Kim Folks, Tampa Electric Amanda Johnson, Utility Payment Conference

Utility Payment Conference

October 19, 2010

Payment Organizations and Associations

Payment Regulations

Payment Tenders, Terms and Acronyms

Miscellaneous Payment Information

Federal Reserve

NACHA

• Central Bank system• Created in 1913• Private bank system:

Board of Governors appointed by the President

Federal Open Market Committee

12 regional BanksMember banksAdvisory councils

• Not-for-profit association • Represents more than 11,000 financial institutions through

direct memberships Network of regional payments associations, and 650

organizations through its industry councils• Develops operating rules and business practices for:

ACH - Automated Clearing House Network EBPP - Electronic Bill Presentment and Payments EIPP - Electronic Bill and Invoice Presentment and

Payment EDI - Electronic Data Interchange PaymentsEBS - Electronic Benefits Services

NACHA-The Electronic Payments Association(formerly known as the National Automated Clearing House)

Red Red FlagFlagRegulation E

• Issued by the Board of Governors of the Federal Reserve System

• Implemented in 1978• Governs electronic fund transfers from a consumer’s

account• Protects consumers’ rights and sets limits on consumer

liability for unauthorized payments• Imposes specific obligations to billers for recurring

payments

Indicators

1.Alerts, notifications or warnings from consumer reporting agent

2.Suspicious documents

3.Unusual use of or suspicious activity related to a covered account

4.Suspicious personal identifying information

A pattern, practice, or specific activity that indicates the possible existence of identify theft

Your program must be reasonable

For additional information go to: www.ftc.gov/redflagsrule

2. DETECT

Red flags that have been incorporated into the program

3. RESPOND

Appropriately to any RED FLAG(s) detected

4. UPDATE Program periodically to capture lessons learned and changes in risks

1. IDENTIFY

Relevant patterns, practices and specific forms of identifying possible red flags

• The ACH network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system

• Governed by the NACHA operating rules

• Provides for the inter-bank clearing of electronic payments for participating depository financial institutions

• The ACH network can be used to send either debits (payments) or credits (refunds) • A credit sends funds to a Receiver’s account• A debit takes funds from a Receiver’s account

Originator: Company /individual initiating an ACH transaction according to Receiver agreement

Originating Depository Financial Institution (ODFI): Financial institution transmitting ACH files for the Originator into the ACH Network

ACH Operator: Central clearing facility operated by a private organization or Federal Reserve Bank for participating financial institutions, to or from which financial institutions transmit or receive ACH entries.

Receiver: A person or organization that has authorized the Originator to initiate an ACH entry (debit or credit) to the Receiver's account with the RDFI.

Receiving Depository Financial Institution (RDFI): Financial institution that receives ACH entries from the ACH Operator and posts the entries to the accounts of the depositors (Receivers).

Third-Party Processors: Processors that participate between any relationship within the ACH processing flow (i.e., correspondents, sending-point processors or payroll processors).

Each type/method of payment in the ACH “world” has its own rules and guidelines.

These are determined by the SEC (Standard Entry Code) used in the payment file.

Commonly used SEC codes

POS

SHR

CIE

CTX TRC

TRX

ENRCBR

PBR

DNE MTE

MTE

DNE

XCK

COR

ATXACKTEL

WEBRCK

BOC

AAAAAHHHHHHH ! ! ! !

ARC

PPD

CCD

ARC – Accounts Receivable Conversion (mail)

BOC – Back Office Conversion

POP – Includes check serial number

TEL – Phone

WEB – Internet

PPD – Pre-authorized Payment and Deposit (auto draft)

RCK – Return Check

RDFI – Receiving Depository Financial Institution

ODFI – Originating Depository Financial Institution

ARC – Mail-in payments Ck21 – Mail in payments POP – Walk-up Retail Locations TEL – IVR (Credit card/Check) Payments WEB – E-Lock box (Consolidators) PPD and CCD – EFT – Auto Pay CTX – EDI 820’s

Accounts Receivable ConversionThrough electronic Accounts Receivable Check (ARC) Conversion; lock box or drop box received eligible consumer checks can be converted into electronic debits and processed through the ACH network.

Checks drawn on consumer accounts payable in U.S. dollars are eligible for ARC conversion.

Checks are machine read to capture the Magnetic Ink Character Recognition (MICR) information routing number, account number and check serial number along the bottom of the check.

The data elements, along with the check amount, are used to create an ACH record. Typically, the billers bank account is credited the next business day.

http://www.federalreserve.gov/pubs/checkconv/#what

Back Office Conversion

•Eligible checks converted to ACH debits •Controlled environment in the back-office •Authorized signature for conversion not required•Scanning equipment installation not required  •Customer notification of conversion disclosed at the register and on documents •Checks that contain auxiliary on-us fields or those over $25,000 are ineligible for BOC

http://www.federalreserve.gov/pubs/checkconv/#what

Point of Purchase

Location where payment takes place Purchaser and seller are both present Information from the consumer's check is used to create the electronic transaction

Internet Payments

One-time or recurring

Should include Terms & Conditions

Privacy statement

Appropriate authorization language

Receipts / confirmations delivered electronically upon completion of payment

Internal Voice Response Payments

Can be either PPD or TEL EntryRequires written authorization if treated as PPDOne-time or recurring for PPDIf no written authorization on file then can complete only per TEL rules.

This requires written receipt or tape recording (actual oral authorization)

TEL = one-time paymentSetting up PPD Payments via IVR is complex, normally IVR should be a TEL entry

ACH Authorized Check21 Contracted CTX EBPP Electronic

Check Conversion

IRD EDI Internet

payments IVR M-payments

MICR NOC Non-contracted P2P Unauthorized E-Lockbox EBIDS

Corporate Trade ExchangeThe CTX payment format combines payment information and a variable length record (called an addendum record) ACH format which allows for up to 9,999 addenda records with approximately 800,000 charactersAllows multiple payments to creditors or billers in a single transfer of funds

The legal equivalent of the

original check

Image Replacement Document

Electronic Data Interchange

A set of standards for structuring information electronicallyTechnical conversation between two entities, either internal or externalInformation is the same displayed on paper documents Transmission method is agreed to by the sender and recipient

Notice of Change

Information sent by an RDFI to notify the ODFI that previously valid information for a receiver has become outdated or that information contained in a pre-notification is erroneous

Pre-authorized Payment & Deposit

Used to credit or debit a consumer account. (Payroll direct deposits and preauthorized bill payments)

Return Check

A physical check that was presented but returned because of insufficient funds may be represented as an ACH entry

Electronic Bill Presentment and Payment

Is the process that enables bills to be created, delivered and paid over the Internet.The service has applications for many industries, from financial service providers to telecommunications and utilities.

• Fast• Secure• Environmentally responsible

☎ Mobile payment (M-payment) is a point-of-sale (POS) payment made through a mobile device; cell phone, Smart phone or personal digital assistant (PDA)

☎ Person to person (P2P) can be a wireless or text enabled device which can be used to pay a variety of bills at anytime without interacting with anyone including: Ability to transfer monies with a mobile phone from

person-to-person (P2P)

☞ Account number and personal identification number (PIN) for authorization purposes required

A process in which your check is used as a source of information for the check number, your account number, and the number that identifies your financial institution.

Transaction types include:ARC – Accounts Receivable ConversionBOC – Back Office ConversionPOP – Point of Purchase

Benefits•Privacy•Secure and Protected•Information of descriptive statement •Environmentalhttp://www.federalreserve.gov/pubs/checkconv/#what

• Passed in Oct 2004

• Produces a digital image by scanning both sides of a paper check

• If a paper document is needed, a photo-reduced copy of the original checks is created (“substitute check” or IRD (Image Replacement Document)

• Check21 is represented by: IRD – Image Replacement Document POP – Point of Purchase

http://www.federalreserve.gov/pubs/checkconv/#what

In person payment

•Authorized or unauthorized •Utility office location or 3rd party vendor relationship•Receipt issued for payment transaction•Data terminal equipment

Kiosk – customer initiatedTerminal – store or cashier initiated

•Potential 'real-time' payment posting

• An official contract/agreement with a 3rd party payment vendor

• The vendor authorize business or retailer to accept payments for the utility

• Cash, Check and Money Order tenders accepted

• Advertised by utility

• No official contract or agreement with 3rd party payment vendor

• A business or retailer who accepts biller/utility payments without contract

• Typically only accepts cash as tender

• Usually 2 - 5 (business) day delay of payment to biller

• Consumer funded convenience fee of $1 - $5

•Are you currently looking to issue an RFP or RFI?•Are you currently contracted with a vendor that you are unhappy with?•Is your contracted vendor providing exemplary service?•Do you believe it would be more effort to sever relations with your existing vendor and to bring in another vendor?

Credit / Debit Card

eCheck

Cash

Check

Recurring

Scheduled

One-Time

Web

Touchtone Phone

Assisted Phone

Mail In

In Person

Channels

Customer

ACH

Methods

Frequency

Kim FolksTampa Electric Company813-275-3845 kbfolks@tecoenergy.com

Amanda JohnsonUtility Payment Conference309-762-2854 Office (CST)ajohnson@paymentconference.com

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