Published in Transform by Joe Devlin Click here for list of articles
  July 2001 Why replacing paper-based remittance systems with electronic remittance is so difficult-and how to go about pulling it off
IntroductionMain ArticleMixing PaymentsGauging EBPPThe Check & List Problem
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Banks and billers face a muddled environment of electronic and paper-based processes. The latest technology merges mixed payments and streamlines conventional transactions.




By all accounts, EBPP solutions will eventually provide a huge leap in efficiency over traditional remittance processing.  But it is going to be a long time before every payee will be willing to accept electronic payments. Today, even the largest on-line payment brokers still send out an awful lot of paper checks.  For example CheckFree, the acknowledged 100-pound gorilla of on-line payment, estimates that 40% of the payments it makes are via paper check. Smaller on-line payment systems are still sending out more checks than electronic payments. This mixture of paper and electronic payments is creating an enormous headache for lockbox operations and remittance vendors world wide.

"The problem that remittance operators are facing is that the stubs (itemized lists of what is being paid and by whom) that are shipped out by the on-line payment brokers don't look anything like the stubs shipped out along with the paper bills that still constitute a majority of remittance transactions." notes Jeff Vetterick, VP of Marketing at Advanced Financial Solutions (AFS) of Oklahoma City, OK, a major vendor of remittance solutions.

"It wouldn't be so bad if each check corresponded to a payment for a single customer and was accompanied by a single stub."   But it's not reasonable to expect the CheckFree's of the world to send out 10,000 separate checks to each payee each month", warns Vetterick.  Instead they save postage by batching them, sending a single check along with a list of all the accounts and payment amounts covered by that check.  From the remittance processor's perspective it's a nightmare."

"Every on-line payment broker uses a different format. Some are normal size stubs, most are provided on 8-1/2 by 11 sheets of paper, or on long sheets of greenbar. None of this stuff can be handled normally through the high-speed transports and recognition engines that have been adopted to automate the handling of paper checks, bills and stubs. Unless new processes can be put into place all of the new electronic EBPP stuff gets handled as an exception." In other words some poor data-entry clerk has to to hand enter each transaction. The irony is that paper remittances usually end up getting handled by automatic processes but electronic ones require manual intervention. Fortunately new automated processes are just now coming on-line that can handle electronic check and list remittances as efficiently as paper.


Advanced Financial Solution's solution to this problem is to hand EBPP records over to an new sort of advanced module dubbed DREAM (Dynamic Reject Auto-correction Module). DREAM is a software product originally designed to automatically correct MICR rejects. It uses ICR technology to take a second look at the MICR line of checks that could not be recognized via normal magnetic recognition. In a recent live evaluation, Scott Image Associates of Sanford, NC found that DREAM corrected 70-80% of previously rejected items.

More recently AFS's customers have begun to use DREAM to handle the checks and lists coming from on-line payment brokers like CheckFree. "It's a little different workstream here" notes Vetterick, of Advanced Financial Solutions.

Here both the checks and the lists are scanned on the same page scanner at the same time, maintaining transactional integrity. According to Vetterick, "it's 20 times more efficient to handle both at the same time than to separate the paper paths and put them together later on". "DREAM can automatically read the MICR line off the check and look for a valid OCR A line to find the account code and the amount due off the remittance stub or the list. But the biggest improvement in efficiency comes with tools that help the operator input lines from the list."

For example, AFS has worked very hard to make it easier for the operator to key in multiple account numbers and amounts embedded in the list. No longer is an operator forced to look at a screen full of numbers with the unaided eye. Take a typical page composed of fifty lines of numbers, the first column holding customer ID, the second column payment amount, the third column the date, and so on. It is easy to match up customer ID with payment and data on the top line of the page. But move down to the middle of the page and matching up customer ID up with the proper payment amount can be downright difficult. AFS solves this problem by providing an auomatic highlighting sytem that keeps track of the line for you.

Jeff Vetterick explains. "The system starts by highlighting the first line at the top of the page. If we get the positioning wrong the operator can drag it around until it is centered correctly. Once they hit return the system moves the highlighted arrow down a couple of pixels to the next line. The system learns from its mistakes. If an operator is forced to adjust the position of the second highlighted line it pays attention and adjusts its tracking. From that point on, the system will move down the appropriate number of pixels for each line allowing the operator to key at a much more accurate high speed mode without ever getting lost. By our accounting, this simple technique allows lists to be processed in one fifth of the time it takes without the machines assistance."

AFS is currently working on linking its ICR engine into the list processing utility described above. Once this is done, the system will be able to do most of the data capture without the need for human intervention. Feed it a page full of account numbers payment amounts and the like and the system will use its recognition engine to capture the relevant information, check the payment amount against the amount billed. Humans will only need to look at the record in cases where the computer calculations show that payment does not equal amount billed. Once it gets that done, the efficiency of check and list processing will take another huge step forward.

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