If figures from the Electronic Payments Network (EPN) are any indication, 2006 was the year the universal payment identification code (UPIC) came into its own. Introduced approximately three years ago, the UPIC is a way for corporates to make ACH payments to business partners without revealing their bank actual account number, thereby decreasing their chances of falling victim to fraud.
According to EPN, the private sector ACH operator, the number of UPIC payments increased to 47,700 through the first three quarters of 2006, a tenfold jump when compared to the same period last year. The dollar value of those payments grew to $2.9 billion through the first nine months of the year, compared to $367.4 million for the same period in 2005.
Why the sudden explosion in interest? Rossana Salaris, SVP with The Clearing House, which runs the EPN, says that companies desire to perform more payments electronically these days. However, they are more vigilant than ever about decreasing their risk. "They'd like to receive more e-payments, but that means they would have to give out their bank account number to their trading partners," explains Salaris. "As a result, corporates have been carefully choosing which partners they'd like to do business with and pay electronically, or they just pay by check."
Enter the UPIC. "The UPIC is a pseudo account number that's associated with a real bank account," Salaris continues. "You can only credit an account with a UPIC payment—not debit it. So this eliminates the risk of anyone opening a false account or issuing demand drafts."
Adoption of the UPIC was slow at first, says Salaris. However, the EPN worked at building awareness among banks and the business community to the point where today, there are 220 UPICS in existence representing 22 different industries. Just this year alone, 105 UPICs were added. "Adoption now is more by word of mouth," she relates. "Corporates are talking about it and their trading partners are hearing about it. This is a dramatic shift from two years ago when we were going to them and telling them what a UPIC was; now they're asking us about it."
In fact, Salaris says, in many instances, companies are asking for UPICs in their requests for proposals from banks. "This is really starting to gain momentum in the corporate world."
Banks access EPN's database via a secure online interface. There, they enter pertinent information on their client into the system. A randomly generated UPIC number is then created for that company and sent to the bank, which issues that number to its client. When the business makes a payment, it appears as an ordinary ACH item to the payee.
Fraud prevention is just one plus of the UPIC, states Salaris. She also says that the numbers are a convenient way for companies to handle their payments. Once it is added to the accounts payable system, that one UPIC number can be used for all its trading partners. Additionally, the UPIC is portable, so if a company decides to switch banks, they still retain their unique payment identifier.
On the bank side, Salaris says offering UPICs is a great value added service for business customers. "UPICs save time and money, and they're just more efficient to manage. Some banks are adding the UPICs to their fraud prevention packages," she states.
The UPIC is suitable for banks and companies of just about any size, Salaris notes. Currently, there are 13 bank partners issuing UPICs, including Bank of America, Citigroup, Wachovia, M&T Bank and Sterling National Bank.
The latest talk in UPICs circles, according to Salaris, is applying UPICs to wire transfers. Although she says this would require a great deal of change to the wire system, Salaris thinks this is a positive indication of the growing importance of the UPIC. "Corporates are talking to the [Federal Reserve] and EPN about this," she explains. "They want UPICs for both [ACH and wire] systems. We're still evaluating this, but the momentum is there."