Despite growing adoption of electronic billpay by consumers, most businesses still pay the old-fashioned way: paper - and it's likely to stay that way for some time. But what makes B2B checks so unwieldy isn't just the paper, it's that each payment can come with several pages of instructions; these instructions lead to errors, exceptions and delays posting checks - and when companies are looking to save costs and boost liquidity, such inefficiencies and delays are not easily dismissed.

As a result, there's growing demand for advanced wholesale lockbox solutions that can read these lengthy payment instructions and translate them into an electronic format, says Bob Meara, a senior analyst at Celent. Historically, only the largest banks in the remittance processing game were interested in these solutions, but that's changing. Now some companies are looking to lower costs and achieve faster check posting, and some smaller banks are looking to move up market by offering wholesale lockbox solutions to their clients.

"It's been a sleepy industry for a while," says Meara. "Then Check 21 came along and banks needed to revisit and upgrade their feature functionality. Wholesale lockbox will be a staple offering for at least another decade. It's not sexy, but it's a pretty important offering in the scheme of wholesale banking." He says the two big players in the wholesale lockbox space are Metavante, which acquired Vicor in 2006, and Wausau, which acquired DMP Payment Systems from First National of Nebraska in 2006.

To tap into this widening pool of potential customers, Metavante recently launched a hosted version of its wholesale lockbox solution to target companies and middle-market banks. Called RemitPoint, it's the more affordable outsourced version of Metavante's flagship RemitEnterprise product.

Bob Murphy, the general manager of the remittance business unit within the image solutions group at Metavante, says about 300 banks in the U.S. offer some form of remittance processing. The top 10, with transactions north of 200,000 per month, are clearly candidates for RemitEnterprise. Those in the 10 to 50 range could, depending on their business models, choose either Remit Enterprise or RemitPoint. Banks beyond the top 50 would be better served by RemitPoint. Lake City Bank in Indiana is the first announced user of the hosted solution, though seven more banks have signed up and others will come on line soon, Metavante says.

Metavante has continually worked to improve RemitEnterprise's ability to lift data from check images and, particularly, the accompanying documents. Murphy explains that a Cisco reseller might send one check with instructions to divvy it up between several purchase orders, or perhaps make partial payments. The more information that Metavante's technology can lift without human intervention, the less chance for a keystroke error and the faster Cisco will get paid. Metavante's current clients for RemitEnterprise include Bank of America, Wells Fargo and PNC. Recently Marshall & Ilsley Bank also signed up for RemitEnterise. (M&I spun off Metavante in 2007.)

Jeff Oleske, svp, M&I treasury management, says that through a series of acquisitions, M&I inherited multiple lockbox solutions running in multiple locations; those needed consolidation for efficiency's sake and to position the bank for growth. RemitEnterprise will support M&I Bank's expanding processing needs across its multi-site footprint, allowing the bank to capture payments in a variety of formats with minimal key entry.

Another business opportunity that Metavante and M&I both recognize is healthcare payments. Healthcare payments "are several layers more complicated than standard B2B payments," Murphy says. He estimates that nine out of 10 institutions interested in RemitEnterprise or RemitPoint ask about healthcare payment processing.

Healthcare processing could help propel growth over the next year or two, Murphy says, though recent overall growth has been relatively healthy. Last year, Metavante processed 380,000 B2B transactions worth $1.7 trillion, eight percent more than the year before. He expects similar growth this year. By comparison, an Ernst & Young cash management survey put industry-wide growth at six percent last year, Murphy says.

But Meara warns that even if Metavante does a good job reaching mid-level banks with its hosted solution, growth will depend on the individual banks' ability to sell the service. "Their clients have to be willing and able to evolve, and some are having a hard time getting off the paper habit. Many of these AR departments are not state of the art."

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