Transforming Electronic Receipts to a Straight-Through Process

Transcription

1 Transforming Electronic Receipts to a Straight-Through Process Jeff Hill Supervisor Business Operations Duke Energy Steve Bernstein ACH Product Specialist J.P. Morgan Utility Payment Conference

2 JEFF HILL Supervisor Business Operations Duke Energy

3 Duke Energy Fast Facts July 2012, completed merger with Progress Energy Headquartered in Charlotte Serve 7.2 million electric retail customers in six states (FL, SC, NC, KY, OH, IN) Serve 0.5 million gas customers in OH and KY 2012 Revenues just under $20 billion Approximately 28,000 employees 57,700 MW generating capacity

4 Payments Vision and Purpose Vision: Create the foundation for payment processing across all channels to move to a fully electronic and streamlined model. Purpose: Serve our customers by delivering efficient, accurate and timely payment processing.

5 2006 to 2013: Making Progress Where Duke was in 2006 Compared to Where We Are in Mail 56% 36% Over-the-Counter 20% 11% Auto Draft 7.5% 8% One Time Credit Card & Check by Phone 4.5% 11% Electronic (e-bill, EFT, other): 12% 34% Total Electronic: 24% 53%

6 Incoming EFT Payment Opportunities Four separate billing systems Name change for legacy Progress customers New remittance PO Boxes in Charlotte for legacy Progress customers Upgraded lockbox process to have one job to rule them all Multiple EFT concentrators (JPMC, Wells Fargo, PNC, Metavante, Fiserv/CheckFree, RPPS) Confusion for customers and consolidators Customers not including correct remittance information

7 Electronic Payment Issues What s the Solution? How Duke is Addressing: Working with assigned Duke account managers to contact certain large account customers to correct issues Streamlined process to setup new EFT customers, detailing steps on our web site Considering JPMC s ACH elockbox Transaction Repair tool or other internal Duke enhancements to help expedite payment posting, i.e. the Black Box

8 Future of Payments at Duke Energy More choices/options for customer convenience, but only if it makes sense Push to lower cost channels and self service models Recently expanded pay agent network to include mostly fee based agents Recently implemented mobile pay option Improve quality of incoming electronic payment data through multiple efforts/projects, i.e. scrub files. Considered option of rejecting EFT payments in certain cases but have chosen not to pursue.

9 STEVE BERNSTEIN ACH Product Specialist J.P. Morgan

10 U.S. Payment Trends ACH and Check are the dominant payment methods 82% of all payments by value Rise of debit and prepaid cards primarily consumer driven, contributing to a negligible amount of business payments. Wires dominate cross border payments 69% of cross border payments are wires and represent 12% of total payments by value US Transactions Volume 217 billion US Transaction Value $84,093 billion 108 (50%) Cash $1,872 (2%) 43 (20%) Debit/Prepaid Card $1,593 (2%) 24 (11%) Check $31,595 (38%) 22 (10%) Credit Card $1,917 (2%) 19 (9%) ACH $37,163 (44%) Wire $9,953 (12%) Sources 2010 Federal Reserve Payments Study, and The Clearing House, Project Compass Comprehensive Payments Study (2011)

11 U.S. Shift in Overall Payments Mix Check payment decline, Average yearly decline: -6.5% Aggregate decline: -49% The majority of this check volume migrated to ACH & Debit Card payments: ACH average yearly growth: 15% Debit Card average yearly growth: 15% 140 Check ACH Debit Credit e 2015e Source 2010 Federal Reserve Payments Study and Company estimates

12 Payment Landscape ACH not initially intended to convey $ and data Current market needs to migrate away from check to electronic Current market requires integration of various payment types, whether ACH, check, wire, card Must support SAP, Peoplesoft, XML, Wall Street systems, ISO, etc Integration is a requirement Enrollment services are key Solution should be global in nature

13 Recommendation ACH is recommended for corporate and consumer payments. This convenient electronic option offers significant benefits: Transaction costs can be significantly lowered by the reduction of the internal processing of vendor checks, plus reduced mail costs Select one or two divisions with high levels of check volume to pilot the test of this service. Once successful, roll out to all divisions Electronic payment permits to obtain discounts, since the payments will be made on the precise date that has been defined Improved funds availability - will know exactly when payments will clear your accounts Enhance vendor relationships by offering a range of payment options Use of ACH provides assurance that payments have been made safely and consistently, thereby increasing security

14 How to Reengineer The Payments Process Considerations Understand all payment flows by analyzing payment mix, i.e., Check, Card, ACH Benchmark current payment practices to industry Recognize customer preferences such as risk, timeliness, cost Demographics Maturity and flexibility of customers Develop payment goals and plan to achieve Drivers New technologies and trends Industry-specific regulatory requirements and trends

15 Having Issues with ACH Payments? You may already receive ACH payments but find them difficult to understand, process, and apply to open receivables. Sometimes businesses receive one ACH payment that covers multiple outstanding invoices, but that payment is not accompanied by the remittance information needed to understand and reconcile the payment to the open receivables items. ACH can assist with this situation: An electronic ACH payment file offers a standard format to carry remittance information to explain what the payment is for e.g., invoice numbers, adjustment information, discounts and so on. Many businesses use the ACH network to send both payment and related remittance information, which is often referred to as Electronic Data Interchange or EDI.

16 Having Issues with ACH Payments? If you want to receive electronic remittance information with an ACH payment from a business partner, you ll need to ask them to provide it and ask your FI to deliver that remittance data to you. Your trading partner may be able to send it to you in several different electronic formats. You may find out that your trading partner is already sending the remittance information to you, but that your FI has not been passing it on to you. Ask your FI to deliver this information to you: All FIs are required by the ACH network rules to provide this information to business customers, if asked. Be sure to specify the method of delivery and the format you want. If you are looking to integrate this file into your accounting software, you may want to bring your IT support to a meeting with your bank.

17 Solutions Your financial institution has tools available to provide you with remittance information delivered through the ACH network. Many FIs have software installed as part of their ACH service allowing them to provide you with the remittance information you want. FIs that don t already have their own software available can access easy to use, low cost capabilities through one of the two ACH operators in the U.S. Both of these ACH operators offer services or products that translate remittance information carried in an ACH payment file into reports or electronic files that your FI can provide to you.

18 Virtual Reference Numbers: Streamline Invoice Reconciliation Your concerns I spend too much time and resources aggregating and reconciling receivables in multiple accounts. We need to improve operational efficiencies. My days sales outstanding (DSO) times are too long. I ve got limited liquidity and visibility across my accounts. I need detailed information to streamline my receivables posting. Virtual Reference Numbers Consolidate electronic payment types into a single demand deposit account (DDA) and manage this information centrally. Reference numbers are available to assign at your discretion to your remitters. This improves matching rates and reduces exceptions. By shortening the settlement process, you reduce DSO and improve straight-through processing. Balances are concentrated into a single master account. Reference number to payer ID is a one-toone match. You also gain greater visibility across your receivables. Visibility on receipts helps you facilitate faster decision making when releasing goods or extending credit to payers.

19 elockbox How it Works Notify your payment processors to send the payment files directly to your ACH elockbox. Work with each consolidator to complete the payment redirection. Customers send you payments electronically (e.g., online banking, credit cards, bank-by-phone, government remitters) After validating that the billing account numbers and data match, payments are consolidated automatically upon receipt A single credit plus all remittances post to your account on the same business day

20 Benefits of elockbox Consumer Benefits Reduced costs from the elimination of postage Eliminates the use of having to write paper checks and mailing it to the receiver Pay bills in as little as 1 days versus a week or more using the traditional paper methods Receiver Benefits Eliminate manual exception processing and collection costs Consolidate multiple electronic consumer payments into a single transaction Expedite exceptions handling and data validation, improving the accuracy of remittance and customer account number data

21 elockbox Process Flow Consumer Consumer initiates bill payment via their payment originator Online Banking Mobile Banking MasterCard remote payment and presentment services elockbox FI Receives, edits and processes payment: Mod 10 calculation Account length Dollar amount Review file from Receiver determines Acceptance or Rejection Exelon Receiver Credit is applied to receiver s account Additional reporting transmitted to receiver, including: Transmittal Report Prenote Report Rejected Report

22 elockbox Timeline Day Zero Day One (Early A.M.) Day One Consumer initiates bill payment through payment originator Federal Reserve Bank Financial institution edits payment Consumer account debited at retail bank Client receives data transmission & credit Consumer account updated

23 Handling elockbox Exceptions Receive transactions that do not meet the edit/validation instructions and correct these transactions securely online, where they will be sent back to you automatically Eliminate future exceptions as any updates you make can be "remembered and applied to any incoming subsequent transactions, auto corrected Validate/Decision ACH received CIE, CTX, CCD+, CCD payments for acceptance, rejection, or correction.!

24 Looking for Efficiencies in ACH Payments? Do you have an accounting package that can upload electronic files of ACH payment-related remittance information? This could be as simple as a spreadsheet or a comma delimited file format. Talk to your software vendor for details they can provide. If your accounting package can accept electronic files, you re in luck. You won t need to manually reconcile payments to open receivables anymore. Many FIs can automatically send a machine-readable file with this information.

25 So, what are the Best Practices that can be Utilized? NACHA remittance coalition Partner with enrollment providers that can execute check to ACH conversion Partner with a provider that can maintain vendor files and validate formats Partner with a provider who can translate XML, ISO as needed Integrate fraud prevention solutions, e.g. UPIC, ACH positive pay, into the process Consider Virtual Reference Numbers as a possible global solution Seek commonality with your business partners to streamline the payment and remittance process