19 October 2017
visit www.avoka.com

Clearing house study identifies electronic payment barriers

20 August 2002  |  4327 views  |  0 cash - dollar moneybags

The New York Clearing House has published a market research study that identifies five key barriers to electronic payments across large, medium and small companies.

The survey of one hundred fifty-five companies targeted treasurers and other financial professionals in charge of the payments area within their companies. This survey was followed by nine focus groups of executives and senior managers responsible for company finances and accounts payable/receivable.

While company representatives agree that the trend is toward electronic payments, for many there is little incentive to move quickly in this direction. The results tally with research conducted by the Federal Reserve and Nacha which show that paper-based payments still represent 84% of all US corporate payments.

Most company representatives stated that lack of information with payments was a key barrier to be overcome, although they varied in the amount of information they need. Currently, one seventh of all payments are accompanied by enough electronic remittance information for automated reconciliation. The survey also found that across the revenue segments 65% of companies were "likely" to "certain" to adopt a service that integrated the remittance information with the payment.

Companies have shown they are more interested in receiving payments electronically than in sending them, says Nacha. This is partially due to the perceived loss of cheque float associated with making electronic payments. Since ACHs and wires settle within one or two days, funds are moved earlier than with cheques, unless the terms of payments are renegotiated.

Furthermore, there is often an assumption that the electronic payment was a debit transaction initiated by their trading partner. Results show that while they do like using direct debits for collections, businesses do not like being debited by other companies as a form of payment. Instead, they prefer to control the timing and amount of payments. Direct debits are primarily used out of pressure from large customers or limited to well-established business partners, due to the lack of security and the difficulty in resolving issues.

The beneficiary’s bank and account number must be known in order to initiate electronic payments. Many companies said they were reluctant to give out their account numbers, which is required to initiate electronic payments.

This points to an overriding security concern that many companies have with their accounts, says Nacha. The survey showed 38% of large revenue companies had experienced unauthorised debits to their accounts in the past six months.

Another barrier is the lack of functionality and integration in cash management and accounting systems. Existing business software is not designed to easily send or receive payments, nor is it integrated with the payment systems in other parts of many companies.

The Clearing House says it is addressing these barriers by enhancing its payments systems and working with accounting and cash management software providers, as well as its eleven owner banks. As part of this work, The Clearing House has developed the Universal Payment Identification Code (UPIC), which allows companies to receive electronic credit payments from trading partners while masking sensitive banking information.

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Revised Fed stats show US cheque use in decline since mid 90s

Revised Fed stats show US cheque use in decline since mid 90s

15 August 2002  |  3189 views  |  0 comments

Related blogs

Create a blog about this story (membership required)
visit www.capgemini.comvisit www.vasco.comvisit www.innotribe.com

Top topics

Most viewed Most shared
Ripple looks to drive bank adoption with $300m XRP rebate programmeRipple looks to drive bank adoption with $...
15518 views comments | 12 tweets | 4 linkedin
Swift positive on blockchain, but big challenges remainSwift positive on blockchain, but big chal...
8710 views comments | 16 tweets | 22 linkedin
hands typing furiouslyHow artificial intelligence can deliver a...
8349 views 0 | 8 tweets | 9 linkedin
satelliteGates Foundation backs Ripple collaboratio...
7795 views comments | 13 tweets | 10 linkedin
IBM uses blockchain to improve cross-border payments processingIBM uses blockchain to improve cross-borde...
6962 views comments | 9 tweets | 17 linkedin

Featured job

Competitive base, commission, benefits
London, UK

Find your next job