Getting comfy at NACHA Payments

Mark Brousseau


Visitors to 3i Infotech's booth this week at NACHA Payments in Austin, Texas, have a chance to win a limited edition Snuggie bearing the company's logo. Here, I model the Snuggie with Kathy Hamburger, president, North America, and global head of BPO for 3i Infotech.

Ordinarily, I ask for your opinion at the end of these posts. Don't bother -- I already know.

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.

TAWPI @ NACHA Payments

eGistics Chairman and CEO Bob Lund, also chairman of the TAWPI board of directors, greets Tonya Gregoire of IAPP and Billy Terrell of eGistics this evening at the NACHA Payments conference in Seattle.

You Get What You Pay For -- Even With Remittance Solutions

By Mark Brousseau

When making a purchase, everyone like to "get the best deal." In these difficult economic times, with costs being carefully scrutinized, that is more true then ever.

So, when it comes to remittance solutions, what is the best deal, and what is the true cost?

"A neighbor and I replaced our roof shingles at about the same time last summer," recalls Wally Vogel, president of Purepay Receivables Automation (wvogel@pure-pay.com). "My neighbor proudly told me that he paid half the price to his roofer for the same job. 'The roofers are all the same,' he said. Right? When I heard this I felt that maybe I should have obtained more quotes (I did get two), or shopped around more. But this spring when my neighbor had water leaking into his house in three places, and was unable to track down the company that did his roof, I felt sorry for him. But I also felt better about the value I received for my money. The lowest price does not always represent the best value."

What's true for roofers is also true for remittance processing solution providers, Vogel cautions. "They are not all the same, and choosing the wrong one can be an expensive error," he says. "Saving some money upfront won't seem like such a good idea when your system is down, or you have errors and inefficiencies keeping your organization from making your deposit deadlines."

Vogel says users need to ensure that they are getting a solution that will truly meet their needs, before they consider the price. "Missing features could result in extra manual keying and sorting, which will reduce the time savings of the solution," Vogel explains. "A poor user interface could result in operator errors which are expensive to correct and can cause customer service issues. And a cheaper scanner could jam more, have poor image quality and a lower read rate, resulting in less throughput and more errors."

There are other hidden costs as well. Some of these may be obvious, such as higher costs for maintenance, Vogel says. Others may not come to light for a year or two, when it's time to change a step in the process. "This is when users discover that they need to pay more for custom changes that wouldn't be necessary with a more flexible remittance solution," he says.

Another hidden cost is the time and effort required by a biller's staff, and its IT department, to implement the solution. "Purchasing a less expensive system which takes twice as long to implement, or purchasing from a company which does not have efficient project management in coordinating the interfaces, testing, and training required will result in internal costs that could well exceed the savings when compared to a truly turnkey solution from an organization with a professional implementation and delivery model," Vogel says.

So, when seeking the best value in a remittance solution, Vogel recommends that billers look beyond the sticker price and consider:

... a full set of time saving features (e.g. no need to sort multis from singles, MICR match for check only, account number reading for consolidator checks, ICR roping of long lists)
... ease of use and user interface (e.g. one key zoom, color coding, easy to read fonts)
... quality of the scanner hardware
... maintenance costs
... costs for future changes and upgrades
... time to complete implementation
... quality of project management from vendor
... expectation of your IT involvement

"Taking these and other factors into consideration will help ensure that you truly obtain the best value and that you will be satisfied with your remittance solution in the long run," Vogel says. "Checking references, talking to others about their experience with the vendor, and visiting other client sites is a great way to assess what you can expect from a vendor and what type of value they will deliver over the long term."

"I have heard some say that remittance solutions are commodity items and that they just want the lowest price," Vogel concludes. "If anyone still believes that, I say let's talk. We can meet at my neighbor's house. But you might have to bring a bucket if it's a rainy day."

What do you think? Post your comments below.

USPS Talking Points

By Mark Brousseau

The remittance space is buzzing about the Postmaster General's recent request to Congress to lift the requirement that the postal service deliver mail six days a week. There is concern from many corners about the potential impact this move would have on the industry.

To help head-off potential public relations issues, USPS prepared the Talking Points below for its staff to use when discussing the Postmaster General's plan. These were passed along by an industry observer.

RECOMMENDED TALKING AND MESSAGE POINTS
PMG TESTIMONY
UPDATED
29 JAN. 09; 2 P.M.

Confirm Testimony
Postmaster General Jack Potter testified Wednesday before a Senate subcommittee on the financial health of the Postal Service. His remarks were candid and he presented options for working our way through the current economic downturn. Potter stressed that the priority would be relief from the prepayment of retiree health benefits.

... Potter’s testimony has been posted on usps.com

Customers First
The Postal Service remains committed to providing the American people with quality, affordable service -- despite the current economic situation. Any decision made to help alleviate our financial situation starts with how it might affect our customers, the American people. We will continue to look at ways to cut costs and improve efficiencies within our system in order to guarantee to deliver the reliable, trusted service our customers have come to expect. In the past year the Postal Service has taken very aggressive cost-cutting actions, including the following:

... Halted construction of new postal facilities;
... Worked with National Association of Letter Carriers to permit a new interim agreement to enable quickly evaluating and adjusting letter carrier routes to reflect diminished volume;
... Frozen the salaries of all Postal Service officers and executives;
... Reducing authorized staffing levels at Postal headquarters by 15 percent;
... Reducing authorized staffing levels in the regional offices by 19 percent;
... Slashed travel and meeting budgets to take advantage of video conferencing technology; and,
... Consolidated some duplicative mail processing operations.

Health Care Relief a Priority
The Postal Service's first option is to restructure the prepayment of future retiree health care costs. We are the only government agency that is required to fully fund all projected retiree health care costs. Nonetheless, the Postal Service remains committed to meeting this obligation but a modified schedule of payments would allow the Postal Service to focus on current financial needs during this crisis. This change would neither increase the health benefit premiums paid by current or future Postal Service retirees, nor would it affect their benefits. Neither proposal would involve tax subsidies.

... Potter asked that the payment schedule for funding be adjusted.
... Modifying the schedule of payments would allow the Postal Service to focus on current financial needs during the economic crisis.
... This change would not increase the health benefit premiums paid by current or future Postal Service retirees.
... This proposal would not involve tax subsidies.

5 Day Delivery
Americans have come to trust and count on delivery six days a week. If the Postal Service is not allowed to postpone retiree health care benefits for at least the next two years, we would look at a temporary solution of limiting delivery to five days a week. This would come only during those periods of the year when mail volume is at its lowest and would be infrequent at best.

... This is a consideration only. No final decision has been made.
... We have no immediate plans to halt our current operating, processing or delivery procedures and systems.
... Our priority remains on working with Congress to change our contribution schedule for the retiree health benefit fund.
... No decisions have been made as to what day we may consider as the “non-delivery” day.
... Business will proceed as it always does. Service, delivery and, especially, work at BSNs continue as it is today.
... It is business as usual for the Postal Service.

What do you think of this? Post your comment below.

The Economic Upside

By Mark Brousseau

The current economic downturn has created a renewed focus on cash, and prudent cash management. And like any other economic situation, this trend has a downside and an upside when it comes to solutions sales in the payments space, says Wally Vogel, president of Toronto-based Purepay Receivables Automation (wvogel@pure-pay.com).

“We have seen mixed results in our customer base as a result of the new reality,” Vogel told me.

“One the downside, uncertainty is delaying projects and purchases,” Vogel said. “These deals are not dead by any means, but they are not moving ahead either.” Vogel calls this ‘purchase paralysis.’ “The delays we are seeing now are moving out sales that we have spent months developing. It is frustrating to have them stall as they near the finish line.”

Not only does this stymie payments solutions providers like Purepay, it also frustrates the organizations that can’t do anything but maintain the status quo, Vogel noted.

But there is an upside to the current economic situation. Vogel says Purepay is seeing some of its clients take advantage of the current environment to improve their technology infrastructure and gain a competitive advantage over their more conservative peers. “These clients are reducing costs, expanding their service offerings, and winning business,” he said.

“With the primary goal of prudent cash management, automating and enhancing the payment processing technology platform, and expanding rather than contracting business, is an effective way to achieve positive results,” Vogel said. “Organizations that invest in their payments infrastructure now are on an upward vector and will grow and thrive, despite the economy.”

As for the rest of 2009, Vogel expects to see even more of a stratification of the winners and losers in the payments space, and an increased focus by users on offerings that deliver immediate benefits. “Any investment of capital will be, and should be scrutinized to ensure that there is a solid business case, clear costs savings, and that it creates a competitive advantage,” Vogel said.

What do you think? Post your comment below.

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."

Mail Days May Be Cut

Posted by Mark Brousseau

Below is an article from the Associated Press on the Postmaster General's request to Congress to lift the requirement that the agency deliver mail six days a week.


Postmaster General: Mail days may need to be cut
By RANDOLPH E. SCHMID
The Associated Press
Thursday, January 29, 2009; 2:41 AM


WASHINGTON -- Massive deficits could force the post office to cut out one day of mail delivery, the postmaster general told Congress on Wednesday, in asking lawmakers to lift the requirement that the agency deliver mail six days a week. If the change happens, that doesn't necessarily mean an end to Saturday mail delivery. Previous post office studies have looked at the possibility of skipping some other day when mail flow is light, such as Tuesday.

Faced with dwindling mail volume and rising costs, the post office was $2.8 billion in the red last year. "If current trends continue, we could experience a net loss of $6 billion or more this fiscal year," Postmaster General John E. Potter said in testimony for a Senate Homeland Security and Governmental Affairs subcommittee.

Total mail volume was 202 billion items last year, over 9 billion less than the year before, the largest single volume drop in history.

And, despite annual rate increases, Potter said 2009 could be the first year since 1946 that the actual amount of money collected by the post office declines.

"It is possible that the cost of six-day delivery may simply prove to be unaffordable," Potter said. "I reluctantly request that Congress remove the annual appropriation bill rider, first added in 1983, that requires the Postal Service to deliver mail six days each week."

"The ability to suspend delivery on the lightest delivery days, for example, could save dollars in both our delivery and our processing and distribution networks. I do not make this request lightly, but I am forced to consider every option given the severity of our challenge," Potter said.

That doesn't mean it would happen right away, he noted, adding that the agency is working to cut costs and any final decision on changing delivery would have to be made by the postal governing board.

If it did become necessary to go to five-day delivery, Potter said, "we would do this by suspending delivery on the lightest volume days."

The Postal Service raised the issue of cutting back on days of service last fall in a study it issued. At that time the agency said the six-day rule should be eliminated, giving the post office, "the flexibility to meet future needs for delivery frequency.

A study done by George Mason University last year for the independent Postal Regulatory Commission estimated that going from six-day to five-day delivery would save the post office more than $1.9 billion annually, while a Postal Service study estimated the saving at $3.5 billion.

The next postal rate increase is scheduled for May, with the amount to be announced next month. Under current rules that would be limited to the amount of the increase in last year's consumer price index, 3.8 percent. That would round to a 2-cent increase in the current 42-cent first class rate.

The agency could request a larger increase because of the special circumstances, but Potter believes that would be counterproductive by causing mail volume to fall even more.

Dan G. Blair, chairman of the Postal Regulatory Commission, noted in his testimony that cutting service could also carry the risk of loss of mail volume. He suggested Congress review both delivery and restrictions it imposed on the closing of small and rural post offices.

The post office's problem is twofold, Potter explained.

"A revolution in the way people communicate has structurally changed the way America uses the mail," with a shift from first-class letters to the Internet for personal communications, billings, payments, statements and business correspondence.

To some extent that was made up for my growth in standard mail _ largely advertising _ but the economic meltdown has resulted in a drop there also.

Potter also asked that Congress ease the requirement that it make advance payments into a fund to cover future health benefits for retirees. Last year the post office was required to put $5.6 billion into the fund.

"We are in uncharted waters," Potter said. "But we do know that mail volume and revenue _ and with them the health of the mail system _ are dependent on the length and depth of the current economic recession."

He proposed easing the retirement pre-funding for eight years, while promising that the agency will cover the premiums for retirement health insurance.

At the same hearing the General Accounting Office agreed that the post office is facing an urgent need for help to preserve its financial strength. But the GAO suggested easing the pre-funding requirement for only two years, with Congress to determine the need for more relief later.

Potter noted that the agency has cut costs by $1 billion per year since 2002, reduced its work force by 120,000, halted construction of new facilities except in emergencies, frozen executive salaries and is in the process of reducing its headquarters work force by 15 percent.

From the Postmaster General's Mouth

Posted by Mark Brousseau

Below is a link to Postmaster General John E. Potter's testimony before Congress Wednesday where he asked lawmakers to lift the requirement that the agency deliver mail six days a week. This proposal could have a significant impact on remittance and lockbox processors, industry observers point out.

http://www.usps.com/communications/newsroom/testimony/2009/pr09_pmg0128.htm

What do you think? Post your comments below.

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.

Utility Webinar Q & A

By Mark Brousseau

Last week, TAWPI’s Payments Capture & Clearing (PCC) Council and Purepay Receivables Automation hosted a Webinar on the business case for image-based remittance solutions in the utility industry. The Webinar included a case study presentation by Omaha Public Power District (OPPD), a Purepay remittance software user. There were so many questions at the end of the Webinar, that there wasn’t enough time to answer them all. So, below are the responses to the Webinar questions.

Are you able to save queries?

Tim Vasquez, Omaha Public Power District: We save our own queries in Access.

How much does the software cost?

Doug Myers, Purepay Receivables Automation: Software is based on the type of transport that it runs on, much like the CPU based pricing for the core product, and this is pretty standard across the industry and then there might be some additional modules that are specially priced based on particular capability rather then on size of transport.

How many hours are your employees spending each day now on processing your items in the utility?

Tim Vasquez: Processing on our peak days in the week takes about 6 hours total for the two processors to complete. About 4-5 hours on off-peak days for one processor.

What forms of electronic presentment and payment does OPPD offer to their customers?

Tim Vasquez: We have a very large base of customers who use our own automatic bill payment that’s about 25 to 30 percent of our customers, we get another 10 percent who use our online system or pay from an online banking system. Many of our companies will pay us by EDI or an ACH transaction. We also offer credit card payment and in-person payments to make up for the rest of that percentage to get us to that 41 percent for mail.

What does EDI stand for?

Tim Vasquez: Electronic Data Interchange; it’s used typically to send extra data (such as account numbers) along with an ACH payment.

What forms of electronic presentment and payment does OPPD offer to their customers?

Tim Vasquez: We offer Web, IVR and the auto debit program. In addition, we have electronic payment links to most major payment groups (Checkfree, Online Resources, etc.)

How long do you hold your paper items prior to destruction?

Tim Vasquez: I believe the bank requires you to hold them for 5 days. I’d check with your bank on those things specifically. We went for as much room as we could hold; most people recommended that to us as we were doing vendor evaluations. We can hold about 5 weeks of data and we destroy it internally ourselves.

Do you have walk in sites that take payments? And does this application interface with those sites?

Tim Vasquez: We have about 20 locations throughout our service territory where anybody can walk in and take a payment with an OPPD logo on it. We have OPPD software running there. Then we get those checks down at our location. If had wanted to make the investment of putting that image piece out of those offices, then we would be able to interface directly. But it seems easier for us to ship the check down to us for processing.

How do you handle keying check only payments regarding quality? - For example, double keying, etc.

Tim Vasquez: We interface with our CIS system for check only payments of that type. If it’s just check only batches that are being deposited, we use the control total to ensure the items haven’t been double keyed. If its for the account number, we return an amount from our CIS showing us what amt is due from that customer, so it gives someone an item to balance against just like it’s a regular transaction, we are assuming that the bill coming was for the amt the customer owed and then if the check does not equal that amt it presents it back to the operator like Amanda showed, showing whether you want to adjust the stub or adjust the check amount. The system can be configured to double key amounts if required.

Did OPPD ever use lockbox? There are several doing this, what would you suggest to those companies?

Tim Vasquez: We use a lockbox for deposit of our high dollar amounts. They receive the mail earlier and deposit earlier. We still process the items afterwards. We have had several people approach us to take over our processing. I think this is part of the challenge we are talking about to make sure we are competitive with that cost.

We feel that we have something to offer to that product, it’s not just a commodity we just want to use payments process. Those are our customers, they are our contacts and that’s our business life blood. We want to own that responsibility for those payments, get them posted and have the control and the ability to research when a customer calls in. We take that stuff seriously and so before you answer to us I really suggest to you that to evaluate this system, no one is going to let me talk about a specific price, but the pricing on this type of system is worth your while to look into.

I have heard companies had issues handling bill-pay payments. How did you address this issue within your organization?

Tim Vasquez: We did our bill pay; we’ve used two different groups for our bill pay. We had a lot of internal interfacing expertise. Certainly all payment processing is all about balancing, are you batching, and are you real time; if your real time, do you have a method of dealing with returns. My preferred method as an accountant, I want to batch, I want to know it’s in balance before I post anything and I want to see it posted in my bank account that same day. A big component of that when I get a chance to put in an interface for a system I ask to batch, I want to see a total and I want to see it in a bank the same day before I post payment. That’s how I would suggest doing it.

Who are you using for your web and phone payments and do they integrate directly to the other accounts receivable file you receive on other payments?

Tim Vasquez: We put Purepay systems through our regular interface for payments. Basically anytime you have a payment interface you’re going to be creating some type of flat file that goes through your interface system. It’s really not complicated. A long time ago when we started developing our interface systems for a RCIS system, we said lets make a standard flat file that’s easy to get your hands around and is simple to explain to a vendor, so that no matter what payment style we go after whether it’s a Check Free, Princeton, or PayMyBills.com; there are so many of those types of organizations that wanted to be send a very simplistic flat file format, this is my flat file format, this is what I need you to be able to create and if they can’t create it, they have the expertise in-house to create that type of simple flat file.

I know this payment type is decreasing, but what percentage of total payments are in-person?

Tim Vasquez: We actually have quite a contingent of walk-in payments. We have 10 percent of our customer base walk into our customer office through the past 10 years; really an un-phased group. Then we have an additionally 4 percent who walk in to our payment agent locations. Certainly we service a pretty good geographical region that covers rural and urban and a pretty good demographic of young to old. Those payment styles, I think Mark had mentioned, just because they are declining doesn’t mean that they are really going away. People are their payments, and they will pay the way that they prefer and we don’t discourage or encourage from any particular site location.

Does the software automatically convert each check to check 21 or does it also convert some checks to ARC?

Amanda Hales, Purepay Receivables Automation: It can do both. If you have purchased both modules it can do the decisioning for you for both. It will automatically decision if its ACH flow or should be Check 21.

Tim Vasquez: We went with the opinion of doing Check 21 just because we have so many banks within such a close geographic location. Once we deposited to 3 banks we were getting a pretty favourable flow schedule without ARC’ing, we felt it was a cost benefit for us to just go all Check 21.

Who were some of the vendors/how many vendors did you consider when you went through the process of choosing Purepay?

Tim Vasquez: I had considered 10 different vendors. Having not cleared who I can say and who I can’t say; I’ll say that I had considered all of the major players, and it was only after looking at what was out there and available that I decide to look at some of the smaller software providers who I didn’t know as well. It really all started with a walk through the TAWPI showroom, just seeing what equipment was available and who were the venders that were in play who I thought would be around for the next 5 years. Then I went to 10 of those people.

Can you explain a little about why you might not want to go with "all electronic" from day 1 if you had it to do over again as you mentioned in your intro?

Tim Vasquez: You really need to work through your banking relationship to figure out what their timeline is for electronic payment deposit. I was surprised afterwards that most banks say you have to be live and then follow this schedule for this number of weeks before we will accept an electronic deposit for you. And because of a very strong good relationship within our own geographic region with our banking group, I set the schedule for one of my banks who then adhered to it are getting a lot of props from me as far as being someone who was on my side during implementation.

Most banks you’ll find though when you start talking, find out what their schedule is for electronic deposit. See what you can do about the schedule and how you can still operate in your own environment while waiting for the electronic deposit piece to come up. Probably now if I had to do it over again I would get my bank to commit to letting me send from a remote site, set up the equipment in that remote site, go through the testing from that remote site, by remote site I would mean my vendor’s location, so that when it comes to I’m ready to electronic deposit when my vendor is ready to send.

Are you using RDC for the walk-in payments?

Tim Vasquez: We do capture walk-in payment checks using RP$ for deposit.

Which is cheaper ARC or Image Exchange?

Tim Vasquez: That’s what you want to check with your bank on, make then commit to what the pricing is going to be for Image Exchange in all types and ARC in all types. Make them commit in writing to you before you go forward on what’s your best solution. We had to run the scenario with the types of transactions we thought we would get from our history and got our banks to commit to what the pricing was. And then our learning afterwards was make sure you go back and make sure you are getting that price, because there is a lot goes into electronic deposit. You want to look at those analysis payments and make sure you are hitting that target price they said they would give you.

Is there a need for scanning letter size documents along with checks?

Tim Vasquez: Purepay has a solution for that. If the company was paying me with a check/stub attached and had data that I wanted to capture. I started using that check/stub as my stub and I would just enter data from there so I can capture that image. I decided not to go with a full length page just because there wasn’t enough volume for us to justify trying to put in that solution. Though, Purepay did offer me a solution for our volume that we had.

How do you handle Image Quality problems?

Tim Vasquez: The bank will notify you with the image that doesn’t pass their quality check. It is not a large volume, most of the time the ones you’re going to have returned are the ones where customers have used the ‘Gel’ pens that don’t show up on the image. We get probably one or two of these that we deal with daily during the peak and probably two for the rest of the week. So I say we get probably a handful every week that we have to deal with. That’s why the bank requires you to keep them for whatever the number of days. I think the bank requires 2 weeks or 5 days. That their time to get back to you and tell you these items didn’t clear your image quality, you go back and pull them out and then you deposit them in a paper form. We have a courier that still delivers office deposits for us, so we utilize that courier at that time.

How do you send the remote deposit file to your bank?

Tim Vasquez: Each bank has different guidelines for sending. We use the secure web site for one and SFTP for another.

Does your software do Remittance Amount Recognition? Meaning if the amount is hand written and not in the scanline.

Amanda Hales: We can use ICR (Intelligent Character Recognition) to read a hand written amount on the document. Yes.

In this solution, is there a need for redaction - stripping/removing personal/confidential information before transmitting?

Tim Vasquez: We had to do this a little bit with our credit card payments. We didn’t want the credit card number to be really captured anywhere on our system, almost period. And so during the software configuring you want to store with your payments and whatever it is you want to send from your payments. We also went through with the different banks that we were dealing with the different types of encryption that we would use for the data that would get sent.

What is your item per paid labor hour throughput (IPH)?

Tim Vasquez: Our throughput per machine is around 1,000-1,400 per hour depending on the operator.

Are you sending an X9.37 image file to your banks? Also, how do you determine what bank receives what deposit? Does Purepay allow you to select what bank account to deposit prior to running the deposit?

Tim Vasquez: We are sending tailored x9.37 files to the bank. Each bank has their own customizations required of the x9.37 file. OPPD determines what bank to deposit based upon the ABA number of the check being deposited, but the determination is customizable.

Amanda Hales: The deposit accounts can be setup in the application to be dynamic. You can setup multiple deposit accounts based on criteria in the scanline, etc.

System Configuration Pitfalls

By Mark Brousseau

What is the most common mistake billers make when configuring a new remittance system? Looking at the solution with too limited of a scope, says Bob Balotsky (bbalotsky@usdataworks.com) of Houston-based US Dataworks, Inc.

“Billers may think that they are expanding their horizons by implementing a new system with advanced features and functionality,” said Balotsky, citing exceptions handling and data entry tools as two examples. “But that is not enough. Automating remittance payments that come through the mail, although valuable, doesn’t address the other ways payments are made to an organization.”

Balotsky tells me that organizations need to look beyond the remittance silo and develop an enterprise-wide payment strategy. Only then can an organization take full advantage of the available payment clearing alternatives. “In order to truly maximize organizational efficiencies, billers must take a higher-level, enterprise-wide approach,” Balotsky said.

Yolanda Sanchez (ysanchez@usdataworks.com), product manager at US Dataworks, adds that when configuring a remittance system, especially an enterprise payments solution, billers want to be sure to consider the different types of transactions that were previously in different departments, and now will be coming together: “You need to consider the total throughput.” Similarly, billers need to be sure their new solution supports emerging payment types.

Sanchez also warns billers not to fall into the trap of having a new solution replicate the tasks of a legacy system, simply because the organization is familiar with those processes. “Be sure you understand how the new system can be configured to make processes more efficient, or in some cases, eliminated,” Sanchez said. “You need to get past the mental roadblock of, ‘We’ve always done it this way.’” What do you think? Post your comments below.

The Credit Crisis and Cash Management

By Mark Brousseau

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

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

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

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

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

Remote Remittance Capture Grows

By Mark Brousseau

While some lockbox providers have been disappointed by what they see as sluggish demand for their remote remittance capture solutions, Chris Rohner (chris.rohner@fnis.com), national remittance sales at Jacksonville, Florida-based Fidelity National Information Services (FIS), says the demand and volume has met her company’s expectations. FIS has about 20 financial institutions doing some form of remote remittance capture, Rohner told me.

The thing to keep in mind, Rohner notes, is that distributed capture isn’t for every lockbox client. “It works well when the customer has remote locations with walk-in payments, and they don’t want to be bothered completing the transaction,” Rohner said. “A good example of this is tax processing, where a municipality might have a lockbox, but also accepts walk in payments. At the end of the day, they want to receive one file and one set of reports. This is ideal for distributed capture.” In addition to municipalities, Rohner said FIS is seeing strong demand for its distributed capture solution from utilities and property management firms.

And she expects interest to pick up as FIS rolls out flatbed scanning capabilities for supplemental remittance documents. Today, the company only captures checks and coupons, with MICR and OCR read technology. It also offers a remote deposit capture solution to automate check deposits to a bank, and a consumer capture solution, as well. “We do a lot of due diligence before recommending a distributed capture solution,” Rohner told me.

How would you describe demand for remote remittance capture?

Post your comment below.

ECP Implementation Tips

By Mark Brousseau

Electronic check presentment (ECP) is becoming an increasingly important part of the lockbox services mix. With electronic clearing, billers can achieve significant benefits when processing their receivables through a lockbox, including reduced deposit fees, faster funds availability, improved collections, later deposit windows, and streamlined returns handling.

But like any other business process change, electronic clearing requires billers to consider the potential operations and customer service impact of implementing the technology, or they might find its benefits to be elusive. That’s according to Lesa Brooks, general manager, Data Capture Services, Western Region for CDS Global (lbrooks@cds-global.com). An early adopter of ECP, CDS Global electronically deposits checks to four major financial institutions on behalf of several dozen lockbox clients, Brooks recently told me.

The first consideration, Brooks said, is ensuring that the biller has the right banking partner. “Billers need to make sure that their bank is experienced with the process,” Brooks said. “Most of the larger banks have teams dedicated to implementing ECP projects. They have the process down pat, and their fees are usually much lower. But we have seen cases where clients have worked with a local bank that is unfamiliar with ECP and it has made the process more confusing. Local banks might also have higher fees since they are working a vacuum.”

And deposit fees are a key consideration, Brooks said. Billers should expect banks to pass along some of the internal cost savings they achieve from electronic clearing. “But fees for ACH conversion, on-us items, check image exchange, and substitute check printing are all over the board, so it’s a good idea to shop around. In general, ECP fees are coming down.”

Billers should also make sure that their lockbox provider is experienced with ECP, Brooks said. Billers need to determine whether their provider allows for the use of multiple banking partners; whether the lockbox provider can handle opt-outs for ACH conversion; and whether the lockbox provider can customize X9 files to allow the deposit record to be marked based on the type of deposit (Check 21, ARC, BOC). “If your lockbox provider isn’t experienced with ECP, and it doesn’t offer flexibility for managing the process, it can add a significant amount of time to development and testing, as well as higher upfront costs,” Brooks said.

Another consideration for billers is whether to use ACH conversion or just Check 21. Depending on the biller’s business, it can be a no-brainer (utilities) or more complicated (non-profits), Brooks said. Once the biller determines it will use ACH conversion, it must consider how to handle customer notification for ARC conversion. Billers must think through what to say (and get the necessary approvals), where to put it, and whether to include a toll-free number for opt-outs. They must also leave time for printing. “Finding the space in customer mailings to put ARC notifications has been the biggest implementation delay, hands down,” Brooks said. Since this notification needs to be made 30 days prior to going live, Brooks said this task should be near the top of a biller’s implementation project list.

Similarly, billers must plan to educate their customer support staff on ECP. “Consumers still have questions about whether their check was cashed,” Brooks said, noting that checks presented via ACH look different on a consumer’s bank statement. “This is an especially big issue for non-profits and direct mail companies.” Customer service reps must understand that converted items might appear in a different location on a consumer’s statement. “We’ve chased our tails researching whether an item was processed, only to discover that the consumer was not looking in the right place on their statement,” she said. As part of their customer service planning, billers should also think through returned item handling.

Have any tips for implementing ECP at the lockbox?

Post your tips below.

Regulus Sale Just The Start?

By Mark Brousseau

The sale of Regulus Group LLC earlier this week to 3i Infotech, a global information technology company (see TAWPI Top Stories), could be the start of a wave of consolidation among lockbox providers.

Regulus is the largest independent remittance provider and one of the leading providers of document processing services in the United States – addressing the full document lifecycle from print and electronic bill presentment to remittance. Under the terms of agreement, 3i Infotech has proposed to acquire 100 percent of Regulus, including the company’s products, trademarks and product brands.

John Mintzer, vice president at Citizens Bank, expects more consolidation among lockbox providers, some of it simply as a result of mergers and acquisitions among regional banks.

But the real driving factor, in Mintzer’s view, is the declining number of consumer checks. “The ability for lockbox processors to meet their fixed costs gets increasingly difficult as check volumes decline,” Mintzer told me. “The single biggest challenge that lockbox processors face is the cost of labor, including benefits. This is a significant expense, and one that harder and harder to cover as customers require more exceptions-type processing.”

Serena Smith, senior vice president, Fidelity National Information Services, agrees with Mintzer. “All of us our facing economic pressures as volumes decline,” Smith told me, adding that consolidation among lockbox providers will be biggest story in the market over the next 12 months. “Providers will need an aggressive approach to the market, which means expanding their product offerings or exiting the business altogether. Providers who have not embraced a complete payments offering will miss the boat.”

Smith said that many in-house processors already are looking to outsource, to find the best mix of price, quality and functionality. “Processors have to be creative to differentiate themselves on something other than price,” she noted.

Mintzer believes that survivors of the coming lockbox market shakeout will need to have significant automation that makes their operations less dependent on heads-down labor. “Surviving processors also will require the ability to combine inputs of information received from multiple sources into one concise file or report, essentially providing the customer with an information dashboard.”

Smith said survivors would need to demonstrate robust product offerings, a commitment to the business, sustainable market share, and ready capital for investment.

With consolidation on the horizon, the obvious question is why companies like 3i Infotech are entering the lockbox space. Smith said the trend of in-house processors outsourcing their volume is very compelling, and can offer successful providers a large amount of volume.

But Mintzer warns that the financials don’t seem to support new entrants: “The significant investment in plant and equipment is extremely hard to make up in this ‘penny’ business, and this is before factoring costs associated with disaster recovery.”

Do foresee more consolidation in the lockbox market? Post your comments below.

The Economy And Lockbox Demand

By Mark Brousseau

The recent economic volatility has got many people wondering whether lockbox providers are seeing a change in demand. To find out, I asked three lockbox industry veterans.

John Mintzer (john.d.mintzer@citizensbank.com), vice president at Citizens Bank, said interest in outsourced remittance processing continues to be steady even during the most recent economic volatility.

“Remittance processing is similar to the gaming industry in that the demand for remittance services doesn’t necessarily retrench or diminish during difficult economic times,” Mintzer explained. “However, the comparison stops there. While the client of the casino takes on more risk in the pursuit of wealth – capital – the remittance processing client is looking to reduce risk in the pursuit of protecting its capital.”

Customers with in-house lockboxes continue to evaluate whether it makes more sense to outsource, Mintzer told me. “There is significant appeal to outsourcing, because it simplifies the budgeting process by boiling the expense down to a per item basis. This eliminates the need to worry about changing labor costs, software and hardware upgrades, and the significant expense associated with business continuity.”

Steven Nugent (steven.nugent@firstdata.com), director, product management, at First Data Corp. doesn’t believe that economic factors have influenced the market’s interest in outsourcing as much as the ever-increasing unit cost per item due to electronic migration. “Companies have historically measured the value proposition of an outsourced lockbox against internal pressure to achieve margin goals,” Nugent told me. “It would surprise me if most in-house processors weren’t contemplating outsourcing prior to the latest economic downturn.”

Ron Victor (ronald.j.victorjr@jpmchase.com), vice president, Receivables Product Management for JPMorgan Chase, said his bank is seeing a decline in B2B check volumes of approximately 4 percent in the first quarter. “In my opinion, the key factors are the economic downturn, remote capture adoption [which flows into a separate P&L at JPMC] and electronic payment adoption.”

Victor added that the economic downturn certainly places a greater focus on intra-day collaboration (exceptions repair, data augmentation, invoice matching), straight-through processing, and remote deposit capture. “One key thing we have found is that the on-line user experience and ease of browser use are important to customer satisfaction,” he said.

Nugent also sees a stronger focus among billers on working capital management. “Value-added services designed to decrease time-in-process, such as intra-day exceptions processing and remote payment capture, take center stage in almost every conversation we have,” Nugent said. “Many of the payments processed through these channels carry a disproportionately higher dollar average. Image cash letter has become a standard for accelerating the back end.”

Mintzer, who will be a panelist with Nugent and Victor at TAWPI’s Payments in Transition conference this month in Las Vegas, added that his bank’s existing remittance customers continue to focus on line item processing charges. Some wholesale lockbox customers, as an example, are evaluating whether they can transition to retail lockbox services to reduce per item costs. “In some cases, this can work,” Mintzer said. “But there are many factors that need to be considered, including the return rate of the remittance coupon and the ability of the customer to absorb the upfront programming charges,” he explained.

What are you seeing? Post your comments.

Managing Lockbox Relationships

By Mark Brousseau

Developing a strong working relationship with your lockbox provider is critical to the success of any payments outsourcing initiative, says Craig Bjork (cbjork@cds-global.com), director, account & business development, Data Capture Services, at CDS Global.

As a first step, Bjork recommends that billers make sure that their business rules are well documented and clearly understood by their lockbox provider. To be sure everyone is on the same page, ask the lockbox provider to share a copy with you. Review these business rules with your provider to understand why things are done a particular way, and what benefits they provide. If you hear, “I’m not sure,” or “We’ve always done things this way,” you’ve probably found a process that needs changing. “But don’t concern yourself too much with how the work gets done,” Bjork warns. “It is the results that you should worry about.”

Similarly, billers should make sure that their contract or service agreement is specific, and that they understand all of the billing points and how volumes are derived, Bjork explained.

In addition, whenever billers change their forms or remittance documents, they should give their lockbox provider an opportunity to adequately review and test them, Bjork said. “And listen to your lockbox provider’s comments and recommendations,” he said. “Documents that create issues in lockbox processing can also create exceptions and posting delays.”

Bjork noted that lockbox providers may want ‘perfect world’ scenarios, but this might not work for the biller. “Work with your lockbox provider to find the best solution for both parties,” Bjork said. “Everyone’s goal should be the same: timely and accurate processing.”

Bjork also recommends that billers visit their lockbox provider’s facility, to build personal relationships with the people servicing their accounts, and to see firsthand how their work will be processed. And know the chain of command for your provider. You also want to get at least two alternate contacts so you have options if your primary contact is unavailable.

Any strategies you would like to share? E-mail me at m_brousseau@msn.com.

Small Banks Seek Lockbox Solutions

By Mark Brousseau

Demand from community and mid-sized banks for image-based lockbox solutions is on the upswing, says Bob Pangrac (rpangrac@creditron.com), national account manager for bank lockbox providers at Creditron. The reason? Smaller banks are looking to defend their commercial account base from large “national banks,” which Pangrac says are now showing up in regional and small markets with cash management services such as wholesale and retail lockbox processing.

“Previously, the cost of an image-based payments solution was cost-prohibitive for a smaller financial institution,” Pangrac told me. “With the introduction of Microsoft-based solutions, smaller banks can now afford a solution that will provide new revenue streams for the bank.”

But why not outsource?

One reason is that banks can keep more of the revenue from their lockbox services, Pangrac said. Another factor is that in-house systems offer better cost-controls than outsourced providers. Finally, in-house systems allow banks to clear exceptions “as they happen” or at the end of the day, rather than waiting for them to arrive from the outsource provider. “With an in-house system, exceptions can be handled the same processing day, benefiting the bank and the bank’s customer – retail or commercial – alike,” he explained.

As an example, Pangrac recounts the story of a $250 million bank that sensed that they were experiencing holdover with their lockbox provider. “By bringing their lockbox processing in-house, they seldom have holdover, which translates into more efficient customer service, deposit management, and cash management. The bank can also handle their ‘on-us’ accounts, such as the bank-branded Visa card, and their home and car loans,” Pangrac said.

So what functions are smaller banks looking for in image-based lockbox systems? Pangrac said ease of use tops the list, followed by ease of account setup, an R&D path for electronic payments, and the ability for customers to research items and receive invoices via the Web.

Are you a small bank that has successfully deployed an image-based lockbox solution? E-mail me at m_brousseau@msn.com.

Market Consolidation Predicted

By Mark Brousseau

Watch for more lockbox market share consolidation this year as declining check volumes put an even greater strain on lockbox service providers, in-house remittance operations and lockbox solutions vendors alike. That’s according to Serena Smith (serena.smith@fnis.com), senior vice president, Remittance Processing Division, at Fidelity National Information Services.

“We’re all keenly aware of declining check volumes and the issues this presents. As a result, I believe we are going to see even more acquisitions, more consolidations and more companies moving into new markets,” Smith told me, adding that Fidelity expects an increase in the number of banks and billers looking to outsource their remittance processing. “Every processor, whether it’s an in-house operation or an outsource provider, is feeling the decline in check payments, in terms of higher unit costs and equipment maintenance fees,” Smith said. “As part of this trend, more lockbox providers will look to offer additional services to replace their lost check volumes – such as healthcare payment processing – and add technologies to try and capture some of the ‘new’ electronic payments volumes.”

Which brings us to the trends in technology that Smith foresees in 2008. She says more corporate billers will require their lockbox providers to deliver a consolidated view of the transactions handled on their behalf – regardless of whether they were paper or electronic – and to provide a check image exchange file to, or for, their corporate clients.

What do you think? E-mail me at m_brousseau@msn.com.