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July 2000
Master the Mix of Checks and Electronic Payments
By Penny Lunt
Checks rule. While 100 million consumer bills are now paid electronically each month, 1.6 billion payments are still made by check, according to the Chicago consulting firm Treasury Strategies. That means less than 5 percent of all consumer bills are paid electronically.
One obstacle to e-payment is the fact that less than half of all U.S. households have computers, and there are few alternative devices that can be used for presenting and paying bills electronically. People who don’t have computers usually don’t have video phones either, says Dick Poje, a partner at Treasury Strategies. Even among consumers who have computers, most still prefer to write a check.
“One of my clients has 73 million customers and they’re heavily marketing electronic bill presentment and payment, but they’re only signing 30 customers a day,” Poje says.
Despite sluggish acceptance, electronic bill payment has a promising future — our children will no doubt lead the way. “I think electronic payments will represent 10 percent to 15 percent of payments within the decade,” Poje says. “As technology changes, we’re becoming not a checkless society, but a hybrid payment society, with payments made by credit card, debit card, automated clearinghouse transaction and by check.”
Accepting It All
With a preponderance of paper checks coming in and a small-but-growing share of electronic payments creeping into the mainstream, billers and lockbox providers are creating electronic strategies. “Companies like AT&T, Sprint and utilities — anybody who’s in the high-volume billing business — need to be able to seamlessly integrate payments and payment information that comes from a traditional check-based source and a variety of other sources,” Poje says. “They have to be able to do it in such a way that when the information is presented to the accounts receivable system, that system doesn’t care whether the transaction started out as a Quicken payment, a credit card payment, an ACH debit or a check.”
The vendors of high-volume remittance processing software have started incorporating
electronic payments into their paper-processing systems. J&B Software (www.tmsimage.com)
offers an electronic bill presentment and payment (EBPP) product called TMS
iPay that works with J&B’s TMS Image2000 remittance processing product.
J&B is setting up its first iPay beta site. The company is also discussing
integration with EBPP vendors.
Wausau (www.wausaufs.com) is integrating PaySense
EBPP software from TriSense (www.trisense.com)
with its own ImageRPS remittance processing system. The integration should be
complete later this year. Unisys (www.unisys.com) is developing an EBPP product
of its own, but the integrator’s VisualRemittance software already accepts
feeds from third-party EBPP systems, including CheckFree’s.
BancTec’s (www.banctec.com) Pay- Courier
remittance system works with electronic payment systems, including BancTec’s
electronic lockbox solution. BancTec, too, seeks partnerships with EBPP vendors.
Advanced Financial Solutions (www.afsimage.com)
is developing an Application Service Provider electronic bill presentment and
payment offering expected to debut by the end of the year. AFS will use its
enterprise report management technology to convert print statement files to
HTML for Web delivery.
Smaller remittance/lockbox system providers also are starting to work on the hybrid payment challenge.
“I received two requests for proposal today, and one had a short reference
that said ‘the system shall be compatible with EBPP.’” says Ken
Bour, president of Netvantage (www.netvantage.net),
a remittance processing software company based in Gaithersburg, MD. “There’s
nothing in our system to prevent it being compatible with EBPP. If one of our
clients contracts with another company to do EBPP, all we would need to do is
get a file of those payments and put those records in our file.”
Perfecting Paper Processing
Given that paper still dominates the payment process, remittance processing software vendors have been refining how they process paper in these areas:
Courtesy amount read rates: The average first-pass recognition rate for check courtesy amounts is 50 percent. Incremental improvements are possible by using grayscale images and by matching courtesy amount recognition (CAR) results to the handwritten legal amount recognition (LAR) results as well as to the remittance coupon. Unisys recently updated its recognition engines, incorporating its SoftCAR Plus, which provides grayscale-based CAR and LAR.
J&B has integrated the Mitek Doctus product (including Parascript’s LAR engine) and the A2iA CAR/LAR engine into TMS Image2000.
Exception handling: Exception handling is the most expensive and time-consuming
part of remittance processing. “Exceptions are almost impossible to do
electronically,” says Stephen McNair, president of FTP Consulting (www.ftpconsulting.com).
“Depending on the application, they make up 15 percent to 20 percent of
the volume.”
Wausau recently added helpful improvements in this area within its ImageRPS system. Employees completing check data can now use 3270 emulation to hot-key to a customer service application to look up additional information. This reduces the amount of time spent looking up information or returning checks to customers.
Other exception item innovations from Wausau include a MICR database and an insufficient-funds database. These let the data entry employee refer to a readily available information source instead of making phone calls or accessing separate systems.
AFS’s Dream MICR reject repair system uses information captured from imaged checks to help read damaged MICR lines. Even if your mail opening equipment sends checks into your system upside-down, Dream can read their MICR lines during the first pass, according to AFS.
Check truncation: “We see a trend toward scattering remittance across
the organization and truncating the check at the point of service,” says
Larry Tong, associate director at RTLawrence (www.rtlawrence
.com), in La Mirada, CA, a remittance software vendor. With truncation,
the customer mails or hand-delivers a check. The branch that receives it scans
and stores the check and sometimes gives it right back to the customer. The
images are sent to a processing center. By the time the physical check comes
in for encoding (if it does at all), most of the processing has already been
done. This enables more balanced workloads and a more efficient system overall.
Remote data entry: Some systems let you scan centrally and complete the data at the client’s location, at employees’ homes or at a service bureau. Unisys’ VisualRemittance system will send batches of TIFF, CCITT or JPEG images over a LAN or WAN to be completed by someone at a remote location using any data capture software. File extracts are matched to the Unisys system. The system also works with the robust Opex 150 mail opening, extraction and image capture system. It processes high volumes at a central location and completes the data entry anywhere.
Voice response: Wholesale lockbox presents extra processing challenges that retail lockbox doesn’t. While consumers dutifully tear off a remittance coupon and mail it in with their check, corporate customers aren’t as predictable: Sometimes they return the invoice with their check; sometimes they print a stub for the check; sometimes they print one statement and one check for hundreds of invoices.
“There’s a surprise in every envelope,” says Bob Kirk, vice
president of marketing at Vicor (www.vicor.com).
Every wholesale lockbox account has different requirements. At a bank with 3,000
wholesale lockbox accounts, an operator would typically look up the instructions
for each account in a three-ring binder and then key in index data for each
paper in the envelope.
Vicor’s RIDS system lets the operator dictate the lockbox number to start
a batch. Voice recognition reads the number and displays the appropriate processing
screens. The first screen might ask for the dollar amount of the check. When
the operator says the number, the dollar amount appears on the screen and so
on with the rest of the screens. The operator doesn’t have to put the paper
down or key in information. Finally, the documents are stacked into an ImageTrac
color scanner from IBML (www.ibml.com). Later, the
scanned documents are married to the spoken information and the scanned checks.
The color images retain color backgrounds and watermarks common on corporate
checks. This makes corporate customers more willing to look up their check images
over the Web rather than receive the paper back, Kirk says, saving the time
and expense of returning checks. Bank of America and Chase are using this system
for wholesale lockbox.
If you’re trying to choose a remittance processing software product, “Look at as many vendors as possible,” advises McNair of FTPConsulting. “Cost shouldn’t be the deciding factor. Try to determine the reliability of the vendor. Ask them how many other customers they have dealt with similar to your business. Do they have a path for growth and embracing electronic payment processing?” Relevant experience and a clear vision forward are your best assurances of long-term satisfaction.
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