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. 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, according to the private sector ACH operator. Further, 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, EPN reports.
Introduced approximately three years ago, the UPIC is a way for corporates to make ACH payments to business partners without revealing their actual bank account numbers, thereby decreasing their chances of falling victim to fraud. According to Rossana Salaris, SVP with New York-based The Clearing House, which runs the EPN, the sudden explosion in UPIC payments can be attributed to companies' desires to perform more payments electronically while remaining 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."
Banks access the EPN's database via a secure online interface and enter information on their clients into the system. Randomly generated UPIC numbers then are created for those companies and sent to the banks, which issue the UPIC numbers to their clients. When the businesses make payments, they appear as ordinary ACH items to the payees.
Adoption of UPICs was slow at first, notes Salaris. However, the EPN built awareness among banks and the business community. Now, there are 220 UPICs in existence representing 22 different industries, according to Salaris, who adds that this year alone, 105 new UPICs were issued.
"Corporates are talking about it and their trading partners are hearing about it," Salaris relates. "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, she says, in many instances, companies are asking for UPICs in their requests for proposals from banks.
But fraud prevention is just one plus of the UPIC, stresses Salaris. She says UPICs also are a convenient way for companies to handle their payments. Once added to a firm's accounts payable system, one UPIC number can be used for all its trading partners. And the UPIC is portable, so if a company decides to switch banks, it still retains its unique payment identifier, Salaris explains.
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," she states. "Some banks are adding the UPICs in their fraud prevention packages."
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. *