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Latest Insight Into Payment Remittance

The Aite Group recently conducted a survey that analyzed remittance practices, benchmarks and perspectives of US and International corporations.  The findings confirmed some commonly held views but also provided some surprising insights into practitioner’s preferences.

The study was based on 240 U.S.-based companies, 280 companies based outside of the U.S., and a total of 25 financial institutions and other industry participants (e.g., third-party processors, vendors, and industry utilities)

Some of the less surprising findings were:

  • Checks still rule. 70% of B2B payments are still made via check.
  • The lack of structured data and application of standards makes custom coding the norm to improve straight-thru-processing (STP) rates.
  • Midsize and small businesses lack the IT staff to develop automated solutions.
  • Society still worries about exposing bank account numbers to trading partners.
  • Small businesses comprise the highest percentage of business customers and suppliers for U.S. –based companies. 34% of receivables respondents are less than US $10 million in revenue and 40% of payables respondents are less than that same threshold.

Some of the more surprising findings were:

  • Almost 60% of payers at U.S.-based companies allow other companies to initiate direct debits to their companies’ accounts, while only 25% of companies based outside of the US allow direct debits to their accounts.
  • Generally it is the payer who determines how remittance information is exchanged with suppliers.  Suppliers are not in a position of strength when it comes to dictating formats.
  • For both Receivables and Payables respondents, both within and outside of the U.S., having the remittance information when the payment is received is the most important consideration, more so than receiving the information in a structured format or being able to auto-post the information without operation intervention.
  • Of U.S. remittance volumes by channel, only 10% are sent with the payment in an industry-standard format. 56% of remittances must be re-keyed into AR systems! 
  • The most preferred way of receiving remittance information, regardless of business size, is… email!  Email is considered easy and convenient, quick and timely and provides adequate levels of detail.
  • The most preferred way of sending remittance information is mail (for small and medium businesses (< $10M and $10M-$500M in revenues respectively) and email for large businesses (> $500M in revenues). 

The shift from paper to electronic delivery of both payments and associated remittance has been inexorable but slow. The results of the survey show clearly that the most popular and prevalent form of remittance delivery has the following characteristics:  it’s ubiquitous, it’s familiar, it’s easy to use, it’s reliable, it’s based on a worldwide standard, and it is perceived as free.  As the financial services industry, software vendors and standards groups continue to support efforts to enable straight through processing, it will be important to keep these characteristics in mind.   

 How do these findings align with your experience?  I’d love to hear from you.


Comments: (3)

A Finextra member
A Finextra member 20 July, 2012, 19:57Be the first to give this comment the thumbs up 0 likes

Yes, companies out there continue to struggle with the disjointed payment / remittance process.  Where they exist, email remittances (now printed direct from the fax machine that used to receive them over a phone line) are the norm - they come out of SAP / Other ERP systems as pdfs and arrive typically one or two days before the payment at the target email address.

Oh for the day when the payment itself carries the remittance and we can really start STP.  Until then, we will remain in the dark and grateful that we have at least received the cash from our customer - adding it joyfully to the growing pile of unallocated receipts in the sales ledger.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 24 July, 2012, 19:47Be the first to give this comment the thumbs up 0 likes

Maybe I'm missing something, but I'm unable to reconcile the first point in the second list with the first point in the first list. If 60% of B2B payers accept direct debits, how come 70% of payments are made by checks?

For many suppliers - me included! - collecting the payment in time is a major task in itself. Most incoming payments don't contain any remittance information, let alone in an industry-standard format. The second point in the second list shouldn't be a major surprise for many such suppliers.

Until e-payments permit detailed narration required for reconcilation - rather than just a cryptic message that can be accommodated in the limited lengths of their reference field - we can expect the usage of checks to continue to dominate B2B payments.

A Finextra member
A Finextra member 04 October, 2012, 05:30Be the first to give this comment the thumbs up 0 likes

I missed this article unntil now but the day is coming  when a web reference carried within the limited lengths of e-payment reference fields can be associated with any amount of remittance information held outside payment infrstructures. 

The short URL is automated and generated as part of the payment file.

Any amount of payment remittance detail, required for reconciliation, can be downloaded as a PDF or via web service to enable straight through processing.

Its almost free but ticks all other remittance delivery charateristics. 

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