Current Payment Trends – - PowerPoint Presentation

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Uploaded On 2019-03-20

Current Payment Trends – - PPT Presentation

CMTA A focus on working capital and expense reduction If only it were this easy 2 2009 Wells Fargo Bank NA All rights reserved Member FDIC Agenda Common AR pain points Cost and prevalence of payment types ID: 758325

2009 bank fargo rights bank 2009 rights fargo wells reserved fdic member payment data payments online bill file check electronic posting credit

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Slide1

Current Payment Trends – CMTA

A focus on working capital and expense reductionSlide2

If only it were this easy…

Agenda

Common A/R pain points

Cost and prevalence of payment types

Paper checksACH Debit

Website collectionsCC and E-CheckOBPCashIntegration with accounting system

Migration to electronic payments

Parting thoughts

Common A/R Pain Points

Inefficient paper posting process

Tedious re-keying of data in multiple places

Need to increase throughput without adding staff

Pressure to lower transaction costs

Lack of visibility and control

Need for better auditing and reporting

A/R follow-up when collection issues occur

Checks Still Dominate for Bill Payment

Checks continue to dominate C2B landscape for utility type services

Easy to receive

Setup not technical

Universally acceptedIssues with checksPer item costs are highAvailability delays

Method of payment received from “Major Business Customers” Source: 2007 AFP Electronic Payments Survey

ACH Debits

12%

Other

14%

Checks

66%

E-Check

Credit Card

Payment Methods

More Company Control

Less Expensive

More Expensive

Less Company Control

ACH Debit

Online Bill Payment

Credit

Card Debit

E-Check

Credit Card

Check by Mail/Drop

OTC

Check

Scanned at company site

Remittance data scanned and/or keyed from invoice/coupon

Posting available at scanning point

Eliminates keying from most images

Scanned at company site

Discretionary data can be keyed with each check or scanned from coupon

Electronic posting file available, combined with other payment types

Information is input a part from the deposit process

Internal or External Lockbox

External Lockbox

Scanning

Keyed Data

Posting File

Scanned by provider

Remittance data scanned and/or keyed from invoice/coupon

Electronic posting file available from bank

Eliminates keying from images

Internal Lockbox

Remote Deposit

Key considerations for item processing

Internal factors

Equipment upgrades

StaffingBCP and continuity plans

Audit controlProcess customizationCustomer contactCentralizedDecentralized

External factors

Declining number of checks

Environmental forces

Check 21ARC BOCBank feesLocation of provider

Decentralized Deposits

Courier or Drop-Off

Pros

Effortless

for companyCustomer contact and convenienceConsAvailability

funds subject to delivery method

Armored carrier forces early cut-off

Desktop Deposit

Pros

Can be deposited immediately

Setup is universal

Cons

Multiple steps for staff

Entry cost can be a barrier

Courier may still be needed for cashSecurity of check items being deposited

Recurring ACH Debits

The silver bullet?

Most control for biller

Least expensive method

Internal processingBank fees

Not quite

Most companies report a plateau

Returns, NOCs, and NSF still remain

Environmental changes

Internationally consumer protection laws are tightening

Company Maintained Website

Payment collection methods

Credit Card

Client entered

Voice enteredE-Check – One-time debitMulti-functional toolCompany informationService bulletins

Payment function is usually provided by third-party

Credit Card and E-Check options are expensive

Strict regulations on data

Cumbersome for consumersUsually for one-time payments

Credit Card Payments

Cons

Different state laws and statutes affect strategy

Regulated vs. Non-Regulated

Comparatively expensive on an average ticket basis vs. other methodsVery tight rules around protecting consumer dataComplicated pricing structure

Chargebacks can be a problem

Pros

Good funds model

Less risk of returns

Widely used and accepted

Payment Processing Center Check

Online Consumer Preferences

52% of consumers prefer to pay bills at their bank’s site

Benefits cited by consumers:

Flexibility & control

Easy set-up of automatic payment Protection

Source: 2007Javelin Strategy & Research

Streamlined process

Fraud/Identity Theft

Online Bill Payment Usage

Number of US online households that pay bills online by generation

Electronify Your Online Bill Payments!

Source: Forrester’s Consumer Technographics

2000-2005 North American Benchmark Studies, Forrester’s North American Consumer Technology Adoption Study 2006 Benchmark Survey, and US Census Bureau

Gen Yers

(b. 1975-1990)

Gen Xers

(b. 1964-1975)

Boomers

(b. 1946-1963)

Seniors

(b. 1900-1945)

Actual

Forecast

60M

50M

40M

30M

20M

10M

Source: Forrester Research, 2007

Bank online channel growth 30% faster than overall online bill payment growth

Banks will achieve nearly twice the five-year growth rate of biller sites by 2011

Online Bill Payment Projection

Gen Y EBPP adoption will increase by 157%

Gen Y will represent only 26% of US households, yet they will make up 36% of EBPP users

By 2011, Gen X and Gen Y will constitute 65% of EBPP users

Source: Forrester Research, 2007

Online Bill Payment Projection

How do you handle cash?

Expedited payments made by consumers at in-person or walk-in agent locations.

In person payments provide an alternative for your customers who do not have bank accounts and can’t mail a check or pay by credit/debit card.

Service validates and processes payments in real-time or in a periodic batch mode. Your customers receive a confirmation number and real time posting credit.

Reduces the expenses of late payment processing as well as cutting off and reinstating servicesData transmissions improve the accuracy and efficiency of A/R postings

Online Bill Payment Trends

In Summary

Online bill payment growth expected to continue surging

Faster growth expected in bank-hosted channel

Not a “bank vs. biller” battleLarge billers need a strategy for handling increased volumes of online banking payments and the challenges created by electronic exceptionsMay require a mindset shift around billing/payments practicesPaper remittances can be expected to continue declining

Further impetus to outsource paper remittance processing

Working Capital Value Proposition

Increased number of electronic payments

Reduced DSO

Reduced Account Analysis feesReduced time spent reconciling account

Reduced number of rejected paymentsReduced number of inbound data transmissionsCompressed month end reconciliation

How to Streamline Receipt and Posting?

Automate

the receivables process

Receive a data file for both paper and electronic receivables

Standardize the use of remittance data across payment type

Integrate

automated file to your accounting system

Import file into system and initiate automated posting

Only work the exceptions that do not meet matching rulesConvert as many payments as possible

Encourage trading partners to pay via ACH and OBP

Use electronic methods to receive data for paper payments

Maximize your online bill payments

Automate

Integrate

Electronify

Accounting System / ERP

Automating Your A/R Process

Data files sent to Receivables Hub for each payment type

Hub creates standardized file per requested time and format

File transmitted to Acct system at requested time

File is imported and used for auto-posting

ACH Credits/Debits

Incoming Wires

Online Bill Payments

Remote Deposit

Bank Receivables Hub

Data files

Mail/OTC Payments

Data files

Card Payments

Data files

Consolidated

Data File

Integration Defined

Automated file received from bank

File uploaded into accounting system

Data used to identify customer and apply receipt

Receipts applied automatically by systemLeverages matching logic to minimize exceptionsOnly exceptions need to be workedReconciliation can also be automated

Consolidated

Data File

Accounting System / ERP

Key Considerations

Business case is straightforward

Banking partner can be consultative partner on this

Benefits can quickly offset initial investment

Need to consider future staffing needsSmaller companies starting to automate/integrateSoftware providers more focused on bank integration for payables and receivablesLess demand on IT Resources requiredTime to benefit doesn’t have to be measured in “months”

Automate

Integrate

Electronify

GlossaryARC – Accounts Receivables Conversion

BCP – Business Continuity Plan

BOC – Back Office Conversion

BSP – Banking Service Provider

EBPP – Electronic Bill Payment and PresentmentNOC – Notification of ChangeNSF – Non Sufficient FundsOBP – Online Bill PaymentOTC – Over the Counter

Pathway to Electronic Receivables

ACH Direct Debit

OBP

ACH Credit