FTNI Blog

Believe it or not, people (and companies) are still using checks to pay their bills. In fact, in 2014, 93 percent of checks deposited as images came from business customers.¹

The time-tested routine of invoice and check within traditional accounts receivables (AR) processes has officially been disrupted as the world races towards electronic payments. Disrupted, yes. Dying, perhaps. But not dead.

Checks may not be the next new thing—in fact, check use is on the decline—but believe it or not, remote deposit capture (RDC) can help you drive strategic integration and streamline receivables processes within your organization.

Originally published in Payments Business Magazine (May/June 2015 Issue)

Integrated Systems Lead to Faster Reconciliation of Checks, Which Means Lower Costs and Speedier Remittance

I am waiting for the day when I can pay for everything—groceries, trips, my mortgage—by waving my hand over a sensor on my watch. We’re moving in that direction; at some point, as the cost of smart phones drops and the technology for mobile payments catches up to consumers, technology will advance to the point that both making payments and reconciling remittances become swift and painless.

US companies are wasting $1 billion each year because their receivables and payment processing systems are siloed and overly complex. It’s a grim picture, and it’s not improving nearly as fast as it could be. In the burgeoning digital age, consumers have come to expect rapid, personalized experiences in every aspect of their lives, from ordering groceries online to paying their bills. Companies, wanting to delight their customers, have responded by adding disparate platforms and capabilities to their accounts receivables (A/R) systems: ACH, pay-by-phone, online payments, you name it.

Part 1 of the 3-part True Straight Through Blog Series

Here at FTNI, we’ve been in a lot of conversations lately discussing how siloed the payments space has become. With technological advances in mobile and online payments over the last decade, companies have had to stretch their capabilities to keep up, offering customers multiple different ways to pay. This is great news for customers, but it’s been a struggle to manage multiple, disparate payment platforms and the manual processes created as a result. Integrating the various technologies used for accounts receivables (AR) is a bit of a monster, frankly.

Once upon a time, when a customer decided to pay with a check, the business receiving their payment would deliver that check to their bank for manual processing. Upon receiving the customer’s paper check from the business, the bank would then verify funds, process the payment, and deposit the funds into the business account. The merchant would then wait for the funds to clear. This process was very time consuming and often took several days to complete.

As we take a look at recent trends, data and what we are seeing with our own customers, a few things are certain. As the payments landscape changes, we see more payment types and channels being added but not many (if any) being phased out. This translates into increased complexity of payments processing for businesses today and into the future.

Checks Remain Strong but Move toward Electronic Imaging

For example, checks are still in wide use and are not going away as many had predicted in the past. The volume of checks is lower than other payment types, but businesses are still relying on them for both accounts payable and receivables. However, trends show consumers are adopting new methods to enhance the way these checks are processed. Nearly one in six checks are now deposited as an electronic image rather than paper and we expect this trend to continue growing significantly in the future.

Fraud Continues to be a Concern

One of the reasons that businesses and consumers still rely on checks could have to do with fraud concerns. Fraudulent transactions accounted for $6.1 billion in value, representing 31.1 million unauthorized transactions in 2012. Of this amount, card fraud substantially outpaced both check and ACH fraud rates, representing 92% of all unauthorized transactions. That clearly poses a concern for businesses who want to provide convenience to their customers but avoid fraud loss. Businesses must continue to focus on security, such as providing end-to-end encryption to ensure the transaction is secure from initiation to posting through to reconciliation. This becomes even more important with the imminent proliferation of mobile payments.

Mobile Payments Abound

Mobile payments are on their way to becoming the new norm. In North America, mobile transactions accounted for nearly one-fifth of all transactions last year, making up approximately $37 billion in volume. Both businesses and consumers alike are embracing the mobile trend and increasingly leveraging mobile remote deposit capture (mRDC), in addition to credit card and ACH-facilitated mobile payments, for more traditional payment remittances. More than one in eight Americans have used their mobile devices to deposit checks. Furthermore, of the 17% of checks paid as electronic images in 2012, 93% of them came from business customers.

No doubt, smartphone payment usage will only continue to increase as the number of smartphone users is anticipated to be nearly 160 million by 2014 in the U.S. alone. mRDC will likely be the next big wave of growth in mobile payments, with 48 million smartphone users expected to use mobile deposit features by 2016. This could provide significant cost and time advantages to businesses who embrace this trend.

FTNI’s ETran solution offers a unique and time-saving MICR (magnetic ink character recognition) matching tool that can be used by any business that receives checks from the same payers on a monthly basis (examples include loan processors, insurance agencies, nonprofit agencies, etc.). MICR check matching collects account information and reduces manual processing time. So what is MICR and how does FTNI’s matching tool work?

MICR verifies the originality of checks and other paper documents. Characters in the MICR line on the bottom of the check are printed with special ink that is sensitive to magnetic fields. The characters on the MICR line usually include the bank code, account number, check number, check amount and a control indicator. MICR characters can be manually read, but the technology also allows software that can read MICR to scan the information directly.

Remote deposit (also known as ‘Remote Deposit Capture,’ or ‘RDC’) is a way to process payments without sending checks to the bank. With remote deposit capture, you can scan (or snap) an image of a check, send the image to your bank, and see the funds added to your account more quickly.