All posts by Wayne Brown

Director of Business Development Wayne develops and manages business relationship at Alacriti. He brings over 25 years of financial services experience and worked with Metavante Corporation, Deutsche Bank, and MasterCard Worldwide before joining Alacriti. Wayne holds a B.B.A in Finance from Baruch College.

Working Together: Financial Institutions and Fintech Partners

Banking and technology go hand-in-hand. Many top tier financial institutions are investing heavily in innovation labs, tech experts, and other resources to bring next generation fintech solutions to market. However, they sometimes struggle to do this on their own due to size, magnitude, or lack of in-house expertise.

One of the biggest considerations in developing fintech solutions is speed to market. As technology becomes more prominent in banking, some financial institutions want to break away from a reputation for slow progress. They not only need to develop highly secure technological solutions that can successfully serve customers with diverse needs, but also deliver and implement these solutions at a pace that’s rapid enough to stay competitive.

Silos are another challenge that financial institutions encounter in their attempts to modernize services and operations. As technology evolved over the years, financial institutions often utilized an assortment of products that failed to work harmoniously with one another. These disparate systems can create significant organizational and administrative challenges within the banking ecosystem. A fintech partner can help make sense of these silos and restructure or develop new technological infrastructure to help carry established financial institutions into the modern age.

As market demands increase, many financial institutions find that they need more comprehensive technology support. For some, outsourcing technology services may be the most cost-effective solution. Working with a fintech partner can provide access to an arsenal of expertise and open doors to innovation that financial institutions might not consider on their own.

Security is paramount, especially as public concerns over cyber and financial crime continue to escalate. A fintech partner can help fill the gaps in a financial institution’s internal resources and equip it with the expertise and finesse required for particularly high-risk undertakings. The right partner can ensure that solutions are innovative and user-friendly, as well as secure and compliant with all regulations.

Outside the Box Thinking

Aside from partnering with fintechs for technology platforms, financial institutions can also leverage fintech-developed services to gain a competitive advantage and market differentiation. A Cornerstone Advisors report lists three potential areas small to mid-size financial institutions can leverage:

  1. Bill negotiation services that integrate with a financial institution’s bill pay platform and analyzer consumer bill payment activity to make recommendations for ways to lower bills and save money.
  2. Subscription service management that offers consumers one place to subscribe, manage and cancel all subscription services from one location. 
  3. Data breach and identity protection services that make dealing with data breaches easier for both consumers and the financial institution by continually analyzing reported data breaches throughout the U.S. and assigning a risk score to activities. 

The Bottom Line

Development and deployment of fintech solutions require significant investment of resources. Therefore, financial institutions may feel more comfortable working with a partner that has both the bandwidth to deliver high-quality fintech solutions to market and a proven track record of doing so. In addition, fintech companies serve more than one client, giving them a unique vantage point unavailable to an individual institution. It could take an internal team several months to research an issue and determine the best solution for it. Alternatively, fintech companies are poised to quickly offer a diverse array of solutions that can be customized for any sector or function.

With a trusted fintech partner, financial institutions can capitalize on a bird’s eye view into the industry, leverage security and compliance expertise, accelerate product delivery and continually innovate. An astute fintech partner can be instrumental in helping generate new revenue and achieve goals quickly and efficiently. For financial institutions, aligning with fintech partners that offer strategic, cost-effective solutions and support can be an intelligent investment as competition within the industry continues to heighten.

Updated from a blog originally published January 22, 2020. 

Read the checklists for what banks or credit unions should look for in a payments fintech partner. 


Today’s legacy and siloed banking technology infrastructure limit financial institutions’ ability to rapidly innovate. It’s time to look at money movement in a new way. Alacriti’s Orbipay Unified Money Movement Services does just that. Whether it’s real-time payments, digital disbursements, or bill pay, our cloud-based platform enables banks and credit unions to quickly and seamlessly deliver modern digital payments and money movement experiences. To speak to an Alacriti payments expert, please call us at (908) 791-2916 or email info@alacriti.com.

Paper or Electronic Billing: What’s Your Preference?

Do you prefer paper bills, electronic statements, or both?

On one hand, there’s a segment of the population that lives exclusively in the digital world. Technology is a trusted companion for activities like streaming media, messaging with friends and family, buying goods and services, and receiving and paying bills. This segment is comfortable using mobile devices and computers to receive electronic statements and pay bills online—and has increased exponentially in the aftermath of the global pandemic as demand for touchless-everything grew.

On the other hand, a portion of the population still prefers traditional paper bills and may pay those bills with cash or checks. So-called “double dipping” occurs when customers make electronic payments via their bank accounts or biller websites, but also receive paper statements. Paper bills might be preferred because they provide benefits for recipients including physical reminders, easy archiving, and proof of address.

As the world becomes increasingly digital, why don’t businesses eliminate paper bills once and for all? It’s reasonable to think that most organizations would stand to benefit both financially and operationally if their customers went to 100% electronic bill presentment and payments (EBPP). This is especially true for customers that are already making payments online but still receiving paper statements. Eliminating the choice of paper bills could save companies time and money, while also creating a positive impact on the environment.

The reality is that simply offering an electronic option isn’t enough to encourage full participation. Some companies set up their enrollment process so that customers opting-in to electronic payments automatically opt-in to e-bills as well. Others provide their customers the option to disable paper bills, but don’t make electronic statements mandatory. If customers choose to pay their bills online, it might make sense to require electronic billing in tandem. Businesses must make a concerted effort to shift customers toward EBPP by offering the right incentives.

For most businesses, there’s no greater priority than customer satisfaction. And, like it or not, paper bills remain a critical component of a personalized billing and payments experience. Businesses might find it increasingly difficult to balance consumer demands for fully digitized experiences with long-standing paper habits. Looking to the future, these organizations must devise creative strategies to encourage full participation in electronic billing and payments.

Updated from a blog originally published September 3, 2019.

Read more about paperless billing in Paperless Billing: Why Make the Switch?


Today’s legacy and siloed banking technology infrastructure limit financial institutions’ ability to rapidly innovate. It’s time to look at money movement in a new way. Alacriti’s Orbipay Unified Money Movement Services does just that. Whether it’s real-time payments, digital disbursements, or bill pay, our cloud-based platform enables banks and credit unions to quickly and seamlessly deliver modern digital payments and money movement experiences. To speak to an Alacriti payments expert, please call us at (908) 791-2916 or email info@alacriti.com.

Healthcare Providers and the Transition to a Digital World

Due to the complexities of the industry, it’s often challenging for healthcare providers to make the transition to an increasingly digital world. Healthcare costs continue to soar for reasons ranging from federal legislation to higher equipment and service expenses. Furthermore, outdated technology can be a source of frustration for practitioners and patients alike. Mounting expenses, outdated technology, and a lack of convenient service options can combine to negatively impact patient satisfaction and ultimately hurt a healthcare provider’s bottom line.

Healthcare is becoming more of a business than ever before, leading patients to behave more like consumers. Many insurance plans push increased costs from providers to patients. Expensive advertising for pharmaceuticals and specialized care also contribute to higher medical costs, which are passed on to patients as well. As a result, more patients are shopping around for health insurance plans and options that best align with their needs, making the entire industry more competitive. Patients also expect to receive more value from healthcare providers as their personal financial responsibility for medical care increases.

It’s important that providers make a concerted effort to retain patients amid soaring costs and increased competition. Technology can give providers that are struggling with administrative excess and decreased patient satisfaction the opportunity to level the playing field. For example, an electronic bill presentment and payment (EBPP) solution can help providers deliver a modern bill payment experience to patients.

Once a patient leaves a provider, collecting payments can become a challenge. An EBPP solution allows for better electronic communication with patients after the point of service while consolidating all payments activities into a single platform. This not only creates more stickiness between patients and providers but can also help increase patient satisfaction. Conveniences like modern payment channels (Pay by Text, Facebook Messenger, Amazon Alexa, etc.), the ability to save funding methods and enroll in AutoPay, and proactive electronic communication (text messaging, email, etc.) can also increase a provider’s likelihood of receiving payments on time, thereby improving cash flow.

Patients are likely to continue facing higher out-of-pocket medical expenses as healthcare costs increase. In today’s economic climate, there are many factors outside of a provider’s control that impact the overall patient experience. The payments process, however, is one area where healthcare providers can make cost-effective improvements that increase patient engagement and satisfaction.

*This blog was edited for clarity in 2020.

Is Bank Innovation Fact or Just Fiction?

The road to banking innovation is lined with challenges as well as benefits.  At times it is difficult to differentiate fact from fiction. The fact is that growth opportunities for banks will come from innovation in technology and services. This includes adopting a mindset for innovation and investing in improving technology in departments currently utilizing legacy systems.

In some situations, banks claim to market innovation, but this is nothing more than a smoke screen. The reality is that many banks do not want to absorb the high cost to implement innovative technology solutions. This, however, is not a good strategy for growth. Banks will have to develop products and services that meet the evolving needs of their clients in order to be competitive. But dollars spent on technology to “grow the bank” must be offset with the dollars to “maintain the bank”, and disruptive technology comes with a high cost.

Many banks are finding it best to partner with a technology vendor. In recent years, startups have grown from being small and mid-size vendors to large companies working within the global bank ecosystem. The FinTech startup community is agile and continues to make inroads in new markets with their products. The buzz about banks working with startups to offer their customers new products and services in an accelerated timeframe is not a new strategy. For example, the Electronic Bill Presentment and Payment industry gained widespread acceptance among banks when the Internet became mainstream.

This past July, Startupbootcamp FinTech New York Demo Day conducted an intense 13 week program. The recent cohort represented six countries where over a dozen fast tracks were held. Criteria for selection included whether or not the teams had a product that solves a real problem, and if they were the right groups to solve the respective problems. The sponsors consisted of Santander, Deutsche Bank, RoboBank, and MasterCard Worldwide.

In this environment, competition is often tough. The FinTech Accelerator provides bank sponsors the opportunity to work directly with startups. As banks continue to employ the word “innovation” in their marketing efforts, they need to move from strategy to execution. Innovation is not only a marketing tool but also allows banks to revolutionize their current framework, and offer new products and services. It comes at a high cost to both the bank and their clients, but those who are observing from the sidelines and taking a passive role as financial technology evolves are leaving themselves at a disadvantage.

Although there is a cost involved, banks must be innovative in order to remain competitive. Consumers today want solutions that properly leverage technology, provide convenience, and are affordable.  Large banks have the budget to innovate, but what are other banks doing?  Only time will tell how it all plays out, but financial institutions should work to ensure they remain on the frontlines of this race, or they risk being left behind.

Reflections on the Windy City Summit Conference

This past May I delivered a presentation called Cash Flow and Your Payment Strategy to an audience of treasury and cash management professionals on the final day of the Windy City Summit Conference. For the past thirty years, financial service professionals from across the country have been traveling to Chicago for 3 ½ days of sessions on liquidity, asset management, risk and compliance, forecasting, and cash flow management. Many attendees are certified cash managers and this conference provides the courses required to maintain their certification.

Surprisingly, my session on Friday morning at 8:30 am was well attended. Usually by the last day of the conference, attendance is lower than the previous days; however, a number of attendees entered the presentation room ready to learn about implementing a payment strategy to deliver cash flow results. So many thoughts were going through my head the morning of the presentation, and there was one thing I failed to plan for: I left my laptop at the hotel. Without my presentation, I had to make some quick decisions about what to do.

I decided to turn what would have been a presentation into an interactive discussion and get input from the audience about the key opportunities and challenges around cash flow management. I asked questions about their jobs, the cash flow strategies employed, their budget processes and procedures followed to solicit help from their organization around the yearly planning and budget process.

Through this interaction, it was obvious that many organizations conduct their annual planning process in silos, with little input across the functional team. I provided some real examples of how some organizations manage their budget reviews by getting all stakeholders in a “virtual room” to ensure everyone is fully aware of both the dollars budgeted and the strategies being employed to achieve their respective goals. Attendees acknowledged the challenges within their organizations and were open to making changes based on our discussion.

The goal of the presentation was to provide cash and treasury managers the objectives to increase revenues, reduce costs, accelerate product development, improve time to market, and increase business agility. The mechanics used to develop a cash flow module was out of the scope of the presentation. The real focus was on helping the attendees gain an understanding of how to build a comprehensive payment strategy. The numbers are important, but failing to implement a strategy to drive the numbers could result in a massive misalignment and increase the risk of missing the budget the following year.

Automation is one key to improving cash flow. A number of companies have implemented digital solutions to accelerate cash flow and automate payments.  I presented the audience with several examples of companies that have documented the benefits achieved when their customers migrated from check to digital remittance after implementing an electronic bill presentment and payment (EBPP) solution.

Many healthcare companies have implemented a patient portal solution to capture payments at the point of service or accept payments post service via an online portal. Electronic payment services allow healthcare providers to offer patients multiple payment options that can increase the likelihood of them getting paid for their services post care.

There are many examples of how updates in technology infrastructure can help businesses across various industries accelerate cash flow. Despite the cost to implement, improved payment rates and increased operational efficiencies provide businesses with significant returns on investment over time.

Healthcare Revenue Optimization 101

The healthcare ecosystem has evolved considerably in the last six years, since the inception of the Affordable Care Act.  Self-pay revenues and declines in insurance reimbursements for providers have become a lot more prominent in today’s healthcare environment. However, bad debt continues to escalate for healthcare providers as more consumers are now responsible for larger self-pay portions of their medical bills. This situation leaves diminishing profits for the provider and has a direct impact on their viability.

Many physicians focus on building their practice by maintaining patient ratios and providing optimal care for their patients. As the medical industry expands, physicians must also focus on maximizing patient care, delivering care in innovative ways, and shaping the industry’s future.  At the same time, healthcare is a business and physicians must ensure cash flowing into the practice is greater than the expenses to maintain it.

From the practice management side, maintaining cash flow, reducing DSO, decreasing operating costs, reducing bad debt, and building patient relationships are the lifeblood of a practice. Does this mean a physician also has to have an M.B.A. along with their medical degree to be successful? Absolutely not; however, healthcare is and will continue to be a business, making sound financial standing an integral component of a successful practice.

Healthcare providers look to the financial services industry to help them build momentum and stay afloat. For many providers, their banker is part of the business management team. Furthermore, practice management vendors, business consultants, accountants and others all have their own objectives in working with the provider. This could be confusing for healthcare providers because business management 101 probably was not a required course in medical school training.

A key problem with healthcare banking is that banks have many silos that do not work together to provide a comprehensive bank product for providers. For example, the departments or divisions that lend to physicians have little interaction with the treasury side of the bank that can help providers improve their payments through products such as ACH, Patient Receivable Solutions, Lockbox, etc.

In contrast, an integrated approach can help providers improve cash flow through an infusion of capital, and simultaneously reduce expenses through financial products and services. Banks want to be in the space of offering free consulting to the provider so they can purchase their products and services. For example, the Citizens Bank’s Healthcare Solutions web page not only identifies a host of products aimed at the healthcare community but also offers free consulting advice about key points to consider when evaluating a potential financial partner. This consultative approach has much more value and can save the provider from the brink of financial collapse.

It makes more sense for a bank to not only lend money to a provider but also work with them to implement products that will improve operating efficiencies and reduce costs. Improving bad debt through revenue cycle management is an effective approach to help providers maintain good financial health. Automating patient payment collections can also reduce margins and improve cash flow.

Over the next few years, the financial service industry will likely focus on marketing a host of services to physicians to help them improve the business of healthcare.  Payment automation has already been successful in many other industries including utilities, government, education etc. Furthermore, check remittances continue to decrease as consumers migrate to digital channels— this trend is expected to significantly impact the healthcare industry as well.

For now, we will continue to watch an industry that should have embraced digital transformation years ago. Will healthcare providers be able to focus on the business side of their practices while offering optimal patient care? Time will only tell, but I am confident the industry will be affected by technological disruption and business consequences will mount.

Partnerships Between FinTech and Big Banks: The Lessons

The role of the FinTech startup is evolving in the current economic and technological climate. I recall not so long ago, banks would tell a startup company seeking a partnership to “return when you grow up.” Partnering with large global financial institutions was out of scope for startups at one time, but now, they are often invited to take a seat at the table and participate in discussions when banks seek technology solutions. What has changed?

A number of financial organizations are including technology startups in their partnership/vendor strategies. For example, MasterCard Worldwide is evolving from a marketing/branding company to a high-tech organization. The MasterCard StartPath ™ Program demonstrates their commitment to innovation through partnerships with early-stage startups to accelerate the future of eCommerce. The program continues to team the needs of startups with MasterCard to develop new products and solutions.

Citigroup recently launched a program in which a select group of FinTech startups compete to develop a specific product for the prize of becoming a Citigroup vendor. These types of programs targeting startups have become common among large organizations seeking to outsource technology and create product differentiation.

The real issue is the speed to market for product delivery. For several decades, I held various senior product management roles at global organizations. It was obvious that developing new products in-house could take years in some instances. A key challenge, within these organizations, is to win the competition for IT resources, which are shared services. The department with a big budget often wins the battle. But the challenge today is that the payment ecosystem has changed—the industry is faced with complexities around big data, Bitcoin, AliPay, faster payments, Same Day ACH, and so on. This contributes to a high level of disruption not previously seen in the payment industry. Banks cannot wait on the sidelines to see what new payment options will win the battle; they should be active participants for change.

Since identifying talent to bring in-house is no easy task, large organizations now incorporate partnerships with startups in their strategies. In 2016, we will begin to see more programs focusing on luring FinTech startups to the financial organization’s “table”. Competition will increase and venture capital investment will accelerate. Banks will need to understand that this is not a sprint-run but a marathon and continue to be cautious in aligning with partners for the long haul.

Both MasterCard and Citigroup have gained notable momentum around their partnerships with startups. These organizations have a low tolerance for risk and realize the industry is watching to see if these partnerships are successful. But there are already a number of valuable lessons here: more and more opportunities exist for the FinTech startup to make inroads in the financial payment industry through collaboration.

As a business development executive, I continue to partner with banks and FinTech companies as banks outsource technology-based products. Due diligence is an important step of the vendor introduction process. Common questions include: Who are your clients? What is your revenue over for the last three years? Who are the individuals on the management team? However, the questions will change as things continue to evolve.

I recall participating in meeting a few years back with a global bank. My client was a software company with great technology, though still in the startup phase. I felt the discussion was doomed from the start, but during the meeting, one of the senior executives told me the bank now has a strong appetite to work with startups. Although initially shocked, I soon began to expand my bank contact network.

Times are changing! How will the Bank/FinTech partnership continue to evolve? How can stakeholders participate in the change? What are the additional lessons we can learn from Citigroup and MasterCard Worldwide? Join the discussion below.

Banks Seek New Revenue Opportunities in Healthcare

Historically, one of the ways banks have made money is by lending and charging fees to their clients. This model has expanded in recent years as banks have partnered with healthcare clients to insert themselves in the revenue cycle management process. Meanwhile, the healthcare industry is undergoing consolidations as hospitals merge or go bankrupt. Positive cash flow continues to be a problem while services and liquidity are impacted by insurance reimbursement delays. The cost of healthcare is soaring, and for many, borrowing from banks to stay afloat is the only option.

Banks realize the challenges faced by the healthcare industry and in recent years have been offering additional services to provide automation and help providers to maintain a healthy revenue cycle. For example, some banks have formed new initiatives and divisions focusing on healthcare (i.e.: medical lending) and carved out new business units to target providers to improve their revenue cycle management.

However, healthcare is a new space for banks. Many banks are finding it beneficial to partner with payment technology companies with healthcare payment expertise to deliver these specialized services. Through an outsourced model, banks can leverage their technology partner’s high degree of technological skill, speed, and expertise to capture additional revenue. Moreover, a number of large Treasury Management banks are hiring experienced healthcare professionals to increase credibility within the industry and establish a leadership position, but many others are failing to evaluate the market opportunity and remain on the sidelines as a result.

While some banks have built successful business divisions around medical banking and have sizable loans on their books, bad debt is still one of the largest problems plaguing providers.  One reason why bad debt remains high in healthcare is that medical services are often completed before the provider is reimbursed. Furthermore, any amount that remains patient’s responsibility is usually delayed or becomes bad debt if not paid at the time of service.

I recall a conversation with a small two-doctor medical practice that had over $300,000 in outstanding collections, a significant amount for a small practice. While an extreme case, many healthcare providers are in similar situations. However, providers agree that the right patient payment product can help reduce bad debt. Below are some of the benefits of patient payment solution for a provider based on industry data:

  • Reduced costs

  • Lower days sales outstanding and improved cash flow

  • Enhanced customer service and improved customer retention

  • Streamlined financial processes including collection, payment and settlement

Access to an online payment portal gives patients more control over the payments process, allowing them to set up payments based on their own preferences until the debt is paid. This enables healthcare providers to better manage cash flow and collections. Banks also benefit by providing their healthcare clients with tools to improve overall business processes as it results in closer and stronger business relationships over time.

Healthcare will remain a strong focus for banks in 2016:

  • Banks will continue to expand solutions to develop deeper relationships with their healthcare clients.

  • The volume of payments made via digital channels will increase as patients migrate from paper to digital remittances.

  • Healthcare organizations will continue to invest in technology, resulting in greater opportunities to help clients improve cash flow.

  • Patients will have more control over their healthcare management, making it more challenging for providers to build relationships with them.

  • Out-of-pocket patient expenses will increase and providers will have to develop new ways to maintain revenues and decrease bad debt.

  • Vendors will compete with banks and build stronger relationships with their healthcare clients for patient payment portal solutions.

Although 2016 represents a period of growth and transformation for healthcare, it also presents challenges. Providers will have to identify opportunities to improve cash flow and insurance reimbursement management in order to stay liquid. Meanwhile, banks should continue to seek new ways to innovate and offer clients enhanced payments services. Outsourcing payments to an organization that is a strategic fit maintains high standards of quality, and consistently meets industry compliance standards is one route to achieving a long list of mutually-beneficial business objectives.

Where is the Innovation With Remote Banking and Bill Payment?

There was a time when the primary means of paying a bill was stuffing a check in an envelope and going to the mailbox.  We allowed a number of days before the payment due date and immediately adjusted our checkbook to reflect the disbursement.  Although this is still the practice for many, millions have opted out and changed their method of paying bills. The motivation to change behavior is attributed to convenience, saving time and reducing expense.

But remote banking and bill payment have made significant leaps over the years. I recall a time when customer service representatives handed out free floppy disks on the street corners of New York City to anyone who would accept them. Whether they had a computer or not, people grabbed these disks because they were free.  Armed with a computer and a modem, people could connect with their bank remotely to obtain information about their account balances and even pay bills.  Of course, this would be considered the early days and only a few billers were enabled to receive electronic remittances while the vast majority of payments were sent via check and list or separate checks representing a single payment.

I have been an eye-witness to the vast changes that took place in the electronic banking and bill payment space. The involvement of the Internet and higher modem speeds along with banks offering the service for free had a significant impact to adaption.  Banks got involved and provided incentives to their customers to use the product.  Comparing “free” with getting stamps and running to the post office is a no brainer. The volume spiked liked a hockey stick as banks found new ways to create stickiness and build customer retention. After all who really wants to change their bank and start setting up new payees somewhere else?

The expansion of electronic delivery channels for the bank customers resulted in larger profits for the bank. Whether they outsourced to a vendor like most or ran the application in-house, they figured out the economics to make money. However, even with all this effort and technological improvements, there remains an opportunity for banks to better manage the customer experience and expectations.

There was a time that a customer that use a remote banking and bill payment product did not know if the payment was sent via paper or through an electronic channel such as the ACH. That is not the case today. The informed customer knows the delivery channel of their payment. However, despite this, banks send a significant amount of payments via individual checks. Imagine that, I am paying a bill through my computer or mobile device and the provider is sending out the payment via a check. How innovative is that?

In my last blog post, I mentioned the recent NACHA Bill Payment and Exception Item Research that indicated the bill payment exception items costs the industry upwards of $800 million dollars annually. Although there are opportunities to enhance the current process and provide innovation, who is taking the lead? The consumer suffers because the payment is still being sent as a check, without the remittance stub someone at the biller location has to handle this as an exception payment. This is a manual process and can take time before the payment is posted.

I enjoy working on puzzles because they challenge my mind. The remote banking bill payment industry is a big puzzle and all the pieces include the names of the banks and the billers that have enhanced their systems to accept electronic payments.  But the puzzle is not complete because not all the pieces are available. Who really is concerned about the consumer experience? These pieces are missing.

When banks work to resolve the exception payments on their end, this could reduce their operating costs and perhaps free up funds to make additional enhancements to a system that has been absent of innovation. Furthermore, billers can challenge the industry to innovate as well, since their mutual customer is impacted. However, there are opportunities to innovate and the failure to make these improvements causes consumers to become more cynical, and they begin to wonder about the real value they are getting.

We are stakeholders and have to continue to monitor the industry and applaud the organizations that continue to make a difference for the customer.  We continue to hear fascinating news about MCX, Bitcoin, Allipay and the remote banking bill payment Industry exceptions items costs the industry upwards of $800 million dollars a year. Where is the innovation?

How Bill Payment Exception Items Impact Electronic Routed Payments

Home banking bill payment continues to be on the rise, and banks continue to offer it as a free service. The service enables customers to make payments to anyone, from their utility company to their gardener, whether there is an electronic connection or not. In some instances payments are routed through the ACH network or an electronic gateway provider such as MasterCard RPPS. However, in some cases when a customer has identified a payment to be routed electronically, it can be sent as a paper check. Banks continue to work hard, when possible, to ensure the payment is routed efficiently and accurately to an electronic Receiver Bank.

But why do billers in some situations convert to paper remittance, even though they do accept payments electronically? The reason is that when the account mask is inaccurate and the payment fails the edit check, the Bill Payment Service Provider will convert that transaction to paper and route it to the biller’s lockbox. However, in this case, the paper is sent as a single check without a remittance slip to the biller’s lockbox.

According to a recent NACHA study, they assessed that this issue is costing the industry approximately $800 million dollars a year. The cost not only includes the mail expense to route the check, but since this remittance is not accompanied with customer details there is effort expensed to research the customer and ensure the payment is accurately posted. This costs banks since they must hire staff to manage such cases, especially since the customer expectation was that the payment was routed electronically, allowing just a few days to post to their account.

In April 2014, NACHA decided to address this issue and launched The Bill Payment Exception Program. (BPE) The BPE implementation recommendations for bill payment Originators and biller Receivers to automate the bill payment exception process (according to NACHA, bill payment exceptions are defined here as the biller’s inability to properly apply credit to a consumer account due to missing or incorrect information transmitted by the Originator).

With the BPE, both bill payment Originators and Receivers may opt-in to have these exception payments originated and received via a CIE transaction in the ACH using the BPE convention. The data in the BPE addenda record is designed to provide billers with additional information to help with posting. In addition, the process provides an opportunity to automate the exception process through the ACH Network (backed by the NACHA Rules) as these payments would then be received electronically through a single channel.

To provide feedback to the bill payment originators regarding missing or incorrect customer information, the process further calls for billers to then use the Notification of Change (NOC) transaction to provide the bill payment Originator with corrected information to be used in future transactions. Or, the transaction will be returned in the event the biller still cannot post the credit. Either way, the bill payment Originator will receive a response to the CIE/BPE.

This is one approach to address bill payment exception items from an industry perspective. Previously, Originators and Receivers would partner to address exceptions one at time. This was labor intensive and was not consistent. A manual process to alleviate and electronic solution, has limited benefits as well. Will the NACHA solution have a significant impact? Time will tell.

I recall the days that I increased the electronic payment connectivity at One BSP from 28% to 58% resulting in savings of $3 million dollars. With a small team, we manually cleaned up the bill payment warehouse and worked with banks and bill payment gateways to accepts new customer masks accounts. However, in time things change and when not worked regularly payments will continue to drop to paper.

This is a major thrust to move home banking forward and for that to happen it is essential that the Receiver Banks and Originators work together.

Improve Working Capital through Account Receivable Automation

Improving working capital seems to be a primary focus for corporations. Building a process to ensure more cash is coming into the business rather than going out, has a direct impact on the sustainability and success of the organization. A high number of companies fail because they were not mindful of tracking their revenues and expenses. A business can have a solid product or service but if solid financial processes are not in place, the business can evaporate. Automating the Account Receivables processes is one building block to improve cash flow.

In general, the Account Receivable process consists of the following key components:

Document

  • Develop a process to record the sales incurred

  • Ensure a consistent account system will be used to post sales

Produce

  • Generate invoices and build controls to ensure they are sent on a regular basis

  • Build controls and procedures to ensure invoices are consistently produced

Monitor

  • Make sure someone is monitoring open invoices since this has a direct impact on cash flow

  • Expand customer collection channels in order to meet their payment preferences

Automate

  • Process the cash received and apply to the open receivables

  • Reconcile the cash received to ensure the receivables are accurately stated

Most business must follow these steps to determine if they are winning or losing the battle of maintaining positive cash flow. The steps outlined above are key, however, it is important to remember that any financial process has many moving parts. Whether the company is a large multi-state utility or a county electric coop with only a few hundred consumers, these steps must be followed in building an Account Receivable process.

Currently, most financial professionals continue to identify a number of pain points in processing Account Receivables. The top pain points are indicated below:

  • Inefficient paper posting process

  • Re-keying of data in various places

  • Manual processes create inefficiencies and posting errors

  • Pressure to lower costs

  • Challenges faced to improve internal controls

  • Challenges in automating the ERP process for multiple receivable channels

  • No remittance information received with the payment

  • Late payments and unauthorized discounts

  • Customer demand for additional payment channels resulting in dissatisfaction and attrition

In view of this, there are opportunities to build a process to improve working capital. An effective process will include the following three steps:

Evaluate

  • Build processes to optimize working capital

  • Quantify the optimization

  • Realize that any adjustment will take time, so be patient

  • Run comparisons against companies in your peer group

Go Digital

  • Eliminate process and expand digital channels

  • Leverage core ERP functionality

  • Examine the process of posting the cash

Expand

  • Investigate other areas for “electronification”

  • Build Electronic Presentment and Payment processes

  • Work with partners and vendors to expand automation

  • Track and monitor the results

Although the points above focus on addressing the gaps with the Accounts Receivable process, it is just one side of improving cash flow. Before improving any process, an organization must evaluate their current environment. Once changes are implemented they can determine whether the change led to success or had no impact.

The current process can include building a baseline of the current environment. Here are a few points to consider:

  • What is the current Days Sales Outstanding (DSO)?

  • How does this compare to the organizations in my peer group?

  • What is the current Cash Conversion Cycle (CCC)?

Quantifying these ratios and comparing the numbers once changes are implemented is key to improving the cash flow cycle. A reduction in the Days Sales Outstanding will open up additional cash that can now be infused into the business to support growth strategies, fund capital expenditures, fund expansion and strengthen the balance sheet. In addition, when an organization has an improved cash perspective, there are a number of initiatives that can be accomplished.

There are a number of ways a company can initiate a process to improve cash flow. For example, EBPP is one way to accomplish it. Companies that have employed an EBPP solution have improved margins and increased customer collection rates resulting in creating a positive cash flow. Automating the online bill payment and presentment can accelerate the posting of customer payments, accelerate DSO and reduce the posting of errors.

However, improving the Account Receivable posting is only one side of the equation. Consumer’s preference is causing more and more companies to evaluate their process and begin to explore processes to capture additional digital payments.