Even after the Check Clearing for the 21st Century Act takes effect in October, the vast majority of lockbox payments will continue to start with a paper check and remittance information.
Lockbox operators would be wise to heed the legislation and the new electronic mechanisms it empowers as yet another giant step away from older processing procedures that use separate systems for different payment types. A new breed of lockbox processing platform is becoming more critical, in part because of better technology.
Modern lockbox processing systems incorporate image technology and virtual private networks, which produce operational savings and competitive advantages for both the bank and the corporate client.
Next-generation information capture, collaboration, and data distribution tools eliminate exceptions and speed resolution. The ability to scan checks and other documents — in color — can improve customer service and present new sources of fee income. Other enhancements can be added, such as connections from the lockbox system to demand deposit accounts, the automated clearing house, electronic data interchange, and wire transfer systems.
Advanced lockbox systems with fully integrated processing capabilities can give wholesale customers more reporting horsepower, including increased functionality and faster access to payment information. Better still, the new systems are more affordable than traditional standalone systems.
This tight integration of lockbox functions and tools is helping redefine how lockbox processing fits into the enterprise. For instance, no longer is wholesale lockbox thought of only as a back-office function. The ability of lockbox providers to deliver intraday information (data and images of checks and supplement documents) via the Internet is increasingly vital to corporations in making daily business decisions that affect just-in-time delivery, inventory turns, day sales outstanding, and use of credit lines and trade credit.
Marrying these sophisticated lockbox tools with emerging electronic payment and clearing mechanisms — on a single, adaptive receivables management platform — creates efficiencies all the way through the transaction cycle, from the lockbox that processes it to the corporate client for which it is posted. Most important of all, corporate clients won’t be forced to piece together reports for multiple payment mechanisms, from multiple sources, in order to analyze it. The consolidation can happen directly in the inner workings of the lockbox processing system.
Unifying all of that functionality within a single platform will become increasingly important in the emerging Check 21 environment. First of all, there still will be large volumes of checks — particularly business-to-business checks — for the foreseeable future, along with steadily growing volumes of electronic payment mechanisms, notably ACH.
Second, corporate receivables systems are not changing as a result of Check 21, and clients’ rising demands for timelier and more complete payment data surely won’t subside. This means lockbox providers must provide the most complete remittance data possible, regardless of the lockbox or payment type, or whether the transaction is paper or electronic based.
Third, lockbox systems now must have the flexibility and intelligence to provide feeds not only to an enterprise archive solution, but also to an image exchange network, image replacement document mechanism, or check truncation system, depending on user-defined rules. Finally, Check 21 will place even greater importance on ensuring image quality and usability.
With the emergence of Check 21 and electronic check clearing mechanisms, organizations no longer can afford to use different systems to manage all of the necessary paper and electronic functionalities that will be required for an efficient lockbox and receivables infrastructure. Companies that have already implemented a fully integrated image and virtual private network-based lockbox-processing platform will gain an immediate competitive edge in the Check 21 environment.
