Billers Take Exception! Opportunities for Reducing Bill Payment Exceptions

Transcription

1 Billers Take Exception! Opportunities for Reducing Bill Payment Exceptions Robert Unger, AAP Senior Director Product Management and Strategic Corporate Relations 2014 NACHA The Electronic Payments Association. All rights reserved. No part of this material may be used without the prior written permission of NACHA. This material is not intended to provide any warranties or legal advice and is intended for educational purposes only. 10/15/2014 1

2 2 Summary Bill payment exceptions are increasing in rate and volume The primary source of exceptions payments are the credit push payments originated from banks and third party bill payment processors Exceptions increase processing costs for billers, as well as banks/third parties, and erode customer satisfaction One-off solutions (e.g., exchanging scrub files) can work, but can require multiple bi-lateral agreements/contacts, are manually intensive, and lack standardization Fixing third party bill payment requires industry adoption of standards, and the ACH Network/NACHA Rules can be part of the solution

3 3 Contents 1. Bill payment exceptions benchmarks 2. Payment exception mitigation efforts to date 3. BPE (Bill Payment Exception) banking convention

4 The Need to Improve Bill Payment Data Quality According to a NACHA study, there were an estimated 130 million bill payment exceptions in which cost the industry nearly $800 million (exceptions defined as biller receives funds, but cannot post the credit to the consumer s account). Exception volume represents 0.58% of all bill payments (all payment types, all payment channels) An estimated 61.8 million (47% of total exceptions) were originated as ACH payments (could be more considering drop to check volume ) The primary cause of payment exceptions is invalid consumer biller account numbers (i.e., found in the Individual Identification field in the CIE 6 record, possible addenda in CCD-CTX/other type of direct send transmission). 98% of all ACH bill payment exceptions were due to Incorrect/missing consumer account biller account The top biller epayees are also the top receivers of checks from online banking apps These billers are set up for electronic payments but continue to receive checks from the payment consolidator channels. More importantly, exceptions degrade customer satisfaction 4

5 Exceptions are 2-3 times More Common for Bill Payments Made through Banks/Aggregators than for Biller Direct Payments Channel Receiver Exception Rate Lockbox 7.79%* Online Bill Pay/Aggregator 0.51% Biller Initiated Source: NACHA Bill Pay Exceptions Benchmarking Study 2012 Recurring Credit Card 0.03% One-time Credit Card 0.14% Website One-time ACH 0.15% Recurring ACH 0.22% IVR One-time ACH 0.25% Call Center ACH 0.81% Walk-in 0.20% Other Agents, Retail, OCAs 0.17% 5 Many of these likely started as online banking payments Up From 0.40% as measured In 2007

6 It s Not Always Customer s Fault : Related Account Number Exceptions Associated with Specific Industry Practices 6 Industry Healthcare Municipal Utilities Credit Card Credit Unions Insurance Issue Changing invoice or visit number instead of static account number Property or invoice numbers that change every cycle Customers not updating account numbers when they move Truncated/masked account numbers (e.g. XXXX-XXXX-XXXX-1234) Account numbers followed by account type digits Policy numbers that change every cycle

7 7 Contents 1. Bill payment exceptions benchmarks 2. Payment exception mitigation efforts to date 3. BPE (Bill Payment Exception) banking convention

8 8 Stakeholders Have Deployed Many Bilateral-Technological, Operational, Fuzzy Logic or Other Solutions to Mitigate Exceptions Solution Biller routines to post payments with incorrect account numbers Scrub Files Consolidator tools for billers to correct account/payment data Biller profile Consolidator pro-active requests for biller updates Biller directory Consolidator correction of incorrect consumer-provided data Consolidator processing NOC s on a timely basis RT/Account blocks to prevent transmission fraudulent payments USPS Move Update Automatic Billing Updater Recurring Payment Cancellation Service

9 9 Best Practices for Reducing Exceptions NACHA s Council for Electronic Billing and Payment (CEBP) developed the Exception Processing Management Program in 2008 Tools and recommended best practices for data maintenance Recommendations are now incorporated into the NACHA Operating Guidelines

10 10 Contents 1. Bill payment exceptions benchmarks 2. Payment exception mitigation efforts to date 3. BPE (Bill Payment Exception) banking convention

11 11 CIE with BPE (Bill Payment Exception) Opt-in Program for Problem Bill Payments Bill payment originators would be encouraged to use ACH CIE transactions with BPE addenda records that include various bill payer information (e.g. name, address, address, phone number) when customer-entered data does not conform to biller standards (e.g. edit masks) CIE transaction would be in lieu of dropping to check as the default for nonconforming payments The additional data in the addenda could help billers identify the correct account and post the payment, much as the information of a check/stub is used to post lockbox exceptions At a minimum, the CIE addenda should include the data that would have accompanied a check Billers would then send an NOC/C09 entry to provide the correct account information to the originator to use in subsequent payments 11

12 Current Exception Payment Process: Drop to Check 1 2 Biller receives epayment (via ACH, RPPS or other elec means) 3 4 Yes Biller posts credit to AR Consumer pays bill via Bill Pay Originator BP Orig uses its DB to verify data Does consumer acct. no. pass edit? 4 Yes No 3 a Biller receives check 3 b Can the biller post? Yes 3 c Biller may swap scrub file with BP Orig

13 BPE Process Flow Consumer pays bill via Bill Pay Originator BP Orig uses its DB to verify data Good Payment 1 2 Yes Does consumer account info pass edit? Biller receives epayment (via ACH, RPPS or other elec means) 3 4 Biller posts customer credit to AR 4 Yes Exception Send CIE/BPE instead of check No 3 a Biller receives CIE with additional consumer info in BPE addend. 3 b Can the biller post CIE/BPE? 3 c Biller transmits NOC/CO9 with corrected info to bill pay orig. Yes 3 d Biller returns CIE/BPE to bill pay originator No

14 14 BPE Format and Data Elements Data Element Reference Designator Position Name Content Attributes BPE Originator Customer Identification BPE Street Address Customer s online banking/billlpay identification number assigned by the ODFI. This number will be provided back to the ODFI by the Biller in the NOC transaction if provided by the ODFI. (Instructions: left justify, leave blank spaces/space fill if not used. ID s with less than 15 characters are left justified with blank spaces/space fill following the last character/number. Example: Originator Customer Identification is followed by 10 blank spaces). Customer s street address (Instructions: left justify, leave blank spaces/space fill for information less than 25 characters) O AN 15/15 O AN 1/25 BPE City Customer s city (Instructions: left justify, leave blank O A 1/19 spaces/space fill for information less than 19 characters) BPE State Customer s state O A 2/2 BPE Zipcode Customer s zip code (Instructions: left justify, +4 data optional, O N 5/9 leave blank spaces/space fill if +4 not used) BPE Phone Customer s phone number (Instructions: only U.S. numbers valid no country code allowed) O N 10/10

15 ACH Bill Payment Data Quality Notification of Change 15 The NACHA Rules allow and provide guidelines for using the NOC to update consumer account numbers with the biller: NOCs can be utilized as a solution to updating biller issued consumer account numbers as the stated in the Guidelines on OG150 under Correcting Biller Account Numbers Though the NOC Process : Notifications of Change (NOC) should be created by Receivers of CIE transactions (i.e., the payee or biller) and transmitted via their RDFIs to notify consumers and their financial institutions/bill payment service providers when there is a change in the customer s account number at the payee/biller. An NOC is originated when: (1) the payee or biller changes a customer s account number due to internal system requirements, or (2) the payee or biller can post the payment, but the original customer account number received from the Originator was not correct. Change Code C09 Incorrect Individual Identification Number is used for this purpose. When an NOC is received by the ODFI/Originator, the Originator must update the customer s payee or biller account number within six banking days or prior to transmitting the next CIE entry, whichever is later. 15

16 16 BPE Opt-in Components Opt-in Rules Bill Payment Exception Banking Convention (BPE): Standardized Formatting for Remittance Information in Bill Payment Exception Addenda Record (version June 23, 2014) defines roles, requirements, data specifications Opt-in goals and metrics Metrics Business practices Timeline

17 17 Goals and Metrics Verify the CIE/BPE specification Can participants create, transmit, receive and process CIE/BPEs and NOC CO9s according to the specification? Determine effectiveness in reducing check volume and related ROI CIE/BPE originations: diverting transactions out of check stream How many checks on average did biller receive from originator before and after pilot? Hypothesis: check receipt from participating bill pay originators should = 0. After time, the monthly number of CIE/BPEs may decrease as well once the initial backlog of check payments is corrected NOC CO9 originations: How many NOC CO9s did biller originate (and were subsequent transactions originated with the correct account number)? Related ROI Can the current manual processes (e.g. check imaging, correction in remote centers) be automated for reconciliation/corrections? Are there any call center improvements/reductions in customer service call related to drop to check payments (and customer satisfaction related issues, e.g., delays in processing check payments)? Identifying the benefits for billers to have 1 channel vs many for working exceptions

18 18 Business Practices In addition to generating metric data, the opt-in program may also yield business practice recommendations through shared learnings. For example: What should a bill payment originator do if, after receiving an NOC CO9 and updating a customer s account number with the biller, the customer then changes the account number again? Are there best practices for bill payment originators to separate the drop to check transaction stream? Should billers return drop to check check payments to the bill payment originators? Will biller receivable providers develop solutions (particularly for small/mid sized billers) to received CIE/BPE and originate NOC CO9?

19 19 Features Reduce exception costs Improve customer service Eliminate associated check volume Use the standardized ACH Network Manage process though one channel

20 20 Timeline Business case complete 2008 Exception Management Program 2012 Bill Payment Exception Benchmarking Solution identification 2012 Bill Payment Exception Summit 2013 CIE/Bill Payment Exception spec finalized Complete and submit Business Idea for NACHA approval Draft Participant Agreement: Q Program launch: Q Term of program: months Decision options: continue opt-in, end opt-in, make mandatory

21 21 Opt-in Program Sponsors Kathy Romano Executive Director-Bill Print, Payment and AR Operations, Verizon Andy Branch Senior Product Manager, Electronic Payments, Capital One (credit card product) Steve Hooper Senior Vice President, Payment Strategy, ipay Solutions

22 22 More Information Bill Payment Exception Mitigation Contact: Robert Unger, Senior Director NACHA )