Locking in Your Payments - Using Electronic Lockbox Services Karen Bittner, CTP – BB&T Carolinas Cash Adventure May 16, 2011

2 Electronic Lockbox In its simplest form, electronic lockbox is a corporate cash management service that collects consumer on-line banking payment dollars and posting data to automatically update a billers accounts receivable system. Parties include: –Consumers –Corporate Billers –Financial Institutions –Payment Consolidators

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4 Questions To Our Audience Please raise your hand if you pay any of your bills through on-line banking? Keep your hand up if you pay 3 or more bills a month through your on-line banking.

5 Online Banking Preferred by Consumers

6 Electronic Lockbox- Consumer Perspective Most consumers believe when they make a payment on-line the payment will be electronically passed to the biller. Consumers expect these payments will be quick, same or next business day. Well, did you know if you pay through your on-line banking channel, your payment may end up as a paper check?

7 Electronic Lockbox- Corporate Biller Perspective Electronic Lockbox consolidates consumer on-line banking payments from major bill payment processors such as Checkfree, Metavante, Online Resources, RPPS Mastercard. The purpose of an Electronic Lockbox is to accelerate the deposit and collection of on-line banking payments (accounts receivable remittances), in order to maximize funds availability for the corporate customer and quickly update receivables data. The electronic lockbox service is for consumer to corporate payments made through bank on-line bill payment services. Additionally, Electronic Lockbox also provides the customer with costs savings/controls versus processing the payments in house. Eliminate the manual posting of check and list. Faster posting of payments. Minimize the number of paper exceptions from your lockbox. Receive payment data by direct transmission or through online portal.

8 Electronic Lockbox- Bank Perspective Lockbox Unit –Processes the payment for a higher than standard processing fee, typically if the account number is the correct length the lockbox unit can include the item on the daily A/R transmission. –These transactions are more complex to handle and are sometimes matched to an AR database to ensure accurate posting. –Many corporate clients have these checks returned unprocessed and manually post each check in the local office, further delaying receipt of dollars and information.

9 Electronic Lockbox- Bank Perspective On-line Banking Unit –Multiple bills can be paid through the online banking channel –Bank works with billers and payment consolidators to set up electronic feeds. –Relationships with bill payment processors varies by bank –Consumer use a single bank web site to pay multiple bills. The debit is integrated with the checking or other accounts –The on-line channel will often reach out to payment consolidators to connect with large billers; This is typically based on payment volume and online banking complaints from consumers

10 Electronic Lockbox- Payment Consolidator Perspective Many payment consolidators contract with U.S Banks to manage the transfer of dollars and data from consumers to billers. –Consolidator Contracts with Bank ACH debit to consumers bank account for payment (Some banks) Online Access to Biller Directory (Some Banks) Create and mail paper checks to billers for each consumer payment Handle payment inquiries, returns, assistance in posting data detail –Corporate Biller Receives AR File directly from payment consolidators Receives AR Credit for payments Returns/adjustments handled through the Payment Consolidator –Financial Institution Receives AR Posting File Data and Dollars for all billers with electronic lockbox at the Financial Institution

11 On-line Banking Check Sample

12 Sample Bulletin Post- Frustrated Consumer Bulletin Post -the on line system does not send e-payments to many standard merchants. This has caused issues with late payments because there is a 5-7 day delay in the merchant receiving your payment. It is a paper check mailed! why have on line banking if paper checks are how they pay most.

13 Corporate Options for Electronic Lockbox Corporate billers ask their depository bank to consolidate feeds from multiple payment processors and send a daily credit for items received along with a posting file/transmission or on-line access to reporting. Corporate billers get direct feeds from each major bill payment processors with dollars going to depository bank of choice. Corporate billers have no feeds and receive a paper check for each consumer who initiated a payment through their on-line banking service.

14 Data Elements Passed Electronic Lockbox Transactions include: –Dollar Amount Paid –Consumer Name –Consumer Address (optional) –Account Number (Field length varies by bank portal) –Other Reference (optional at some banks)

15 Are these Data Elements Enough Information? Banks have varying lengths for the posting account number field Some banks also pass consumer address information Some banks do not validate or maintain the most current billers address Some offer recurring payment set up Some banks debit the consumer account prior to sending payment to the biller. Consumers can input the wrong account number If a consumer is paying a biller, more than once, the address is maintained for future payments via the on-line banking system. Limited or no text for additional payment information NSF situation can arise depending on bank model for payment.

16 Behind the Scenes Return Items- NSF or other returns are occasional but some banks send dollars and data prior to validating good funds in an account. Reversals –Occasionally a consumer keys the wrong dollar amount or pays the wrong remitter and request to reverse an item. Account Number Correction- Back end databases may swap out an old or wrong account number for the new account number to allow for automated posting.

17 Tips When Setting Up Electronic Lockbox Services Address –Provide current billing addresses –Provide former billing addresses Provide Account Number Structure –Provide current account structure –Provide former account structures old AR system, merger with another company Provide Check Digit Algorithm for account number

18 Tips When Paying Bill Through Online Banking Make sure you place the correct account number Verify the billing address on your current bill matches the address used previously if you have set up the remitter. Many banks will state timeframe for payment receipt. Typically, 1-2 day is electronic payment, longer timeframes turn into a paper check.

19 Bill Design For Corporate Biller Ensure the bill is well designed for mail receipt and on-line banking! –Account number field used to post a payment is recommended to be numeric only –Include a check digit visually as part of the account number consumers see on the bill –Account number field should be on the statement and return bill section and clearly labeled. Consumer may use either portion of the bill when paying on-line. –Do not use dash or spaces in the account number field –Do not ask a consumer to key an invoice and account number. You will most likely get only one field back. –Highlight on the bill how to pay on-line banking transactions.

20 ABA SURVEY SHOWS MORE CONSUMERS PREFER ONLINE BANKING A new survey by the American Bankers Association shows that for the second year in a row, most bank customers (36 percent) prefer to do their banking online compared to any other method. Last year, 25 percent of customers favored online banking. The annual survey of more than 1,000 consumers was conducted for ABA by Ipsos-Public Affairs, an independent market research firm, on August 14-15, 2010.

21 Do I Need Electronic Lockbox? Absolutely! Why? Speed payment receipt Go Green and minimize the mailing and receipt of paper checks Reduce customer calls asking if payment was received Allocate staff to other functions Save money and reduce DSO

22 Closing Remarks Online banking is readily accepted by many consumers Consumers find this payment method –Easy to use –Secure –Private/self controlled If you have consumer payments, set up electronic feeds to receive payments Design your bills to accommodate this channel Acess your data and dollars faster

23 Questions ?