ABA Banking Journal 5/08 - (Page 42) PAYMENTS “Addressing the handling of remittance data has been the big hitch” — Aaron McPherson, Financial Insights Paper still rules Still, these payments-related developments are more like blades of grass surfacing through occasional cracks in the sidewalk than a lush lawn. With ample reengineering and a top-down push from chief financial officers and other C-suite occupants, the 70% figure quoted earlier may dip by 10% in 2010. “Sixty percent is still a lot of paper checks,” says Esther Pigg, vice-president global product management, Checkfree, Atlanta. Pigg, who sees cautious interest in moving off paper, says she worked for nearly a year researching the corporate treasury and cash management areas for additional e-payment opportunities. However this complicated service area progresses, banks should begin to rethink their payment strategies and equipment, because how they respond to transitioning payment requirements could dictate their long-term relationships with corporate customers, says Aaron McPherson, research director, payments, Financial Insights, Framingham, Mass. “Payments are sticky,” McPherson says, offering a simple but powerful verity. Remittance challenge In an era where, on the retail side and in places like Japan anyway, mobile payments are having an “it” moment, it seems strange that something as “slow boat” going as paper checks and invoices should have survived. “Addressing the handling of remittance data has been the big hitch,” says Financial Insight’s Aaron McPherson. The analyst spoke briefly with ABA BJ 42 MAY 2008/ABA BANKING JOURNAL about the reemerging subject of electronification. McPherson was in the midst of a related research project and couldn’t share much of his early findings yet, but he did say that it was an extremely important year for banks’ cash management and treasury areas. “This is the start of a transition,” he says. To computerize payments without a lot of manual data reentry, payers need easy ways to automate remittance data generation, so that the suppliers they are paying can see (and populate accounting programs with) product or service terms—a function that seems as if it ought to be simple but often isn’t, given the variety of discounting or partial pays that routinely go on. Von Hollen points out that EDI’s simplification—a format called EDI 820— has been floated in the industry since 2005 or so and offers a broader cluster of businesses some of the tools needed for a more electronic workflow. (The logic is, for big-ticket items anyway, that EDI 820 can expand greater use of e-invoicing, one step required for seamless e-payment, according to experts.) “Leading banks, banks that are consolidating payments engines and making it easier for their business customers to make payments based on least-cost routing or other rational criteria, will get and keep the business,” McPherson adds. “Basically corporate customers want banks to compensate for what they lack,” says David Luther, vice-president of solutions development in the global financial services practice at Unisys, Blue Bell, Pa. Cynthia Von Hollen agrees. “In b2b the banks are the ‘two’,” she says. “They are being asked to be a better pipeline. Firms banks to figure out how to make the payments given costs and deadlines.” Legacy always an issue In the long run, technology on either end of the workflow will have to get better organized. The banking environment isn’t very streamlined, and has yielded multiple, specialized payment types and engines (e.g., ACH, check conversion, credit) that all coexist—almost as if payments were an amoeba continually subdividing. And corporate IT processing environment has ample silos and fragmented processes of its own, notes David Luther. While to the outsider it should seem as if the invoicing and payment functions should be tightly coupled within the back office, in the real world they often aren’t, says Luther, who declared an all-electronic b2b, “not yet ready for prime-time.” He reminds readers that the procurement departments that issue invoices tend to operate far (and in an unconnected way) from accounts payable and receivable departments. Moreover, the data only, gets married in accounting systems that sit elsewhere—often imperfectly. It’s this sort of distributed environment that needs to be transitioned away from without anything breaking. Meanwhile, fraud management based on positive pay, exceptions processing based on manual efforts, and applying discounts in invoicing and payments based on matching—not to mention playing with float—all put a drag on change .BJ Subscribe at www.ababj.com http://www.checkfreecorp.com http://www.financial-insights.com http://www.financial-insights.com http://www.unisys.com http://www.ababj.com
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