Emerging trends & technologies in remittance and payment processing: Following the fads, exploring the realities

Today, Jun 2000 by Pinkham, Rick

Web-based remittance processing is enabling banks, lockbox companies and their customers to reduce (and in some cases eliminate) paper processing. In addition to saving time and labor, these systems can also reduce fraud.

In today's highly competitive business environment, companies are seeking ways to improve mission-critical processes, gain greater efficiency and deliver superior customer service. For leading payment-processing vendors, new tools and technologies offer their customers a way to gain a better hold on the endless stream of paper-based payments and reach their objectives.

The remittance processing industry is undergoing a revolution as vendors and customers look for ways to take advantage of Internet technology, distributed work environments and more sophisticated enterprise applications. Understanding these trends, and recognizing the opportunities and pitfalls is a critical first step toward optimizing a remittance processing strategy.

Remittance Processing Gets Caught Up in the Web

In the age of "gotta-have-it-now," Web-enabled remittance solutions are quickly becoming the system of choice for leading banks, lockbox companies and other organizations that have to handle mountains of paper-based payments.

Web-based remittance processing takes an outward-reach approach to obtaining payment data by allowing end-customers to pay their bills online. Instead of sending out paper bills and remittances, customers are provided with a Web site that takes variable data, including payment date, remittance and amount of payment. This data is added to the customer profile and is used to create virtual form data, which can be integrated with a digital signature if needed.

Web-based remittance processing handles the payment itself by leveraging payment technologies like automated check handling, electronic remittance delivery and the standards for electronic payments set by the Society for Worldwide Interbank Financial Telecommunications.

Drastically reducing the amount of paper coming into an organization, Web-enabled remittance processing can deliver significant savings in time and labor for the customer. Because the patrons input their own dynamic data, companies can eliminate keyfrom-paper time and resources. And, because payments are rendered in "real-time," deposits earn interest immediately.

Surprisingly, even in the anonymity of cyberspace, Web-enabled remittance processing helps companies reduce exposure to payment fraud or impersonation through security features like password protection and online validation by third parties for signature verification. Also, since end customers are directly responsible for the accuracy of transactions, there are usually fewer mistakes.

For customers, Web-enabled remittance payments are quick and simple; the account number usually series as the link to each individual's profile. The only information needed to complete the transaction is the date, the item and amount of payment. The remittance is conveniently provided via Electronic Bill Presentation & Payment or by e-mail.

Like most emerging technologies, however, Web-enabled remittance processing has some challenges. Since most Web-enabled remittance processing solutions use a very different technology base (Java, XML, a database loaded into memory) from current document management and image-enabled remittance processing systems, integration with existing document management and remittance payment systems can be timeconsuming and complex.

The Check is in the...E-Mail

Electronic checks are imaged versions of paper checks or electronic checks produced without origination from paper checks, and may include digital signatures for authentication.

Created by customers using specialized financial management software, the checks can be sent as image files, eliminating the need for the imaging function. To protect the integrity and security of the data on the check throughout transmission, electronic check data is encoded using Financial Services Markup Language/Extensive Markup Language.

The electronic check serves one purpose incredibly well-the reduction of check fraud through document, patron and signature verification. In addition, there are the obvious benefits that electronic checks present, such as reduced paper handling and storage costs, elimination of the bundling and depositing of paper items and the reduced collection time for payments rendered. Verification against valid check signers and against patrons' checking account balances is also vastly improved.

Using electronic checks, companies can increase the amount and detail of data that is captured and used on patrons' accounts by the addition of data fields associated with the check, such as a cash letter identification number.

Helping to drive the charge to electronic checks is the Small Value Payments Company consortium, comprised of more than 20 of the top U.S. banks with the shared goal of rolling out electronic check processing capability to all banks nationwide.

Despite its relatively recent appearance to the remittance and payment processing landscape, electronic check payment processing has already won over a heavy-hitting customer-the federal government. The Federal Reserve Bank currently uses electronic checks to render payment to Department of Defense vendors.