Just a little over three years since Check 21 became effective, payment processing technology continues to advance, while acceptance grows. Consider that as of October 2007, about 12.2 billion checks per year were being cleared via an image-based process, reports checkimagecentral.org. This represents about 40 percent of all checks, the site said.
Financial executives with companies of all sizes are becoming more comfortable with tools such as check scanners and recognizing the benefits they offer, says Craig Vaream, vice president and ACH and global check deposit product executive with JPMorgan Chase. "The adoption of this technology makes our clients' lives easier."
As a result, banks continue to introduce new systems to help their corporate clients process payments more efficiently and accurately. Equally important, given that most companies' customers use a range of payment methods, these solutions can efficiently handle various payment types.
Deutsche Bank, for instance, has introduced "Dynamic Payment Management," says Harold Young, head of payments with global transaction banking. Treasurers can tell the bank when to issue different payments. A payment can be set for a specific time, which can be critical during a merger or acquisition or dividend payment. Or, it can be conditional on some event, such as an account having reached a certain balance.
At the same time, treasurers obtain 24/7 visibility into their payments queue. "In a real-time settlement world, you need to manage cash flows intraday to maximize treasury efficiencies," Young says. This visibility also allows treasurers and cash managers to handle more enquiries and investigations of payment questions themselves. By moving to a self-service investigation model, the average length of time required to resolve questions has dropped from about 4 hours to 11 minutes, Young notes.
Artificial intelligence (AI) also is emerging as a useful tool in the payment function. Deutsche Bank incorporates AI into its systems to verify that payments comply with Patriot Act and OFAC (Office of Foreign Assets Control) regulations. These solutions use a "self-learning process" to identify those payments that should be researched or monitored. As a result, the verification process can take place in the background, while payment processing continues. "This scanning doesn't impact the timeliness and efficiency of execution for compliant payment processing," Young says. This will become even more important as these regulations are extended to cover most bulk ACH files in 2008 and 2009.
Even as electronic payments grow rapidly, cash still is very much in play, especially for retailers. Bank of America's Rapid Recognition solution links retailers' point-of-sale systems with the bank's information systems so that the retailer's cash is credited to its account even when the money still is physically in the store, says Joan Brancaccio, senior vice president. Along with allowing for earning interest sooner, the software provides both store and corporate management with real-time visibility into each location's cash, credit, and check collections. Having this information readily available should reduce the number of trips required each day to transport cash to the bank. Rapid Recognition currently is being tested by two clients. A rollout is planned for later in 2008, Brancaccio says.
Given entrenched consumer habits and the complexity of many corporations' payment processes, it is likely that today's mix of payment types will continue for some time. While paper and cash payments continue to decline as a percent of overall payments, a completely all-electronic payment environment is still not imminent. "I'll be retired by then," Edwards says.
