ACH Outsourcing: A Profitability Enhancing Option for Mid-Tier and Large Financial Institutions
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Overview: The credit crisis has exacerbated the need for financial institutions to reduce operating costs, safeguard customer relationships and maximize revenue potential. Until recently, most financial institutions counted on their payments business to generate between 15 to 30 percent of total revenue. However, due to the decline in credit products, payments now represent an even larger share of overall revenue and protecting that income is mission-critical. To make the payments business more profitable, financial institutions must first look at ways to reduce or eliminate cost. Technology and staffing have always accounted for a significant portion of the expenses associated with running a payments business. With check volumes declining and ACH ransactions becoming more prevalent, it is increasingly complicated for financial institutions to control per-item processing costs. And, keeping up with regulatory compliance also requires extensive resources and institutional focus. One way for financial institutions to reduce payments-related expenses is to migrate from the primarily fixed-cost model of Automated Clearing House (ACH) processing to a variable cost solution. By shifting work and systems management to a solutions provider, financial institutions can reduce costs while improving customer service and payments product delivery.