1. Electronic Banking ACH or ICL?
In-House vs. Out-Source
Payment Processing
Utility Payment Conference

2. Electronic Banking ACH or ICL?
Arizona Public Service (APS) is Arizona’s largest and oldest utility, serving since 1886
More than 1.1 million customers in 11 of the state’s 15 counties, about 35,000 sq miles
Current Payment Processing Distribution:
55% Electronically
35% US Mail
10% Business Offices

3. In-House or Out-Source?
Electronic Banking ACH or ICL?
In-House or Out-Source?
Our Considerations:
Current system was 13 years old
Mailed-in payments dropped from 72% to 38% of total payment volume between 1990 to 2008, but still significant
Replace armored car pickup with electronic banking
Leverage technology to process more than payments; anticipating continued payment volume decrease
Centralize data input to better utilized skilled customer service representatives to address customer needs

4. Electronic Banking ACH or ICL?
Options
Banks Non-Banks
JP Morgan Chase - CDS Global
Wachovia - Regulus Group
Bank of America - First Data Corp
Wells Fargo
In-House
BancTec (Unisys)
Wausau Financial Systems
J & B Software

5. Electronic Banking ACH or ICL?
Quantitative Results
Outsourcers:
Competitive process pricing for:
singles
clean payments
Less competitive pricing for:
non-clean payments (white mail, checks only)
exception payments (research, correspondence)
non-payment transactions

6. Electronic Banking ACH or ICL?
Quantitative Results
In-House:
Over an 8 year period projected payment processing costs were competitive
Advantage is gained in managing exception transactions

7. Electronic Banking ACH or ICL?
Qualitative Results
Out-Source Advantages
As volume decreases over time so would costs
Technology remains current
Built-in Disaster Recovery

8. Electronic Banking ACH or ICL?
Qualitative Results
In-House Advantages
Maintain control of customer data
Same day exception processing (Customer PR)
Timely exception transaction processing
Reduce costs by leveraging technology for non-payment transactions

9. Electronic Banking ACH or ICL?
Decision
In-House with Wausau Financial Systems
System was justified on payments alone
Non-payment transaction processing was icing on the cake!
Ability to capture and store non-payment images at the Customer Account level
Timeliness and control of postings
Automation of Non-Payment processing leverages the technology and improves accuracy and performance

10. Electronic Banking ACH or ICL?
Banking Options
Automated Clearing House (ACH)
Vs.
Image Cash Letter (Check 21)

11. RFP for ACH/ICL Services
Electronic Banking ACH or ICL?
RFP for ACH/ICL Services
Submitted to 3 banks
JP Morgan Chase
Bank of America
Wells Fargo
Assumptions
Compare using Bank vs. APS decisioning
Percentage of ARC Eligible Items 80.0%
Percentage of ICL Eligible Items 8.0%
Percentage of IRD Eligible Items 12.0%

12. Electronic Banking ACH or ICL? ICL & ARC - Bank Decision
Bank Results
Total Costs Per Item
ICL & ARC - Bank Decision
ICL and ARC –
APS Decision
Bank 1.
$0.034
Bank 2.
$0.040
$0.030
Bank 3.
$0.029
* Banks in no particular order

13. Electronic Banking ACH or ICL?
Bank Decision
APS will perform decisioning to control costs
We chose all 3 banks to:
Maintain our relationship with each Bank
Keep competitive pricing in play
Overall projected annual savings $57,000

14. Major Project Initiatives
Electronic Banking ACH or ICL?
Major Project Initiatives
Configuration & changes of WFS System to our needs
Testing with each Bank for ICL and ACH files
Enhancements to APS Customer System for multiple payment files and non-payment transactions
Leverage new B2B processes

15. Electronic Banking ACH or ICL?
Payment Transactions
Single Check, Single Stub
Multiple Checks, Single Stub
Single Check, Multiple Stubs
Multiple Checks, Multiple Stubs
Checks Without Payment Stubs
Accounts Receivable Lists
Money Orders
Process bank NSF Files and systematically reverse payments

16. Electronic Banking ACH or ICL?
Payment Transactions
All payments are compared to Hot Files for:
Cash Only Id and Rejection
Pending Shut Off Orders
ARC Opt-Out (Process as Image)

17. Non-Payment Transactions
Electronic Banking ACH or ICL?
Non-Payment Transactions
SurePay, SHARE Pledges & E3 Low Income Enrollment
from Bill Stub (marksense detection)
from Application form (full page scans)
Undeliverable Refund Checks and Bill Statements
Change of Address (marksense detection)
On-Demand Images for CIS at Customer Account level
Systematic Customer Account Note Updates

18. Electronic Banking ACH or ICL?
Bill Stub Samples
SurePay on Page 2
Address/Phone change
Based on mark sense detection

19. Electronic Banking ACH or ICL?
SurePay Application

20. Electronic Banking ACH or ICL?
Share on Stub
Name
Address
City, State, Zip

21. Electronic Banking ACH or ICL?
Share Card

22. Electronic Banking ACH or ICL?
E3 Application

23. Electronic Banking ACH or ICL?
E3 Recertification

24. Electronic Banking ACH or ICL?
Lessons Learned
Bank Validation Process takes time
ACH and ICL are different groups within each bank
“To thine own system be true”
Test, Test, and Test some more
Include all interfaces
Include all jobs, even if you think they do not apply

25. Results Since Installation
Electronic Banking ACH or ICL?
Results Since Installation
Deposit Distribution
Percentage of ARC Eligible Items 78.9%
2,157,904 checks
Percentage of ICL Eligible Items %
573,249 checks
Percentage of Paper Checks %
3,026

26. Results Since Installation
Electronic Banking ACH or ICL?
Results Since Installation
Non Payment Transactions
SurePay ,044
Back of Bill 8,000
Applications 20,044
E3 Low Income ,504
CIS Refund Checks ,369
Returned Mail ,731
We met our Financial Goals

27. Electronic Banking ACH or ICL?
Q & A

28. William Dow Sr. Project Manager Arizona Public Service 602-250-2110 William.dow@aps.com