Payment systems developments - including the adoption of Check 21, the reduction in paper checks and the consolidation of payments providers - are changing treasury/cash management services. There is a transition away from paper and toward electronic transactions, but banks and their corporate customers want options for making electronic payments.
Neither corporate customers nor banks are ready to write off checks just yet, relates Louise Clynes, product marketing manager for Alogent (Atlanta), a provider of electronic solutions for payment processing. The majority of corporate payments - 72 percent - is still made by check, she notes.
With business checks still ineligible for accounts receivable entry (ARC) conversion, the best alternative for banks looking to minimize processing costs is a combination of check truncation and image capture, as facilitated by Check 21, according to Clynes. "A year ago, we thought that image exchange would take hold first after the adoption of Check 21, then distributed capture capabilities, then branches, then corporate sites," she says. "But what has happened is that banks are looking at all kinds of remote deposit capabilities" to accommodate corporate clients.
By capturing check images at remote sites, payments processing starts more quickly, which is what businesses want on the receivables side, explains Cindy Murray, EVP of service products group, ABN AMRO Services Co., a subsidiary of Netherlands-based ABN AMRO. And banks benefit because they lower their check processing costs by using the images to facilitate straight-through processing, she adds.
Current industry consolidation is contributing to competition for corporate clients, observes Eric Campbell, CTO for electronic payments processing solution provider Bottomline Technologies (Portsmouth, N.H.). To capture corporate clients, "Banks are looking for technology solutions so that they can cater to their clients' [cash management] needs," he says. For example, Campbell explains, banks are examining technologies that enable them to offer different treasury management options, including wires, SWIFT and Automated Clearing House (ACH) transactions.
Different Strokes for Different Folks
But no one solution is right for every corporate customer. Clients typically submit multiple files in multiple formats. Payment methods include domestic and worldwide ACH transactions, domestic and worldwide checks, drafts and cross-border payments. Often, there is no connection between a bank's wholesale delivery channel and its Web-based offering that could supply ad-hoc approval, repair, entry and review.
Ultimately, though, banks are looking to provide clients with the ability to submit one payment file - the bank then would validate all the payments and route them to the appropriate system for execution and confirmation, Bottomline's Campbell explains. To support this, banks' systems need to combine channels and support all payment methods, he adds.
Some of the biggest financial institutions are developing their own proprietary cash management solutions, either in-house or in conjunction with technology vendors (see related articles, pages 40 and 42). Smaller players typically seek multiple technology solutions from industry vendors, including Alogent, Bottomline, Metavante (Milwaukee), CheckFree (Norcross, Ga.) and Digital Insights (Calabasas, Calif).
Campbell contends, however, that banks can't automate cash management services without reengineering their own business processes. For example, browser-based offerings allow users to request wires electronically. Yet, because wire request screens force users to enter the debit account, many treasury managers still require originators to fax the information. Before the industry can realize the full benefits of automated cash management, Campbell continues, banks need to reevaluate their products, screen designs and workflows to take advantage of new technologies.