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TRANSCRIPT
Presenters:
The Benefits of Consolidating Payment Services
• Moderator, J.A. Nicholson, City of Pataskala, OH• Speaker: Frank O’Leary, Arlington County, VA• David Quackenbush, Bank of America Merrill Lynch
Treasurer’s MissionTo receive or collect state and local taxes and other revenues; to safeguard (i.e. invest) the funds; and to disburse the funds in accord with the dictates of the local governing body.
The Three C’s
CommunicationConvenienceCompliance
Court Fines& Fees
UtilitiesWater
&Sewer
PersonalPropertyTaxes
ParkingTicketsCustodial
TaxesMeals, TOT
& STR
AgencyDebt
What we process:
Business License
Tax
Dog Licenses
Real EstateTaxes
State Income Taxes
Real Estate$647,611,945
62%Utilities
$94,6691009%
CRIFs$83,905,822
8%
Business License$63,819,531
6%
Vehicle Personal Property$52,239,352
5%
Business Tangible$35,972,273
3%
Meals Tax$34,704,843
3%
Other Custodial$28,119,580
3%
Parking Tickets$6,414,218
1%
Court Collections $1,028,000
0% Departmental Collections$365,890
0%
Dog Licenses$62,715
0%
Mystery Checks$7700%
Other$350%
Payments – The "What"
Total Payments: $1,048,914,073
Question
How do you handle an incredibly large volume of transactions arriving in a relatively compact period?
Payments – The “When"
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
220,000
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Volu
me
Personal Ppty Decals Real Estate Parking Tickets Utilities Misc. Fees BPOL Custodial Taxes
Answer
Reduce the burden. “Outsource” to the maximum degree possible!
Payments – The "How"
Lockboxes242,575
31%
CAPP200,016
26%
Cashiering161,045
21%
Wires82,73411%
Automatic Bank Debit36,596
5%
"Check Free" (ACH)35,293
5%
Set-Off Debt8,6411%
Telephone3,9970% Neighborhood Payment
Program1,4090%
Total Items Paid: 772,306
The Traditional A/R Structure
PaymentsDog Licenses System
Courts
Utilities Payments
System
Personal PropertySystem
RealEstate
Etc…
A Holistic A/R StructureBased Upon the
Concept of aTax-Paying Entity
Examples of Tax-Paying EntitiesInclude the Following: The Traditional Household Professional Businesses Merchants Hotels Restaurants Third Party Payers
• Relatives• Court Appointees
Itinerants in Temporary Residence
Exclude: Tourists Non-Residents with Parking Tickets Other Persons Lacking a Re-Occurring
Pattern of Payments
A Single Record Structure?
Taxpayer ID Data – Who – Where – Etc.Banking/Credit Card InformationReal Property DataData on UtilitiesData on VehiclesData on BusinessesDog License(s)Parking TicketsOther items Ad Nauseum
A Logical Data Structure
Courts
VPPPayments
UtilityPayments
RealEstate
BusinessLicense
BusinessTangible
ParkingTickets
TransientOccupancy
Tax
MealsTax
DogLicenses The
Taxpaying Entity
Building the Logical Data Structure
What Arlington Did - At great cost, both emotionally and financially, replace the mainframe systems with an award-winning relational data base over a period of four to five years.
What We Recommend – Find a vendor with an existing and proven “Payment Portal” to funnel any and all transactions to their proper destination (i.e. A/R sub-system).
A Logical Data Structure
Courts
VPPPayments
UtilityPayments
RealEstate
BusinessLicense
BusinessTangible
ParkingTickets
TransientOccupancy
Tax
MealsTax
DogLicenses
Internet Payment
Portal
Arlington Internet PaymentsRudimentary system started in 1998.Enhanced systems implemented in 2001 and
2003. Current system introduced in 2010. In FY2013 processed 200,000 payments
totaling $147,000,000.• E-Checks – 135,000 payments, totaling
$136,000,000.• Credit Cards – 65,000 payments, totaling
$11,000,000.
Creating the Customer Profile
Establish a team to (laboriously) put together profiles.Allow the customer to create
his/her profile (the “preferred solution!”)
The Missing Link?
The Tax-Paying entity and the related A/R data files must be linked by a system assigned set of characters (Customer ID or CID).
Data Security
To maximize customer convenience, it would be desirable to store relevant banking/credit card data, but only in a totally secure environment (i.e., a PCI compliant site) under the control of a reputable third-party vendor.
The Shopping Cart
With minimal effort the customer can effect a single payment for a number of different accounts and specify his/her method of payment (e.g., credit card, echeck, etc.).
Impediments?
Privacy LawsLack of Data LinksConfusion between
“ownership” and “Taxpaying Entity”Requires Good Judgment by
StaffRequires sophisticated third-
party vendor.Funding?
Bill Payer Alert!Program
“You have a bill!”
By eMailA payment profile is created by either the customer (the tax-paying entity) or Treasurer’s staff. Whenever a debt is incurred, the customer
is immediately sent a “You have a bill!” notice by email.
The email links them automatically with the Payment Portal.
Approximately 66,000 households have signed up, to date.
The Next Steps
Get rid of those pesky (and expensive) mailed bills by allowing taxpayers to opt for E-Billing!
Notify taxpayers of pending refunds and allow them to opt for direct deposit to a bank/savings account.
The Moral of the Story
Communication coupled with Convenience creates
Compliance.
Payment and Receipts Trends
David QuackenbushDirectorSenior Product Solutions SpecialistJacksonville, FL
3131
Processing automation
Payment TrendsProcessing improvement through automation
88%of companies surveyed have started or plan to launch automation initiatives
within the year*
▪Stand
ardize
▪Autom
ate
Standardization and automation are enablers for centralization▪I
mprove
Standardized file types
Standardized security
Standardized system integration
Universal messaging standards
* Source: PayStream’s Invoice and Workflow Automation Benchmark Report 2013; www.paystreamadvisors.com
3232
Electronic invoicing
Payment TrendsInvoice efficiency through automation
#1perceived challenges in adopting invoice
automation: supplier reticence, IT resource shortage and system integration*
▪ Need to automate PO presentment, matching to receipts, routing, invoice approvals and more
▪ Need to clearly identify and communicate the tangible benefits
▪ Need onboarding assistance to obtain internal/external buy‐in
…and yield great benefits
▪Improved efficiencies ▪Lower operating costs▪Stronger control▪Competitive advantage
▪ Offer greater efficiencies for processing invoices
▪ Require changing the way buyers/suppliers traditionally conduct business
▪ Face considerable resistance —both internally and from suppliers
Electronic invoice solutions…
…can address many needs…
* Source: Electronic Supplier Payments PayStream Advisors Q2 2012
3333
Check usage is declining
Payment Trends 68%of corporations in 2011 were writing
fewer checks*
▪ 78% of corporations increased use of ACH▪ Half of respondents reported an increase in purchasing card transactions
▪ One third of respondents reported an increase in wire transfers
* Source: Electronic Supplier Payments PayStream Advisors Q2 2012
reduce variable disbursement expenses by nearly 50%
helps minimize escheatment management
eliminate the need to obtain sensitive account info
recipients receive payments more quickly
Distribute funds without paper
To any financial institution
Using mobile number or email address
Digita
l Disbu
rsem
ents
3434
Fraud prevention
Payment TrendsPreventing fraud in the payments environment
61%of companies surveyed experience
attempted or actual payments fraud*
▪ Altered checks ▪ Stolen cards▪ Organized crime
Current issues
Solutions being implemented
Companies are moving away from manual, paper‐based payments to help deter fraudulent activity
▪ Stale date/maximum dollar control
▪ Check outsourcing▪ Positive pay solutions
▪ Malicious insiders▪ Hacked systems▪ Spyware
▪ Paper to electronic▪ ACH positive pay
solutions▪ Card solutions
* Source: AFP Payments Fraud and Control Survey 2013
3535
Centralization
Payment Trends 88%of corporates indicated they either
already have moved or plan to move to a centralized payment structure within 24
months*
Centralization
CashPro® Connect
Single file payment types: ISO 20022 XML, SAP IDoc, ASC X12 EDI, EDIFACT
ePayables and Paymode‐X®
Current environment
Decentralized payment structure
Solutions companies are implementing
Centralized payment structure
* Source: 2012 Annual Cash Management and Trade Finance Survey in association with SEB ; available at gtnews.com
3636
Receivables management
Receipt TrendsCentralization and standardization of receivables
▪ Cost savings▪ Greater efficiencies▪ Collections/reconciliation
automation (STR)▪ Enhanced customer service▪ Enhanced relationships ▪ Improved payer behavior▪ Enhanced DSO▪ Cash forecasting▪ Stronger commercial and
operational risk management
Current environment
Receivables Processing
Benefits being realized
Receivables Management
Challenges: jurisdiction regulatory/tax issues, invoice detail sharing, customer contact, and varied clearing standards/payment methods
Drivers: regulatory reform (SEPA), invoice matching tools, virtual account management, global liquidity overlays and single FX rates
36%of corporates want to reduce
receivables processing time and costs*
* Source: Aberdeen Group (Jul 2011),"The Order to Cash Cycle: Enhancing performance with process Automation“
3737
Go Green and process efficiencies
Receipt TrendsFinding efficiencies in receivables processing
▪ Image Lockbox▪ Remote Deposit Service Online▪ Client Side Capture▪ Payment Collection Gateway▪ Remote Payments Online▪ Healthcare Revenue Manager
Going greenPotential solutions
Reduce paper processing:▪ Convert paper document to electronic▪ Evaluate whether processes are environmentally friendly▪ Educate consumers about electronic bills, statements and
payments over paper alternatives
Cash processing
Efficient processing and early credit with the bank for cash:▪ Faster posting and positioning for deposited cash▪ Avoid risk of employees transporting cash▪ Just‐in‐time change and currency▪ Combine transportation management requirements
▪ Safe Connect and Recycler Connect
▪ Cash Vault▪ Transportation Management▪ Business Deposit Card
35%one in three companies have made significant
investments in automation*
* Source: Invoice and Workflow Automation Benchmark Report 2013; www.paystreamadvisors.com
3838
Efficiencies through consolidations
Receipt TrendsOperation site consolidations
▪ Image Lockbox
▪ Image Cash Letter
▪ Remote Deposit Service Online
Potential solutionsThe US Postal Service as well as FIs are streamlining operations
USPS:
USPS site consolidations still under review
▪ Next day delivery of first class mail coverage minimized
Paper processing sites are consolidating due to accelerated image exchange:
▪ Banking centers are enabling image capture
▪ Item processing, vaults and returned item paper volumes continue to decline
Source: USPS press release, May 2012
Integration Trends
4040
Standardization
Integration TrendsOne process, greater flexibility
2%‐5%of international payment messages generate exceptions
Value of standardization
▪ Reduced costs▪ Bank interoperability▪ Straight‐through processing
▪ Economies of scale▪ Time efficiencies▪ More…
Current environment
Key tools
▪ SWIFT ▪ eBAM▪ XML▪ More…
Source: SWIFT
4141
Data transmission services
3%Transmission accounts increased three
percent year‐over‐year
Integration TrendsData transmission services
We offer traditional data transmission services (authentication and encryption are required)
Traditional▪ HTTPS▪ FTP with PGP▪ sFTP (FTP with SSH)▪ FTP with SSL▪ AS2▪ Connect Direct® with Secure+▪ VPN
Emerging
▪ SWIFT FileAct (requires SWIFT Corporate Access membership)
Bank of America Protocol Trends New Setups 2011
HTTPS44%
FTP/PGP29%
FTP/SSH11%
SSL/FTP7%
Connect Direct7%
AS22%
Source: Bank of America Merrill Lynch
4242
Mobile banking
Integration TrendsMobile banking
$245 billionmobile payment services expected
to reach $245 billion in value by 20141
CashPro® Mobile offers another channel to meet your electronic mobile banking needs.
Source: IDC Financial Insights press release, 2010/0712
4343
Electronic Bank Account Management
Integration TrendseBAM
50%of corporates employ four or more staff
that focus on bank account management; it can take over two weeks to open an
account*
CashPro® OnlineCashPro® Connect
SecurityVisibility Compliance and audit controls
Automation
Source: Pega System/Finextra survey, September 2009
4444
Channel agnostic file formats
Integration TrendsChannel agnostic file formats
88%of companies would prefer the use of the same
file format, regardless of channel
CashPro® Connect
CashPro® Online
Integrated multi‐channel client experience
Current needs Solutions companies are implementing
Source: Bank of America Merrill Lynch
Swift File
Email VRU
Mobile Web
4545
Securing files using digital identity
Integration TrendsDigital identity
53%corporates expect they will eventually require digital signatures as a means of securing the files they send and
receiveEnterprise level authentication process, able to bridge multiple channels with interoperability between multiple banks and accounts.
In lieu of ink signatures, we have:▪ IdenTrust digital identity token device for our eBAM service▪ SWIFT 3SKey digital identify token device implementation underway for the signing of payment files
ONELOG‐IN
ACCESS
Source: Bank of America Merrill Lynch
4646
Cloud technology
Integration TrendsCloud technology for treasury services
50+%IT CEOs reported customers using the cloud to implement real‐world
solutions
Cloud computing is the next transformational technology wave:▪Has built‐in controls to ensure capability, security and value of delivering using cloud technology▪Reduces the need to manage/ monitor disparate applications▪Acts as enabler for consumer’s treasury management services
Connecting with multiple cloud‐based solutions:
▪ Online treasury platforms▪ Cloud‐based vendor ERP
solutions, such as SAP Financial Services Network (FSN)
▪ SWIFT “cloud‐based”connectivity via Service Bureaus and SWIFT Alliance Lite2
DATA
Source: Sand Hill Group’s 2011 “Leaders in the Cloud”
4747
Balance and transaction reporting
Integration TrendsStandardizing cash management information reporting
84%corporates want to see format and
implementation guidelines standardized
What we are doing to help standardize information reporting:
▪ Co‐chaired subgroups that created the BTRS Language and standard approach for formatting Extended Remittance Information (ERI)
▪ Will offer Balance and Transaction Reporting (BTRS) in 2013– Standard definition of what a
transaction means and how it is to be reported
Currently, the BAI2 format leaves room for interpretation and is not standard
Looking ahead, X9 standard could be more compatible with other standards (like ISO 20022)
Current state of standardizing information reporting:
Source: AFP Survey, June 2010
48
0
20
40
60
80
100
120
What’s Most Important To Global Companies?
Source: GT News survey. Commissioned by Bank of America Merrill Lynch
Issues Very important
Important
Not important
Not important at all
49
What’s Most Important To You?Discussion
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