Profit Now From Both Sides of the Payments Business Equation

Today, Apr 2004 by Brown, Royce

Check 21 is a watershed event that is already facilitating great change. By creating an opportunity for some banks to begin using images before all banks are ready, Check21 is fundamentally changing the way banks process transactions, and more importantly, how banks make money. Although the impact will be felt on both the operations and the revenue side of payments, the revenue race starts now. Banks that enter the race early and learn how to provide the unfolding benefits of the paper/IRD/Image transition will capture the market. As that transition progresses, the opportunity to drastically reduce operations expenses will also unfold. To date, the cost basis for infrastructure and processing transactions has been tied to the deposit source of the physical check. Check21 and the move toward eventual image exchange (IE), changes the business equation.

The requirement to be close to your deposit base, and the associated costs, is reduced with IRDs and eliminated with IE. As more institutions adopt image strategies and a greater percentage of items become eligible for IRD and IE clearing, your customers will need technology that can change incrementally with that shift. That technology is available now and is creating immediate new revenue streams while cost savings begin to materialize.

Following are five important payment strategies that profit from both sides of the payments business equation with new revenue generation and operational savings:

Offer New Products and Services:

Select a distributed capture system that offers cash management products and services that: 1) extend geographical reach, 2) send and receive images to all image networks, 3) integrate with account receivable systems, 4) provide a real competitive advantage and immediate ROI. Realize near and future revenue from cash management efforts that adjust how existing products are delivered, and identify new product offerings.

Redefine Branch Banking:

Extend processing windows and provide greater funds availability to reduce float, improve your balance sheet and enhance revenues. Provide localized service without having a physical presence by clearing and settling transactions over a broad electronic network. Consolidate regional or national deposits to a single account to reduce operational processing costs.

Improve Margins/Lower Unit Cost:

Eliminate multiple platforms and organizational structures, with systems that allow you to truncate 100% of your items at the earliest point of capture over one integrated platform. Eliminate night teller, deposit, drop, inbound transit, proof encoders, 3890 capture, cash letter prep and clearing fees.

Get IRD Enabled:

Deploy an IRD initiative with a rapid ROI and continued savings annuity over years to come. Get more than an interim step between paper checks and images, and reap immediate savings now with IRDs. Reduce check transit and clearing costs, speed check processing, minimize fraud and handling costs with items captured once, on the first pass.

Optimize Clearing:

Select technology that provides choice and flexibility to determine the most optimum channel (IE, IRD or ACH) at the item level. Take immediate advantage of all electronic check clearing channels and manage both cost and risk now, as you migrate toward complete electronic processing.

Organizations that aim to move market share need to plan for both near and long-term gain. 2004 is a pivotal year to lose or gain revenue streams. By 2005 the frontrunners will be established and winning that race for some, beyond reach. For those who get out in front, 2006 will see continued cost savings on the operations side, and achieve even more market inroads with new technologies. Finding ways to generate new revenue opportunities by offering new products and services starts today, if you want to be a front-runner tomorrow.

By Royce Brown, President, Net Deposit, Inc.

Royce Brown is COO and President of NetDeposit, Inc. (www.net-deposit.com). he can be reached at 801-273-6067 or info@netdeposit.com.