’t take long for billers to recognize that RDC could be used to compliment -- and streamline -- remittance processing, which has historically been a back-office task. By capturing payment images and data at the point of presentment, and integrating the images and data with the back-office payments stream -- rather than redirecting the payments to the back-office -- billers can accelerate processing and funds availability; eliminate the costs to ship or transport payments to the back-office; offload some of the work from their back-office staff (and maybe even offload the work from their staff altogether); free back-office staff to perform other functions; and reduce paper handling and the associated costs. What’s more, capturing payments information sooner provides benefits such as faster posting, better visibility into receivables, and faster responses to customer inquiries.
The best part: remote deposit capture accomplishes all of this without requiring much upfront cost.
New RDC technologies are further expanding the applicability of the technology as a compliment to back-office remittance processing. For instance, support for flatbed TWAIN scanners enables consumers or remote employees to capture payments without the requirement for a specialized check scanner. Recognizing that the user in this environment may not be trained in payment processing, software guides the user through the scanning process. Another advancement in RDC is the use of smartphones to capture payment images. This enables field agents to capture payment images without having to transport or ship them to the back-office for processing – greatly speeding posting.
The Bottom Line
By complimenting back-office remittance processing with RDC, funds are available sooner, overall costs are improved, and customer service is enhanced. And because of the low overhead associated with RDC, growth in the biller’s remittance volume can be accommodated without a corresponding growth in the biller’s back-office infrastructure – meaning they can avoid a lot of capital expense.
When remote deposit capture (RDC) first burst onto the scene, it was billed as a way for companies to eliminate daily trips to the bank. Today, reducing the time and costs associated with depositing checks is still a key factor in the adoption of the technology. But application of the technology has also evolved into a compliment to remittance processing, such as a way for far-flung sales agents to capture check images more quickly – helping to drive faster funds availability and enhanced service.
RDC is a product of The Check Clearing for the 21st Century Act (“Check 21”), a federal law enacted in 2004 that allows billers to electronically capture and transmit (via X9.37 file format) images of checks to their financial institution for clearing. Integrated balancing and automated character recognition tools assist billers in building balanced deposits. Once deposits are transmitted, original checks are truncated (retained) and eventually destroyed. Upon receipt of the file, the bank validates the items, performs any necessary corrections, and creates an image cash letter (or ICL) for deposit.
A Compliment to Remittance Processing
It didn’t take long for billers to recognize that RDC could be used to compliment -- and streamline -- remittance processing, which has historically been a back-office task. By capturing payment images and data at the point of presentment, and integrating the images and data with the back-office payments stream -- rather than redirecting the payments to the back-office -- billers can accelerate processing and funds availability; eliminate the costs to ship or transport payments to the back-office; offload some of the work from their back-office staff (and maybe even offload the work from their staff altogether); free back-office staff to perform other functions; and reduce paper handling and the associated costs. What’s more, capturing payments information sooner provides benefits such as faster posting, better visibility into receivables, and faster responses to customer inquiries.
The best part: remote deposit capture accomplishes all of this without requiring much upfront cost.
New RDC technologies are further expanding the applicability of the technology as a compliment to back-office remittance processing. For instance, support for flatbed TWAIN scanners enables consumers or remote employees to capture payments without the requirement for a specialized check scanner. Recognizing that the user in this environment may not be trained in payment processing, software guides the user through the scanning process. Another advancement in RDC is the use of smartphones to capture payment images. This enables field agents to capture payment images without having to transport or ship them to the back-office for processing – greatly speeding posting.
The Bottom Line
By complimenting back-office remittance processing with RDC, funds are available sooner, overall costs are improved, and customer service is enhanced. And because of the low overhead associated with RDC, growth in the biller’s remittance volume can be accommodated without a corresponding growth in the biller’s back-office infrastructure – meaning they can avoid a lot of capital expense.
Tuesday, June 1, 2010
Sputtering Check Conversion
By Mark Brousseau
While the latest statistics from Herndon, VA-based NACHA show that overall Automated Clearing House (ACH) volumes increased slightly in 2009 (2.6 percent compared to 2008 activity), Accounts Receivable Check (ARC) Conversion -- once the darling of remittance operations -- decreased by more than 10 percent during the same period. In 2009, there were approximately 2.4 billion ARC transactions, NACHA reports, compared to nearly 2.7 billion ARC transactions the previous year.
The drop in ARC volumes comes as no surprise to Creditron, Inc., Founder and CEO Wally Vogel (wvogel@creditron.com). Vogel expects ARC volumes to continue to fall as consumers move away from writing checks for recurring remittances and towards electronic mechanisms such as Internet-initiated payments (which registered a stout 9.7 percent volume increase in 2009, NACHA reports).
Vogel says that, "As far as we have seen, ARC is not really going anywhere among mid-volume processors. Our clients are either moving to Check 21 or staying with what they have. Many clients don't perceive a significant cost benefit if they already have an automated encoding solution."
Vogel adds that Creditron is seeing "slow but steady growth in Check 21 among its current clients, and virtually all of its new installations include Check 21. The biggest reason our clients are reluctant to implement ARC is the notification requirement, which isn't a factor if they go with Check 21."
What are you seeing?
While the latest statistics from Herndon, VA-based NACHA show that overall Automated Clearing House (ACH) volumes increased slightly in 2009 (2.6 percent compared to 2008 activity), Accounts Receivable Check (ARC) Conversion -- once the darling of remittance operations -- decreased by more than 10 percent during the same period. In 2009, there were approximately 2.4 billion ARC transactions, NACHA reports, compared to nearly 2.7 billion ARC transactions the previous year.
The drop in ARC volumes comes as no surprise to Creditron, Inc., Founder and CEO Wally Vogel (wvogel@creditron.com). Vogel expects ARC volumes to continue to fall as consumers move away from writing checks for recurring remittances and towards electronic mechanisms such as Internet-initiated payments (which registered a stout 9.7 percent volume increase in 2009, NACHA reports).
Vogel says that, "As far as we have seen, ARC is not really going anywhere among mid-volume processors. Our clients are either moving to Check 21 or staying with what they have. Many clients don't perceive a significant cost benefit if they already have an automated encoding solution."
Vogel adds that Creditron is seeing "slow but steady growth in Check 21 among its current clients, and virtually all of its new installations include Check 21. The biggest reason our clients are reluctant to implement ARC is the notification requirement, which isn't a factor if they go with Check 21."
What are you seeing?
Thursday, May 27, 2010
Integration issues stymie RDC growth among government users
By Mark Brousseau
One positive result of the Check 21 legislation has been the adoption of remote deposit capture, which uses imaging technology to truncate checks at the point of presentment, in turn, streamlining processing, accelerating funds availability, and significantly reducing transportation costs. While remote deposit capture has been one of the most successful banking products of all time (enjoying a faster adoption than even online banking), you would never know it from the results of the 2010 Government Payment and Document Processing Survey conducted by TAWPI and IAPP.
Only 16.2 percent of all survey respondents currently use remote deposit capture. Among state revenue agencies, 17.4 percent of respondents currently use remote deposit capture. The adoption of remote deposit capture was strongest among the county government entities that responded to the survey, with half (50 percent) indicating that they use the technology. None of the (non-revenue) state agencies or city government entities that responded to the question use remote deposit capture.
Dave Bracken, vice president and senior account manager for Cash Management Solutions, Inc., says the low adoption rate of remote deposit capture among government users doesn’t mean that the need isn’t there for out-of-footprint collection solutions; instead it speaks to the complexity of integrating this type of technology without having to replace their entire legacy remittance processing system.
“A standalone remote deposit capture solution doesn’t provide updates to a government user’s internal tax systems,” Bracken explains. “And this ‘associating information’ is as important as the funds themselves. For remote deposit capture to be effective for a government user, it needs to be an extension of their centralized processing system. For most users, this presents an integration issue.”
Despite this challenge, Bracken predicts that more government users will adopt remote deposit capture – or “split source” solutions – into their operations as they replace their highly customized, “one-off” applications – which are difficult to upgrade – with more flexible and open platforms.
“The problem isn’t a lack of need. The problem is in effective implementation,” he concludes.
What do you think?
One positive result of the Check 21 legislation has been the adoption of remote deposit capture, which uses imaging technology to truncate checks at the point of presentment, in turn, streamlining processing, accelerating funds availability, and significantly reducing transportation costs. While remote deposit capture has been one of the most successful banking products of all time (enjoying a faster adoption than even online banking), you would never know it from the results of the 2010 Government Payment and Document Processing Survey conducted by TAWPI and IAPP.
Only 16.2 percent of all survey respondents currently use remote deposit capture. Among state revenue agencies, 17.4 percent of respondents currently use remote deposit capture. The adoption of remote deposit capture was strongest among the county government entities that responded to the survey, with half (50 percent) indicating that they use the technology. None of the (non-revenue) state agencies or city government entities that responded to the question use remote deposit capture.
Dave Bracken, vice president and senior account manager for Cash Management Solutions, Inc., says the low adoption rate of remote deposit capture among government users doesn’t mean that the need isn’t there for out-of-footprint collection solutions; instead it speaks to the complexity of integrating this type of technology without having to replace their entire legacy remittance processing system.
“A standalone remote deposit capture solution doesn’t provide updates to a government user’s internal tax systems,” Bracken explains. “And this ‘associating information’ is as important as the funds themselves. For remote deposit capture to be effective for a government user, it needs to be an extension of their centralized processing system. For most users, this presents an integration issue.”
Despite this challenge, Bracken predicts that more government users will adopt remote deposit capture – or “split source” solutions – into their operations as they replace their highly customized, “one-off” applications – which are difficult to upgrade – with more flexible and open platforms.
“The problem isn’t a lack of need. The problem is in effective implementation,” he concludes.
What do you think?
Friday, February 19, 2010
The Image Clearing Opportunity
Posted by Mark Brousseau
Image clearing networks provide an opportunity for bankers banks to grow their revenues and attract new customers. US Dataworks President and COO Mario Villarreal (mvillarreal@usdataworks.com) explains:
At a time when paper cash letter volumes are rapidly declining, and the banking industry approaches the "last mile" in its migration toward electronic clearing, forward-thinking banks are leveraging Check 21 and their existing IT infrastructure to offer new image clearing services to community banks. If there is one thing that bankers have learned from the credit crisis, it is that focusing on their core services can provide a huge payoff.
Bankers banks provide valuable services to community banks, allowing them to compete with their larger counterparts. Bankers banks that have invested in the best technology to clear image exchange items also can offer this as a value-priced service to other bankers banks, extending their ability to service additional community banks, reduce costs, and expand their clearing network for improved funds availability and returns processing.
The Business Case
Prior to Check 21, check clearing was an extremely labor and capital-intensive process. For this reason, most bankers banks provided only settlement services: most community banks deposited paper cash letters at their nearby Federal Reserve Bank, while community banks that weren't members of the Federal Reserve settled their items through a bankers bank.
With the adoption of image clearing reaching more financial institutions, and advances in technology eliminating the need for bankers banks to print substitute checks in order to clear all of their items, more bankers banks are discovering that they can offer check clearing services to their customers with a much smaller investment in staff and equipment than in the past.
The goal for these bankers banks is to provide a lower-cost clearing option for their community bank customers or members, while generating non-interest income through clearing fees. By establishing a regional clearinghouse for in-network financial institutions, bankers banks can help their customers achieve lower costs through direct exchanges, as well as additional discounts through the bankers banks' aggregated volume. In most cases, community banks see savings of up to 20 percent compared to Federal Reserve Bank fees. Similarly, working with a bankers bank provides lower fees to receive image files from other banks. And bankers banks can offer value-added services such as item-level duplicate detection, which reduces errors and helps identify potential fraud. Other services include long-term payment archiving, expedited research and adjustments, and payment trend analysis.
In turn, bankers banks can strengthen their customer relationships, attract new bank customers, and increase the percentage of items cleared through their network. Bankers banks that have implemented this service have increased the rate of membership in the geographic region they serve, which results in a bigger network and more value to all participants.
Bankers banks also gain operational improvements by implementing an image exchange system that is not based on the old way of paper-check processing, but designed from the ground up to process today’s growing variety of payment types. In one case, a bankers bank reduced the time necessary to complete its check image processing from eight hours to less than 45 minutes using the new standard in image exchange processing. And, unlike traditional check systems, advanced image clearing solutions allow for configuration changes -- such as adding or disabling a clearing endpoint -- without a significant lead time or custom code.
Key Buying Criteria
When evaluating clearing solutions, there are four key criteria bankers banks should consider:
1. Scalability -- Image clearing requires the processing of large volumes in an extremely short processing window, as well as the effective management of a large number of image files.
2. Exceptions handling -- To minimize costly errors, an image clearing solution must have capabilities for duplicate detection.
3. Enhanced clearing capabilities -- In order to reduce fees, a clearing solution should have capabilities for in-network and consolidated decisioning, as well as bi-directional clearing.
4. Expandability -- Because of the fast-changing nature of the financial services industry, bankers banks should look for solutions that are designed to support future services.
Other evaluation criteria include startup and ongoing costs, time-to-market, the vendor's track record in high-volume operations, any value-added functionality (such as data analytics), and the level of control the bankers bank will have over product pricing, processing deadlines and service levels.
The Bottom Line
With fee income on the line, and community banks desperate for cost-effective clearing alternatives, more bankers banks will establish internal image clearing networks to harness the cost savings of in-network clearing and direct sends to major financial institutions, Returned items and research and adjustments are also simplified with the network approach. With these networks, bankers banks can provide the highest quality of correspondent services to community banks, as well as help their colleague bankers bank serve their customers. To provide even greater benefit to their customers, some of these bankers banks will create expanded same-day exchanges and exchanges with national and regional banks, and bundle their image clearing services with cash management products such as remote deposit capture (RDC) and automated clearing house (ACH) processing.
All of this will strengthen the role of bankers banks in the emerging financial services environment.
What do you think?
Image clearing networks provide an opportunity for bankers banks to grow their revenues and attract new customers. US Dataworks President and COO Mario Villarreal (mvillarreal@usdataworks.com) explains:
At a time when paper cash letter volumes are rapidly declining, and the banking industry approaches the "last mile" in its migration toward electronic clearing, forward-thinking banks are leveraging Check 21 and their existing IT infrastructure to offer new image clearing services to community banks. If there is one thing that bankers have learned from the credit crisis, it is that focusing on their core services can provide a huge payoff.
Bankers banks provide valuable services to community banks, allowing them to compete with their larger counterparts. Bankers banks that have invested in the best technology to clear image exchange items also can offer this as a value-priced service to other bankers banks, extending their ability to service additional community banks, reduce costs, and expand their clearing network for improved funds availability and returns processing.
The Business Case
Prior to Check 21, check clearing was an extremely labor and capital-intensive process. For this reason, most bankers banks provided only settlement services: most community banks deposited paper cash letters at their nearby Federal Reserve Bank, while community banks that weren't members of the Federal Reserve settled their items through a bankers bank.
With the adoption of image clearing reaching more financial institutions, and advances in technology eliminating the need for bankers banks to print substitute checks in order to clear all of their items, more bankers banks are discovering that they can offer check clearing services to their customers with a much smaller investment in staff and equipment than in the past.
The goal for these bankers banks is to provide a lower-cost clearing option for their community bank customers or members, while generating non-interest income through clearing fees. By establishing a regional clearinghouse for in-network financial institutions, bankers banks can help their customers achieve lower costs through direct exchanges, as well as additional discounts through the bankers banks' aggregated volume. In most cases, community banks see savings of up to 20 percent compared to Federal Reserve Bank fees. Similarly, working with a bankers bank provides lower fees to receive image files from other banks. And bankers banks can offer value-added services such as item-level duplicate detection, which reduces errors and helps identify potential fraud. Other services include long-term payment archiving, expedited research and adjustments, and payment trend analysis.
In turn, bankers banks can strengthen their customer relationships, attract new bank customers, and increase the percentage of items cleared through their network. Bankers banks that have implemented this service have increased the rate of membership in the geographic region they serve, which results in a bigger network and more value to all participants.
Bankers banks also gain operational improvements by implementing an image exchange system that is not based on the old way of paper-check processing, but designed from the ground up to process today’s growing variety of payment types. In one case, a bankers bank reduced the time necessary to complete its check image processing from eight hours to less than 45 minutes using the new standard in image exchange processing. And, unlike traditional check systems, advanced image clearing solutions allow for configuration changes -- such as adding or disabling a clearing endpoint -- without a significant lead time or custom code.
Key Buying Criteria
When evaluating clearing solutions, there are four key criteria bankers banks should consider:
1. Scalability -- Image clearing requires the processing of large volumes in an extremely short processing window, as well as the effective management of a large number of image files.
2. Exceptions handling -- To minimize costly errors, an image clearing solution must have capabilities for duplicate detection.
3. Enhanced clearing capabilities -- In order to reduce fees, a clearing solution should have capabilities for in-network and consolidated decisioning, as well as bi-directional clearing.
4. Expandability -- Because of the fast-changing nature of the financial services industry, bankers banks should look for solutions that are designed to support future services.
Other evaluation criteria include startup and ongoing costs, time-to-market, the vendor's track record in high-volume operations, any value-added functionality (such as data analytics), and the level of control the bankers bank will have over product pricing, processing deadlines and service levels.
The Bottom Line
With fee income on the line, and community banks desperate for cost-effective clearing alternatives, more bankers banks will establish internal image clearing networks to harness the cost savings of in-network clearing and direct sends to major financial institutions, Returned items and research and adjustments are also simplified with the network approach. With these networks, bankers banks can provide the highest quality of correspondent services to community banks, as well as help their colleague bankers bank serve their customers. To provide even greater benefit to their customers, some of these bankers banks will create expanded same-day exchanges and exchanges with national and regional banks, and bundle their image clearing services with cash management products such as remote deposit capture (RDC) and automated clearing house (ACH) processing.
All of this will strengthen the role of bankers banks in the emerging financial services environment.
What do you think?
Sunday, June 7, 2009
Risk and Image Payments
Posted by Mark Brousseau
Vijay Balakrishnan, president of StratEx, LLC (www.stratexllc.blogspot.com) passes along the following article:
It occurs to me that payment security, like beauty, may rest in the eye of the beholder. Societal norms on beauty have ranged over the years from Raphaelesque abundance to Twiggy-like minimalism. With payments transformed in ever larger numbers from pieces of paper to electronic images, the debate du jour centers on the risk of image payments. Does the transformation of checks to images and data for onward transmission through an evolving electronic infrastructure introduce additional risk? The answer perhaps depends on one's perspective.
The proponents on either side have aligned themselves into sharply defined camps. There are those who attest that technology provides the ability to check for fraud at a scale never before possible, and that business processes need to step up to avail of new avenues. There are others who turn the argument on its head and assert that technology allows the propagation of fraud at the speed of light; the paper check, after all, was bound by the limitations of planes, trains, and automobiles.
Lending more uncertainty to the dialog is a regulatory black hole that allows many degrees of interpretive freedom. Check 21, which is widely touted as the legislative parent of the image revolution in U.S. check processing, is noticeably silent on image exchange. All Check 21 says is that a paper "substitute check" meeting certain requirements can be created from an image of a paper check, and that this new piece of paper has the same legal standing as the original item. It says nothing about the image itself, or its transmission within or between financial institutions. While this delights and provides opportunity to those in the legal profession, it does little to shore up the basic argument- is the new image infrastructure riskier than the paper based one it is replacing?
The central issue is not whether image payments are risky (all payments arguably are risky at some level), but whether they pose additional risk. Those in the no-additional-risk camp question whether every paper item is checked for signature and check stock viability, and whether every deposit is reviewed based on business rules. They assert that technology can automatically examine every item and deposit (or a subset thereof) using rule based filters, and identify those that need manual intervention. They further point out at this can be done on "Day Zero" at initial capture, instead of on "Day Two and Beyond" in the paper world. If anything, they claim, the automated image world is less risky than its paper predecessor.
"Not so fast," say the others. The lack of robust duplicate detection systems across payment channels (branches, ATMs, other remote capture locations), and between institutions make the electronic equivalent of check kiting a real threat. With access to the right software, images can be altered with greater ease than paper items. They also point out that this risk can emanate from within financial institutions, as opposed to "the other side of the firewall". While it is theoretically possible for technology to check all items, few institutions have this capability in place. The regulatory framework is playing catch-up to the reality of billions of image payments zapping their way across the nation (and indeed the world with the international remote capture of U.S. dollar deposits), making for a Jello-like foundation.
During the now distant past when the credit card world confronted similar issues, the card associations came up with rules of governance. They were also able to establish the interchange system, which shared revenue and risk between acquirers, processors, and issuers. Thus, their approach focused less on the presence or absence of risk, and more on a system that compensated entities in the chain for risk exposure. Interchange was established at a time when the power equation between banks and merchants was tilted heavily in favor of financial institutions. It is highly unlikely that an interchange system for image exchange will see light of day. This brings up another intriguing question- regardless of the outcome of the less versus more risk debate, will future years see risk adjusted transaction fees for image processing?
The challenge with questions of this nature early in the life cycle of disruptive technology adoption is that answers cannot be based on empirical information. Like changing perspectives on beauty, there are myriad opinions. If you have a take on this, let me know. Speculating on a brave new world in itself is relatively risk free. It will be a while before your opinion is borne out one way or the other!
Vijay Balakrishnan, president of StratEx, LLC (www.stratexllc.blogspot.com) passes along the following article:
It occurs to me that payment security, like beauty, may rest in the eye of the beholder. Societal norms on beauty have ranged over the years from Raphaelesque abundance to Twiggy-like minimalism. With payments transformed in ever larger numbers from pieces of paper to electronic images, the debate du jour centers on the risk of image payments. Does the transformation of checks to images and data for onward transmission through an evolving electronic infrastructure introduce additional risk? The answer perhaps depends on one's perspective.
The proponents on either side have aligned themselves into sharply defined camps. There are those who attest that technology provides the ability to check for fraud at a scale never before possible, and that business processes need to step up to avail of new avenues. There are others who turn the argument on its head and assert that technology allows the propagation of fraud at the speed of light; the paper check, after all, was bound by the limitations of planes, trains, and automobiles.
Lending more uncertainty to the dialog is a regulatory black hole that allows many degrees of interpretive freedom. Check 21, which is widely touted as the legislative parent of the image revolution in U.S. check processing, is noticeably silent on image exchange. All Check 21 says is that a paper "substitute check" meeting certain requirements can be created from an image of a paper check, and that this new piece of paper has the same legal standing as the original item. It says nothing about the image itself, or its transmission within or between financial institutions. While this delights and provides opportunity to those in the legal profession, it does little to shore up the basic argument- is the new image infrastructure riskier than the paper based one it is replacing?
The central issue is not whether image payments are risky (all payments arguably are risky at some level), but whether they pose additional risk. Those in the no-additional-risk camp question whether every paper item is checked for signature and check stock viability, and whether every deposit is reviewed based on business rules. They assert that technology can automatically examine every item and deposit (or a subset thereof) using rule based filters, and identify those that need manual intervention. They further point out at this can be done on "Day Zero" at initial capture, instead of on "Day Two and Beyond" in the paper world. If anything, they claim, the automated image world is less risky than its paper predecessor.
"Not so fast," say the others. The lack of robust duplicate detection systems across payment channels (branches, ATMs, other remote capture locations), and between institutions make the electronic equivalent of check kiting a real threat. With access to the right software, images can be altered with greater ease than paper items. They also point out that this risk can emanate from within financial institutions, as opposed to "the other side of the firewall". While it is theoretically possible for technology to check all items, few institutions have this capability in place. The regulatory framework is playing catch-up to the reality of billions of image payments zapping their way across the nation (and indeed the world with the international remote capture of U.S. dollar deposits), making for a Jello-like foundation.
During the now distant past when the credit card world confronted similar issues, the card associations came up with rules of governance. They were also able to establish the interchange system, which shared revenue and risk between acquirers, processors, and issuers. Thus, their approach focused less on the presence or absence of risk, and more on a system that compensated entities in the chain for risk exposure. Interchange was established at a time when the power equation between banks and merchants was tilted heavily in favor of financial institutions. It is highly unlikely that an interchange system for image exchange will see light of day. This brings up another intriguing question- regardless of the outcome of the less versus more risk debate, will future years see risk adjusted transaction fees for image processing?
The challenge with questions of this nature early in the life cycle of disruptive technology adoption is that answers cannot be based on empirical information. Like changing perspectives on beauty, there are myriad opinions. If you have a take on this, let me know. Speculating on a brave new world in itself is relatively risk free. It will be a while before your opinion is borne out one way or the other!
Wednesday, May 6, 2009
New Check 21 Standards and Practices
Posted by Mark Brousseau
To prepare for the industry adoption of new Check 21 standards and practices, the Federal Reserve will be making changes to its pre-production (test) environment. These changes will not impact the production environment which processes Check 21 file deposits.
While these changes are being implemented, the Federal Reserve recommends customers delay or minimize testing between May 11 and May 18 until the changes are fully implemented and validated.
Beginning May 11, 2009, the Federal Reserve Banks’ test environment will be updated to include an expanded set of file validations on Image Cash Letter Deposits. Validation will be performed on a broader spectrum of fields and records, including TIFF image analysis. The expanded file validation will align Federal Reserve Check 21 deposit requirements with practices outlined in the Universal Companion Document (UCD) developed by the CheckImage Collaborative (http://www.checkimagecentral.org). The TIFF validation will align Federal Reserve Check 21 deposit requirements with ASC X9.100-181-2007, the Specification for TIFF Image Format for Image Exchange (http://www.X9.org).
With the May 11 implementation date, customers submitting test files will receive new and expanded file validation results. Test customers may notice an increase in the number of errors displayed by the File Acknowledgement Accept/Reject Notices. The validation results may require participants to make customer based parameter changes to their image or item processing software. Some may even require vendor contact or technical assistance. Any TIFF validation errors will be shared separately by Federal Reserve Bank implementation managers.
The Federal Reserve says it has been working closely with the Check 21 vendor community on this initiative. The Federal Reserve's plan is to monitor customer test results and industry adoption to ensure all participants are prepared for live implementation. All Federal Reserve customers will be provided notice of the production implementation date well in advance. Federal Reserve Bank implementation managers are available to work with customers who may need assistance in adopting the new validation practices and test changes to achieve compliance.
To prepare for the industry adoption of new Check 21 standards and practices, the Federal Reserve will be making changes to its pre-production (test) environment. These changes will not impact the production environment which processes Check 21 file deposits.
While these changes are being implemented, the Federal Reserve recommends customers delay or minimize testing between May 11 and May 18 until the changes are fully implemented and validated.
Beginning May 11, 2009, the Federal Reserve Banks’ test environment will be updated to include an expanded set of file validations on Image Cash Letter Deposits. Validation will be performed on a broader spectrum of fields and records, including TIFF image analysis. The expanded file validation will align Federal Reserve Check 21 deposit requirements with practices outlined in the Universal Companion Document (UCD) developed by the CheckImage Collaborative (http://www.checkimagecentral.org). The TIFF validation will align Federal Reserve Check 21 deposit requirements with ASC X9.100-181-2007, the Specification for TIFF Image Format for Image Exchange (http://www.X9.org).
With the May 11 implementation date, customers submitting test files will receive new and expanded file validation results. Test customers may notice an increase in the number of errors displayed by the File Acknowledgement Accept/Reject Notices. The validation results may require participants to make customer based parameter changes to their image or item processing software. Some may even require vendor contact or technical assistance. Any TIFF validation errors will be shared separately by Federal Reserve Bank implementation managers.
The Federal Reserve says it has been working closely with the Check 21 vendor community on this initiative. The Federal Reserve's plan is to monitor customer test results and industry adoption to ensure all participants are prepared for live implementation. All Federal Reserve customers will be provided notice of the production implementation date well in advance. Federal Reserve Bank implementation managers are available to work with customers who may need assistance in adopting the new validation practices and test changes to achieve compliance.
Sunday, February 15, 2009
More Fed Layoffs
Posted by Mark Brousseau
An item from Saturday's Baltimore Sun:
The Federal Reserve Bank of Richmond said 55 employees in Baltimore will be laid off because the Fed is shutting down the check-processing operations in April.
The move is part of a consolidation of nearly two dozen check-processing facilities into four initially announced in 2007 as paper check volumes declined due to the increase of credit and debit card payments. Since that time, paper check volume has continued to fall, resulting in the Federal Reserve Bank of Cleveland serving as the single paper check processing site by the end of 2009.
An item from Saturday's Baltimore Sun:
The Federal Reserve Bank of Richmond said 55 employees in Baltimore will be laid off because the Fed is shutting down the check-processing operations in April.
The move is part of a consolidation of nearly two dozen check-processing facilities into four initially announced in 2007 as paper check volumes declined due to the increase of credit and debit card payments. Since that time, paper check volume has continued to fall, resulting in the Federal Reserve Bank of Cleveland serving as the single paper check processing site by the end of 2009.
Wednesday, February 11, 2009
Chicago Fed Cutting Ops Jobs
Posted by Mark Brousseau
This article from the Chicago Tribune is a sign of things to come:
Chicago Fed to cut jobs at check-processing center; first 26 set for next month
By James P. Miller
Tribune reporter
February 9, 2009
A total of 26 employees of the Federal Reserve Bank of Chicago will lose their jobs next month, as the nation's central bank continues to respond to the dramatic falloff in the use of paper checks by cutting back its once extensive network of check-processing faciliities.
In the latest State of Illinois 'WARN" list of employers who have notified workers of impending large-scale layoffs, all of the 97 jobs at the Federal Reserve's Chicago check-processing center in southwest suburban Bedford Park are listed for elimination beginning in March.
But a spokesman for the Chicago Fed said only 26 jobs will be cut next month; the remaining 71 will remain active until at least the fourth quarter.
As recently as 2003, the Federal Reserve banking system had 45 full-service check-processing centers around the country. But credit cards continue to displace the use of paper checks, and at the same time regulatory changes have made it easier to present checks for payment as an electronic image rather than in physical form.
So, the U.S. Fed had halved processing centers by mid-2007, and late last year the central bank announced a plan to operate just one full-service paper-check processing center, in Cleveland, and one electronic-check processing center in Atlanta.
The other processing centers, including the Chicago-area site, will wind down under what the Fed has referred to as "a flexible restructuring schedule," which will lead to their closure "when paper check volumes no longer justify the existing operation."
The Chicago Fed's spokesman said it's not clear when the Chicago center will cease operations. In fact, he said, it is possible that the Chicago center will remain operative, with just a "handful" of employees printing substitute checks from images for the modest number of banks that require a physical check.
The Fed has said it will seek to reassign at least a portion of the workers, if other jobs are available.
The number of paper checks totaled 42 billion in 2001, but by 2006 (the last year for which Fed numbers are available) that number had dropped 29 percent to 30 billion.
This article from the Chicago Tribune is a sign of things to come:
Chicago Fed to cut jobs at check-processing center; first 26 set for next month
By James P. Miller
Tribune reporter
February 9, 2009
A total of 26 employees of the Federal Reserve Bank of Chicago will lose their jobs next month, as the nation's central bank continues to respond to the dramatic falloff in the use of paper checks by cutting back its once extensive network of check-processing faciliities.
In the latest State of Illinois 'WARN" list of employers who have notified workers of impending large-scale layoffs, all of the 97 jobs at the Federal Reserve's Chicago check-processing center in southwest suburban Bedford Park are listed for elimination beginning in March.
But a spokesman for the Chicago Fed said only 26 jobs will be cut next month; the remaining 71 will remain active until at least the fourth quarter.
As recently as 2003, the Federal Reserve banking system had 45 full-service check-processing centers around the country. But credit cards continue to displace the use of paper checks, and at the same time regulatory changes have made it easier to present checks for payment as an electronic image rather than in physical form.
So, the U.S. Fed had halved processing centers by mid-2007, and late last year the central bank announced a plan to operate just one full-service paper-check processing center, in Cleveland, and one electronic-check processing center in Atlanta.
The other processing centers, including the Chicago-area site, will wind down under what the Fed has referred to as "a flexible restructuring schedule," which will lead to their closure "when paper check volumes no longer justify the existing operation."
The Chicago Fed's spokesman said it's not clear when the Chicago center will cease operations. In fact, he said, it is possible that the Chicago center will remain operative, with just a "handful" of employees printing substitute checks from images for the modest number of banks that require a physical check.
The Fed has said it will seek to reassign at least a portion of the workers, if other jobs are available.
The number of paper checks totaled 42 billion in 2001, but by 2006 (the last year for which Fed numbers are available) that number had dropped 29 percent to 30 billion.
Friday, February 6, 2009
RDC and Risk Management
By Mark Brousseau
On January 14, 2009, the FFIEC (Federal Financial Institution Examination Council) published long-awaited guidance on “Risk Management of Remote Deposit Capture.”
This guidance defines Remote Deposit Capture (RDC) as a “deposit transaction delivery system” rather than simply as a new service. It talks about RDC in terms of information received by a financial institution from checks sent electonically from remotely located businesses and individuals, as well as the financial institution’s branches, automated teller machines (ATMs), and domestic and foreign correspondents. However, it focuses primarily on RDC deployed at a customer location.
RDC introduces some new risks and increases some existing risks in processing deposits, says Kathy Levin, AAP, managing director, Payments Information Circle (404-478-3491, kathy.levin@paymentsinformation.com). Some financial institutions have begun offering the service without fully understanding the risks involved in RDC, she notes.
“The guidance addresses expectations for identifying, assessing and mitigating risk and discusses roles and responsibilities in implementing and operating RDC in a financial institution,” Levin told me. “It makes it clear that, as with any new payment delivery system offered, there should be no implementation of these services without management oversight, compliance/internal audit involvement and board approval.”
Levin adds that the guidance addresses the necessary elements of an RDC risk management program and provides strategic, credit/underwriting, vendor management, legal and compliance, fraud management, and operational and implementation direction for financial institutions. It also emphasizes the importance of adequate risk management at the remote locations, she says.
“Many financial institutions implemented RDC quickly and experienced rapid adoption of the service,” Levin says. “Some may need to go back and revise their policies and procedures to ensure they are in line with the new guidance.”
In addition to the suggestions contained within the guidance itself, Levin says financial institutions will need to utilize information contained in the FFIEC Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual, Interagency Guidance on Authentication in an Internet Banking Environment, Interagency Guidelines Establishing Information Security Standards, and sections of the FFIEC IT Examination Handbook, including the Information Security Booklet, the Management Booklet, the Outsourcing Technology Services Booklet, the Business Continuity Planning Booklet, and the Operations Booklet, to ensure compliance in specific areas.
For a copy of the new FFIEC guidance, visit http://www.ffiec.gov/pdf/pr011409_rdc_guidance.pdf.
On January 14, 2009, the FFIEC (Federal Financial Institution Examination Council) published long-awaited guidance on “Risk Management of Remote Deposit Capture.”
This guidance defines Remote Deposit Capture (RDC) as a “deposit transaction delivery system” rather than simply as a new service. It talks about RDC in terms of information received by a financial institution from checks sent electonically from remotely located businesses and individuals, as well as the financial institution’s branches, automated teller machines (ATMs), and domestic and foreign correspondents. However, it focuses primarily on RDC deployed at a customer location.
RDC introduces some new risks and increases some existing risks in processing deposits, says Kathy Levin, AAP, managing director, Payments Information Circle (404-478-3491, kathy.levin@paymentsinformation.com). Some financial institutions have begun offering the service without fully understanding the risks involved in RDC, she notes.
“The guidance addresses expectations for identifying, assessing and mitigating risk and discusses roles and responsibilities in implementing and operating RDC in a financial institution,” Levin told me. “It makes it clear that, as with any new payment delivery system offered, there should be no implementation of these services without management oversight, compliance/internal audit involvement and board approval.”
Levin adds that the guidance addresses the necessary elements of an RDC risk management program and provides strategic, credit/underwriting, vendor management, legal and compliance, fraud management, and operational and implementation direction for financial institutions. It also emphasizes the importance of adequate risk management at the remote locations, she says.
“Many financial institutions implemented RDC quickly and experienced rapid adoption of the service,” Levin says. “Some may need to go back and revise their policies and procedures to ensure they are in line with the new guidance.”
In addition to the suggestions contained within the guidance itself, Levin says financial institutions will need to utilize information contained in the FFIEC Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual, Interagency Guidance on Authentication in an Internet Banking Environment, Interagency Guidelines Establishing Information Security Standards, and sections of the FFIEC IT Examination Handbook, including the Information Security Booklet, the Management Booklet, the Outsourcing Technology Services Booklet, the Business Continuity Planning Booklet, and the Operations Booklet, to ensure compliance in specific areas.
For a copy of the new FFIEC guidance, visit http://www.ffiec.gov/pdf/pr011409_rdc_guidance.pdf.
Wednesday, February 4, 2009
Deposits Will Be Critical in 2009
By Mark Brousseau
There’s little question that we’ll see continued economic change and upheaval in 2009. But Michael Pratt, chief marketing officer, Panini North America, says remote deposit capture (RDC) solutions create an opportunity for financial institutions (FIs) to defend and even acquire the ever-important Demand Deposit Account (DDA) line of business.
With tightened credit markets and higher regulatory and market scrutiny, domestic deposits have become even more critical for FIs. McKinsey estimates that payments represented $235B in FI revenue in 2006, or 40-50 percent of an average bank’s revenue, Pratt notes. Revenue related to DDA is typically 45 percent of this base, or 18-22 percent of an average bank’s total revenue -- highlighting the significance of payments and deposits to a bank.
Economic conditions have increasingly made deposits the “benchmark” by which FI health is perceived in the market, Pratt says, and is the driver of their ability to continue to facilitate financial transactions. “We have already seen major acquisitions based primarily on access to domestic deposits, so the ability of FIs to capture deposits will be very instrumental to their success,” he explains.
“Deposit retention and acquisitions programs are central to the well being of DDA related income to all financial institutions, resulting in a renewed prioritization for remote deposit capture,” Pratt says. “Distributed capture, after all, is at its core a strategic means of acquiring deposits while lowering operational & processing costs.”
Banks that take maximum advantage of this opportunity to gain new deposits and solidify customer relationships via RDC stand to gain the high ground in the war for deposits, he concludes.
What do you think? Post your comments below.
There’s little question that we’ll see continued economic change and upheaval in 2009. But Michael Pratt, chief marketing officer, Panini North America, says remote deposit capture (RDC) solutions create an opportunity for financial institutions (FIs) to defend and even acquire the ever-important Demand Deposit Account (DDA) line of business.
With tightened credit markets and higher regulatory and market scrutiny, domestic deposits have become even more critical for FIs. McKinsey estimates that payments represented $235B in FI revenue in 2006, or 40-50 percent of an average bank’s revenue, Pratt notes. Revenue related to DDA is typically 45 percent of this base, or 18-22 percent of an average bank’s total revenue -- highlighting the significance of payments and deposits to a bank.
Economic conditions have increasingly made deposits the “benchmark” by which FI health is perceived in the market, Pratt says, and is the driver of their ability to continue to facilitate financial transactions. “We have already seen major acquisitions based primarily on access to domestic deposits, so the ability of FIs to capture deposits will be very instrumental to their success,” he explains.
“Deposit retention and acquisitions programs are central to the well being of DDA related income to all financial institutions, resulting in a renewed prioritization for remote deposit capture,” Pratt says. “Distributed capture, after all, is at its core a strategic means of acquiring deposits while lowering operational & processing costs.”
Banks that take maximum advantage of this opportunity to gain new deposits and solidify customer relationships via RDC stand to gain the high ground in the war for deposits, he concludes.
What do you think? Post your comments below.
Thursday, January 29, 2009
Fee to Pay by Mail?
Posted by Mark Brousseau
Some billers are taking more aggressive measures to get customers to pay bills electronically. Take a look at this article from The Beaumont Enterprise in Texas.
Jan. 11--Paying for cable television in Southeast Texas just got more expensive for some customers of Time Warner Cable.
That doesn't refer to just the bill for whatever level of service a customer might have. The act of paying for it by mail is what got more expensive.
Time Warner apparently wants to encourage its customers to pay their bill online, which means people need an Internet connection and have an established online banking capability.
If you don't, as of Jan. 1, your bills will cost 99 cents more to pay.
On the other hand, if you pay online, your bill would be 99 cents less.
"People are moving away from paper bills," said Gary Underwood, Time Warner spokesman. "It's a trend. It's not just our industry."
Jane Walker of Beaumont said she already pays online, but wants the paper statement every month to make certain she's not being charged more than she deserves.
"I pay my bills timely," she said. "For a company the size of Time Warner to charge people 99 cents to send a bill is horrendous."
Walker wrote a letter to The Enterprise in protest of Time Warner's new "Go Green" program, which is how the cable giant is framing the charge. The company said the initiative will reduce paper waste and help to "save the environment."
Walker isn't so certain of Time Warner's motives.
"I would ask them to explain to me why," she said. "They know there are people who can't say no. Isn't it enough to pay our bills timely? It makes me angry that they can do this. Isn't there anyone who oversees this?"
Time Warner enjoys something like an unregulated monopoly in many areas of Southeast Texas, unlike Entergy Texas and AT&T. Neither the electric company nor the telephone company charges customers to send pay by mail.
"Entergy has no plans to charge," spokeswoman Debi Derrick said. "We give our customers a choice. Any new charge would likely require Public Utility Commission approval."
AT&T spokesman Dan Feldstein said: "We do not charge customers who elect to have paper billing."
Wanda Luke of Port Neches said she's been paying her bills online for the last 18 months and she likes the convenience of it.
"It's worked out wonderful for me. Friends had a good level of comfort with online banking. I can look at the complete bill and I can even get more detail, like with my American Express bill," she said.
However, Luke said she didn't realize Time Warner would charge people 99 cents if they still wanted the paper bill in the mail.
"I'm thinking only about how much I can save," she said.
If all of Time Warner's customers in Southeast Texas -- numbering perhaps 100,000 -- paid the 99-cent charge, that's about $99,000 per month just to pay the bill.
Underwood said people also can pay at Time Warner's kiosks, 1420 Calder Ave., Beaumont; and 602 N. U.S. 69, Nederland. To avoid the 99-cent charge, a customer still needs online banking capability.
For those who might want another option, the Yellow Pages -- still available in print version in the free telephone book supplied by AT&T -- has plenty of listings under "satellite and cable TV equipment."
Some billers are taking more aggressive measures to get customers to pay bills electronically. Take a look at this article from The Beaumont Enterprise in Texas.
Jan. 11--Paying for cable television in Southeast Texas just got more expensive for some customers of Time Warner Cable.
That doesn't refer to just the bill for whatever level of service a customer might have. The act of paying for it by mail is what got more expensive.
Time Warner apparently wants to encourage its customers to pay their bill online, which means people need an Internet connection and have an established online banking capability.
If you don't, as of Jan. 1, your bills will cost 99 cents more to pay.
On the other hand, if you pay online, your bill would be 99 cents less.
"People are moving away from paper bills," said Gary Underwood, Time Warner spokesman. "It's a trend. It's not just our industry."
Jane Walker of Beaumont said she already pays online, but wants the paper statement every month to make certain she's not being charged more than she deserves.
"I pay my bills timely," she said. "For a company the size of Time Warner to charge people 99 cents to send a bill is horrendous."
Walker wrote a letter to The Enterprise in protest of Time Warner's new "Go Green" program, which is how the cable giant is framing the charge. The company said the initiative will reduce paper waste and help to "save the environment."
Walker isn't so certain of Time Warner's motives.
"I would ask them to explain to me why," she said. "They know there are people who can't say no. Isn't it enough to pay our bills timely? It makes me angry that they can do this. Isn't there anyone who oversees this?"
Time Warner enjoys something like an unregulated monopoly in many areas of Southeast Texas, unlike Entergy Texas and AT&T. Neither the electric company nor the telephone company charges customers to send pay by mail.
"Entergy has no plans to charge," spokeswoman Debi Derrick said. "We give our customers a choice. Any new charge would likely require Public Utility Commission approval."
AT&T spokesman Dan Feldstein said: "We do not charge customers who elect to have paper billing."
Wanda Luke of Port Neches said she's been paying her bills online for the last 18 months and she likes the convenience of it.
"It's worked out wonderful for me. Friends had a good level of comfort with online banking. I can look at the complete bill and I can even get more detail, like with my American Express bill," she said.
However, Luke said she didn't realize Time Warner would charge people 99 cents if they still wanted the paper bill in the mail.
"I'm thinking only about how much I can save," she said.
If all of Time Warner's customers in Southeast Texas -- numbering perhaps 100,000 -- paid the 99-cent charge, that's about $99,000 per month just to pay the bill.
Underwood said people also can pay at Time Warner's kiosks, 1420 Calder Ave., Beaumont; and 602 N. U.S. 69, Nederland. To avoid the 99-cent charge, a customer still needs online banking capability.
For those who might want another option, the Yellow Pages -- still available in print version in the free telephone book supplied by AT&T -- has plenty of listings under "satellite and cable TV equipment."
Tuesday, January 27, 2009
Coopetition in the Payments World
By Mark Brousseau
According to the results of the Federal Reserve’s last two Payments Studies, electronic payments have risen from 43 percent of all non-cash payments to 66 percent of such payments over the period of 2000 to 2006. Conversely, checks have gone from 67 percent to 34 percent during this same period.
The message is clear: electronic payments are replacing check payments at a very rapid rate. So, it may surprise you to learn that one of the most common questions heard by providers of electronic payment solutions is, “do you have any capabilities for handling our paper-based payments?”
Why the continued interest in paper? Larry Jones of Cash Management Solutions, Inc. (larry.jones@cashmgmt.com) says the answer is simple: Although there are literally billions of payments that have migrated to electronic methods, the majority of high dollar and business-to-business payments are still made by check. This means that paper-based payment processing continues to be of great importance to many of the financial industry’s most prized clients, their corporate customers, Jones said.
Jones believes payments service providers must maintain their paper-based capabilities as they add alternative electronic channels. And, it is a well-known fact, he adds, that there is no system so efficient that it can overcome the inefficiencies of having to run it separately from, and simultaneously with, the system it is replacing.
“Until the landscape changes to the point where electronics replace all paper-payments, billers will continue to ask for methods and technologies that can affect a seamless convergence of these two distinct payment types,” Jones predicts. “Any payments service provider who is currently offering only paper processing should definitely be looking for the ability to offer on-line, direct to biller, bill payment services to their customers in a seamlessly merged deliverable.”
Likewise, any company that makes their living providing on-line bill payment systems or services should be looking for capabilities or partners who process paper payments and provide outputs that can be merged and delivered in a similarly seamless fashion, Jones adds.
What do you think? Post your comment below.
According to the results of the Federal Reserve’s last two Payments Studies, electronic payments have risen from 43 percent of all non-cash payments to 66 percent of such payments over the period of 2000 to 2006. Conversely, checks have gone from 67 percent to 34 percent during this same period.
The message is clear: electronic payments are replacing check payments at a very rapid rate. So, it may surprise you to learn that one of the most common questions heard by providers of electronic payment solutions is, “do you have any capabilities for handling our paper-based payments?”
Why the continued interest in paper? Larry Jones of Cash Management Solutions, Inc. (larry.jones@cashmgmt.com) says the answer is simple: Although there are literally billions of payments that have migrated to electronic methods, the majority of high dollar and business-to-business payments are still made by check. This means that paper-based payment processing continues to be of great importance to many of the financial industry’s most prized clients, their corporate customers, Jones said.
Jones believes payments service providers must maintain their paper-based capabilities as they add alternative electronic channels. And, it is a well-known fact, he adds, that there is no system so efficient that it can overcome the inefficiencies of having to run it separately from, and simultaneously with, the system it is replacing.
“Until the landscape changes to the point where electronics replace all paper-payments, billers will continue to ask for methods and technologies that can affect a seamless convergence of these two distinct payment types,” Jones predicts. “Any payments service provider who is currently offering only paper processing should definitely be looking for the ability to offer on-line, direct to biller, bill payment services to their customers in a seamlessly merged deliverable.”
Likewise, any company that makes their living providing on-line bill payment systems or services should be looking for capabilities or partners who process paper payments and provide outputs that can be merged and delivered in a similarly seamless fashion, Jones adds.
What do you think? Post your comment below.
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