FTNI Blog

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.