Payment Trends, Preferences & What Works for Credit ...€¦ · – Marketing to customers to pay...

© 2017 NACHA — The Electronic Payments Association. All rights reserved.

No part of this material may be used without the prior written permission of NACHA. This material is not

intended to provide any warranties or legal advice and is intended for educational purposes only.

Payment Trends, Preferences &

What Works for Credit-Receivables

Professionals

Matt Skudera, Vice President, Credit Research Foundation

([email protected])

Robert Unger, Senior Director, NACHA

([email protected])




2

• Credit Research Foundation– The Credit Research Foundation is an independent non-profit,

consisting of a dynamic community of like-minded senior/executive business professionals with a vested interest in maintaining a competitive advantage in the disciplines and processes related to credit and accounts receivable management. Membership contains a cross section of industry segments and representation from companies within the Fortune 1500.

• NACHA-The Electronic Payments Association– As a not-for-profit association, NACHA also represents nearly

10,000 financial institutions via 11 Regional Payments Associations and Direct Membership. Through the Payments Innovation Alliance, accreditation programs, conferences and educational offerings, NACHA unites payments systems stakeholders, fostering dialogue and strengthening the ACH Network together.

About




3

• The Credit Research Foundation (CRF) surveyed its

membership on payment-to-cash trends, and related

opportunities and issues to:

– Define leading practices

– Share results from like-minded professionals

• CRF collaborated with NACHA-The Electronic Payments

Association on the survey design and analysis.

• CRF invited their membership to participate in the online

survey, and 130 responded.

CRF-NACHA Survey on CRF Member Payment

Benchmarks




4

1. Overview2. Automation and Robotics

– The branch of computer science that deals with the design, construction, operation, and application of “bots”, as well as computer systems for their control, sensory feedback, and information processing. In this case the payment and application process.

3. Scalability– The capability of a system, network, or process to handle a growing amount of work, or its

potential to be enlarged to accommodate that growth.

4. Efficiency and Cost Containment– A form of analysis that compares the relative costs and outcomes (effects) of different

courses of action and compartmentalizes cost within a an agreed upon amount.

5. Customer Service– The provision of service to customers before, during and after the consumption of a good or

service.

6. Risk and Fraud Controls– The controls placed in a business to detect and prohibit the deliberate deception to secure

unfair or unlawful gain, or to deprive a business of its legal right(s).

7. Obstacles and Answers– Highlights of the obstacles associated with electronic payments and opportunities to

overcome them.

Agenda

Definitions: Wikipedia and CRFipedia




5

0%

10%

20%

30%

40%

50%

60%

70%

Check ACH credit ACH debit Credit card Debit card Wire Cash

Payment Mix Check, ACH Credit, ACH Debit, Credit Card, Debit Card, Wire, Cash

2014 2017 2020

Payments Mix: 2014 – 2017 - 2020




6

Reasons for Shift in

Payment Type Volume 2014-2017

Cost13%

Tech Improvement

28%

Internal Push29%

Card/Bank Push7%

Customer Push23%

Causes for Shift in Payment Mix




7

• Internal Push– Marketing to customers to pay online or by ACH. Calling.

– Worked with sales to force all customers to pay via wire/ACH.

– We moved more of our customers to ACH intentionally.

– Educating customers about wire and ACH transactions.

– We contacted our customers directly and requested they move.

– we requested ACH payment in our contracts

– Our standard process for new customers is ACH

– CS & Sales being able to provide a discount for early electronic payment & pushing for electronic payment

• Tech Improvement– We just began using a payment portal to allow our customers to pay via ACH online.

– Security, ease of transmission, cost savings

– Ease of paying online

– Changes within ERP systems, improvements

– Automation

– Ease of process

– faster processing, less paper

– invested in web portal

Sample Verbatims on Reasons Payment Volume

Mix Shifted 2014-2017




8

• Customer Push– As more of our larger customers go paperless, they find the simplicity of …ACH for payment

more expedient, and the ideal tool for cutting costs, regarding checks, interest expense, etc.

– Customer reducing costs moving to E-payments

– More customers are paying via ACH

– Customers want to pay via ACH

– AP dept are finally understanding the cost savings of ACH vs check and they are coming to us to convert to ACH vs us asking them.

– more people opting to use credit cards- rebates and incentives and cash flow

– More customers want to use credit cards for points.

– Customers are increasing credit card payments and ACH , which gives them better control of funds. Less past due and able to take advantage of any early pay discounts.

• Cost– Cash maximization initiative

– 1. working capital management. 2. shrinking headcount demands automation of payments as well as cash application.

– Reduced cost of processing an ACH vs Check

– Customer cash flow

– Taking advantage of cash discounts, reducing check processing costs


Mix Shifted 2014-2017 (continued)




9

• Card/Bank Push

– we experienced an increase in credit card transactions, pushed by card issuing financial institutions

– Customers are pushing for credit card payments

– Credit Card Companies pushing reward programs

– Banks marketing of credit card methods of payment. Customers expanding their cash flow with this method.

• Other mentions – specifically about checks

– Increase in fraud with checks

– Concerns about security with checks and mail delivery slowing.

– Fraud and higher costs to use checks.


Mix Shifted 2014-2017 (continued)




10

Payment Type Preference

0 10 20 30 40 50 60 70 80

Debit card

Cash

Credit card

ACH debit

Wire

Check

ACH credit

What is your preferred method of receiving payments from your customers?

Payment Type Preference

Respondents overwhelmingly prefer to have

customers pay them via ACH credit




11

• ACH credit

– Supports automation and cash application

• ACH with CTX allows for automation with SAP, ACH is lowest cost payment method; Bank to bank

transactions and we get an EDI remittance. Very clean.

• We have the process automated with the bank and remittance to auto apply to accounts within SAP.

It's an efficiant process.

• ACH payments offer us a high degree of automation within our cash application system; Auto

application

• Less manual handling, fewer duplicate payments or unearned credits taken.

– Speed, cost and cash flow

• least expensive form; ACH with detail enable better match rate

• Better for cash flow; Helps Cash Flow/DSO; Lowers DSO -low cost for customers

• Less time delay by mail and reduced credit card fees

• Immediate access to funds, no processing fees

• Cost - bank fees are much less for ACH than check or wire; cheapest, fastest, easiest

• Cash maximization; We can anticipate cash and apply accordingly

• Quicker payment, less fees than credit cards

• Faster, predictable, use of funds, cheaper

• No delay in receipt due to mail time and no fees which come with credit card payments

• self-service events by customer at no cost to our organization

– Certainty

• Knowing that the payments will arrive at a specific date is great for our Treasury Department.

• no worries of insufficent funds

Reasons for Payment Preference – Sample

Verbatims




12

• ACH Debit– Payments are on time, for the correct amount, less manpower, fewer errors

&/or questions about where to apply, etc

– We know when and how much will be paid on a specific day - delinquency drops

– cheapest for us to process

– Less fraud and delinquency.

– fewer late payments

• Check– ACH is more work

– Auto processing through lockbox

– Have not been able to change behavior yet.

– Checks carry the least cost structure and come with remittances.

– Less credit card fees

– Our lockbox is automated, ACH are not

– because customers don't always send payment details with ACH or wires.

– little to no cost on our end...CC, ACH, all electronic forms come with fees.


Verbatims




13

• Credit card

– Better preference for International payments

– Although Credit cards are higher transaction costs, the

reduced risks and process efficiency tip the A/R process in

their favor.

– faster payment

– Less work on our part

• Wire

– Secure and quick

– Same day receipt

– Secure and funds can't be clawed back.


Verbatims




14

1. Overview

2. Automation and Robotics

– The branch of computer science that deals with the design, construction, operation, and application of “bots”, as well as computer systems for their control, sensory feedback, and information processing. In this case the payment and application process.






service.




overcome them.

Agenda





15

• Companies are challenged to improve payment related

metrics (e.g., days sales outstanding, average days

delinquent, payment costs, hit rates, etc.).

Automation/robotics provides:

– Reduced labor requirements

– Lower processing costs/improved data accuracy

– Traceability

– Scale

– Fraud control

Benefits of Electronic Payments With Automation

and Robotics




16

Payment Types Accepted

23.2

34.4

43.2

49.6

76

84

96.8

100

0 10 20 30 40 50 60 70 80 90 100

Other

Debit card

Cash

ACH debit

Wire

Credit card

ACH credit

Check

Percent of respondents reporting usage of payment type

Payment Types Accepted




17

Payment Mix Benchmark - 2017

1

1

4

7

10

28

49

0 10 20 30 40 50 60

Debit card

Cash

ACH debit

Wire

Credit card

ACH credit

Check

Annual percent of each payment type received

Annual Percent of Payment Type Received




18

Percentage Auto-Posting of Remittance Advices

50.8

4.8

11.9

13.5

19.1

0 10 20 30 40 50 60

0-20%

21-40%

41-60%

61-80%

81-100%

What percentage of your payment remittance advices flow through your system and are posted automatically,

such that cash can be applied, and invoices can be closed, without any manual intervention?

Percentage Auto-Posting of Remittance Advices

91-100% posting = 5.6%

67.5% have less than 60% auto post




19

1. Overview

2. Automation and Robotics– The branch of computer science that deals with the design, construction, operation, and

application of “bots”, as well as computer systems for their control, sensory feedback, and information processing. In this case the payment and application process.

3. Scalability

– The capability of a system, network, or process to handle a growing amount of work, or its potential to be enlarged to accommodate that growth.




service.




overcome them.

Agenda





20

• Globalization of the world economy is driving businesses

of all sizes to increase their global footprint.

– Recent “Retail Survey” performed by CRF indicated that

over 79% of firms are expanding to a global model.

• Electronic Payments allow for automation and facilitates

the ability to grow the cash application process in scale

while at the same time reducing the overall cost to

process payments.

Companies are Going Global




21

Percentage U.S./Non U.S. Payments Received

U.S.88%

Non U.S.12%

Of the total annual payments, what percentage are from U.S. customers, and what percentage are from international customers? (write in percentage – total

should be 100%)




22

Anticipated Trend 2020: U.S./Non U.S. Payments

Received

Yes79%

No21%

If your company receives international payments (payments from non-U.S. customers), do you

anticipate that the volume of international payments will increase in the next 3 years?




23

Barriers to ACH Adoption: Implications for Global

Enterprise?

4.5

5.4

8

17

17.9

21.4

33.9

44.6

0 5 10 15 20 25 30 35 40 45 50

My bank is unable to accept, process and provide reporting ofremittance detail of ACH transactions to my company.

The economics associated with accepting ACH payments doesnot translate to value for my business

My company is unable to accept and process electronic files ofpayment and remittance information so asking payers to…

Other

The ACH system does not allow for effective exchange ofremittance that is needed to facilitate automated or manual…

My company has not invested in the proper systems and/orhuman resource to respond effectively to the ACH adoption…

My customers are capable of sending ACH payments but mycustomers can not send remittance information with the ACH…

My customers are not capable of sending ACH payments.

Of the following statements, which represent barriers to ACH adoption?

Barriers to ACH Adoption




24

1. Overview





4. Efficiency and Cost Containment

– A form of analysis that compares the relative costs and outcomes (effects) of different courses of action and compartmentalizes cost within a an agreed upon amount.


service.




overcome them.

Agenda





25

• Payments impact many processes and departments, and companies are challenged to identify their “all in” payment costs considering:

– Bank/payment network fees

– Related services (e.g., lockbox, receivables concentration)

– Reconciliation/cash application

– Exceptions/disputes

– Compliance

– Fraud/losses

– Security

– Equipment/software

– Reporting

– Costs/processes unique to payment type (e.g., escheatment and check stock for check payments)

“All in” Payment Costs and Metrics




26

Preferred Channel to Receive Remittance Advice

0

0

4

5.6

6.3

28.6

55.6

0 10 20 30 40 50 60

Telephone

Fax

Other

Customer's Portal (you have to access)

Mail

Email

Bank/vendor/network file sent to you

What is your preferred channel for receiving remittance advices from customers?

Preferred Channel to Receive Remittance Advice

At least 35% of respondents prefer

channel that is difficult to automate.

Best opportunity for

automation




27

• Bank/vendor/network file transmission to you (ACH remittance and lockbox)

– Themes: payments plus information = automation and accuracy

• Receiving the remittance advices along with the payment is more efficient. It does not require us to contact anyone or go to another website, etc.

• For electronic payments we want to see the remittance info with the payment (in the correct format); payment and details all together

• Payments can be uploaded quickly with high level of accuracy.

• Format consistency

• Auto upload enables touchless application; limits the number of human errors in posting cash; less room for interpretation of data errors (human error); most likely to auto cash without errors

Reasons for Remittance Channel Preference –

Sample Verbatims




28

• Email– Themes: simplicity, speed and convenience

• Simpler and more direct; simple and accessible by all appropriate staff (we have an alias setup for "remittances" )

• Email is quick; Quick and easily accessible

• Usually the remittance precedes the wire, so you know it's coming

• We get information early and can ID problems before payment is received.

• Would rather get email than have to go to multiple portals to get payment information which is time consuming.

– And – method to address internal technology deficiencies• No automatic cash application software in place

• we do not do auto cash application

• Until our software is able to handle-this is easier


Sample Verbatims




29

• Mail

– We want the remittance to accompany the check

– Most payments are via mail now. Eventually email or portal

– A majority of payments come via mail with advices

• Accessing Customer’s Online Portal

– Easiest methodology, especially with big-box retailers

– Ease of receipt, speed, cost to retrieve

– Less manual handling, fewer duplicate payments or unearned credits taken.

– Downloads can be automated and the web address would rarely change


Sample Verbatims




30

Preferred Format for Receiving Remittance Advice

0

1.7

6

11.1

17.1

26.5

37.6

0 5 10 15 20 25 30 35 40

ISO 20022

Free Form Text

Other

BAI/BAI2

Excel Spreadsheet

PDF

EDI

What is your preferred format for receiving remittance advices from customers?

Preferred Format for Receiving Remittance Advice

At least 46% of respondents

prefer format that is difficult to

automate.


automation


automation




31

1. Overview







5. Customer Service

– The provision of service to customers before, during and after the consumption of a good or service.




overcome them.

Agenda





32

Payment Method Decision

4.8

9.6

38.4

47.2

0 5 10 15 20 25 30 35 40 45 50

Other

Your Company Decides

Payment Method is Negotiated

Customer Decides

Who, or what determines which payment types and remittance advice methods you receive from customers?

Payment Method Decision




33

Use of Incentives to Encourage ACH Payments

Yes9%

No91%

Do you offer any incentives in the form of payment discounts or extended payment terms to specifically

encourage customers to use ACH payments?




34

1. Overview








service.

6. Risk and Fraud Controls

– The controls placed in a business to detect and prohibit the deliberate deception to secure unfair or unlawful gain, or to deprive a business of its legal right(s).


overcome them.

Agenda





35

• Electronic payments help reduce risk and exposure fraud

compared to checks:

– Fraudsters love checks more than any other payment type.

ACH is the least susceptible to fraud. (AFP)

– Check payments lack recourse (sorry about the fraud or

mistaken payee check – your money’s gone!). ACH

payments can be reversed and returned.

– The US mail is a “black hole” regarding traceability. ACH

payments have time stamps.

Electronic Payments Reduce Risk and Fraud




36

1. Overview








service.



7. Obstacles and Answers

– Highlights of the obstacles associated with electronic payments and opportunities to overcome them.

Agenda





37

Investing to Improve Auto-Posting

• Include payment and remittance specifications (e.g., data required,

formats accepted) in your trading partner agreement.

• Offer incentives (e.g., discount, extended DSO/float time) to pay via

ACH/EDI

• Require ACH debit for customers that are unable to comply.

• Educate customers.

• Verify EDI/format compliance.

• Offer testing and technical/consultative services.

• Provide API/spec to AP/ERP vendors (fund development).

• Partner with financial institutions, payment vendors

and related third parties on pre-processor scrubs,

payment portals, cash application, treasury tools and

reporting options




38

Respondents had

great success in

asking customers to

switch to ACH (or

requiring ACH)

Driving Customer Payment Method: Work with

Customer

Cost13%

Tech Improvemen

t28%

Internal Push29%

Card/Bank Push7%

Customer Push23%

Causes for Shift in Payment Mix




39

Driving Customer Payment Method: Use of

Incentives to Encourage ACH Payments

Yes9%

No91%

Do you offer any incentives in the form of payment discounts or extended payment terms to specifically encourage customers to use ACH payments?

Incentives are an option, but not widely used.

• Discounts

• Terms Modifications




40


4.5

5.4

8

17

17.9

21.4

33.9

44.6

0 10 20 30 40 50

My bank is unable to accept, process…

The economics associated with…

My company is unable to accept and…

Other

The ACH system does not allow for…

My company has not invested in the…

My customers are capable of sending…

My customers are not capable of…

Of the following statements, which represent barriers to ACH adoption?


• Stop blaming the “bad” customers!

• Companies have clearly demonstrated success in increasing ACH

through customer outreach and investment in technology.

• Define payment metrics and costs

• Many companies need to better understand ROI to invest in

payment behavior changes




41

More Information

http://crfonline.org/

NACHA’s Payments Help Desk http://go.nacha.org/paymentshelpdesk

• Blog (free signup)

• Resources




42

Questions




43

Robert Unger

[email protected]

Matt Skudera

[email protected]

Thank You!

mailto:[email protected]

Payment Trends, Preferences & What Works for Credit ...€¦ · – Marketing to customers to pay...

Documents

Transcript of Payment Trends, Preferences & What Works for Credit ...€¦ · – Marketing to customers to pay...