Getting businesses to adopt electronic payments has been frustrating for banks, which still face high use of paper checks and exceptions.
U.S. Bancorp hopes that by acknowledging the critical mass of lingering paper checks and upgrading the surrounding processes, it can bring efficiency to an otherwise old-school process.
The Minneapolis-based bank has developed a new wholesale lockbox service that enables businesses and government agencies to collect paper-based consumer and commercial payments and to enable Web access and automation to execute tangential activities, such as settling disputes and data disparities. The bank also is standardizing the platform across a national network of lockbox sites.
"A lot of times when people talk about automating business payments, they talk about getting businesses to pay electronically," says Ann Smith, U.S. Bank head of global treasury product management.
U.S. Bank and other large corporate payments processors such as JPMorgan Chase & Co. and Citigroup have been incrementally automating corporate-payment processing and treasury management for the past few years. But industrywide progress has been gradual–Smith says about 70% of business-to-business payments, for example, are still made by paper check.
For U.S. Bank, it made sense to recognize the lingering dominance of paper check use in business payments and to attack the related inefficiencies, in effect taking downstream paper out of paper payments. "Our system takes an accepted payment instrument and electronifies the data around that so you can look at images of it, access the data that comes out of the payment and automatically stream that data into a corporate's accounts receivable system," she says. "It bridges the 'paper-to-electronic' migration by taking actual paper and turning it into an electronic stream."
The new service uses U.S. Bank's internally developed imaging technology and RemitEnterprise from Fidelity Information Systems, or FIS. The lockbox technology will be implemented at eight U.S. Bank lockbox sites around the country over the next few months.
The new technology includes Web-decisioning, which enables customers to view images of an exception item and decide whether to reject or process it.
"Before we had to send that payment to customer via mail," Smith says. "Now it happens on the same day, and other payments [from the same payer] are not affected by [an individual exception]. This single payment is delayed for hours instead of days."
Other new additions include split deposits, which allow users to have one lockbox, but distribute individual payments into separate accounts; and accounts receivable matching, which automatically reconciles payments against outstanding invoices and further automates the cash collection cycle.
"We match that data from the invoice with the data in the payment," Smith says, adding the product is designed to advance straight-through processing. "We're able to find items that don't match a client's criteria, beyond the normal 'always accept' type items."
Lockbox services have become a popular lure for banks to get business clients to jump start moribund adoption of online payments or deposits. Fifth Third Bancorp, for example, has introduced an application that directly links a multichannel remote deposit capture function with other automated services, such as Web access to a lockbox.
