Deposits are Not the Pain

 Author: Rob Hudecek, RHudecek@profitstars.com

Most industry experts agree financial institutions, more than ever, need to appear relevant to the businesses they serve.  Through marketing channels such as mobile apps, blogs, Facebook, and Twitter, financial institutions are provided the opportunity to reach vast audiences with the services they offer.  There is more to relevance, however than just getting noticed.  As catch phrases such as "comprehensive treasury management" and "full service merchant solutions" are delivered so often and by so many, it is getting increasingly difficult for target merchants to understand the message.

Where Your Patient Is

Business demographics are changing.  Remote office employees, many of whom can be found at your local Starbucks™, are becoming more prevalent (just try and sit down in a coffee shop sometime during the workweek to read a book and you will know what I mean).  Payment channels are changing as well, and as a result, non-direct financial institution and mobile payment methods such as PayPal™, Square™, near field communication (NFC), and mobile check capture have spring boarded to become comprehensive offerings, further distancing the merchant needs from their current financial institution.  Basic remote deposit capture has become an expectation, not an enhancement to the modern merchant’s needs.  The convenience of deposit is not sufficient enough to hook this essential customer base.

Know the Symptoms

No matter what type of receivables management is used by the merchant, reconciling payments to the overall deposit and accounting records is costly and time consuming.  Consider the challenges of handling the various under payments, over payments, late payments, pre-payments, missed payments, and returned (NSF) payments that come along with the standard payment.  These pain points for merchants most often go beyond the necessity of getting the associated deposits to the bank in time, and only increase as payment volumes increase.

Another merchant challenge is handling multisource payments (i.e. mail in, counter, credit card, check, online, stored value, kiosk, etc.).  While electronic payment methods such as online bill payment, payment portals, etc. began as consumer conveniences to instill on-time payment, today many of these services have grown to integrate receiving merchant conveniences as well (including cash and receivables management).  As the consumer adoption of electronic payments continue to increase, more service providers are coming to market and many times these providers are not directly tied to the merchant’s financial institution.

A Search for a Cure

Just as merchants are pulling in and getting back to their primary business practices, financial institutions need to do the same for their merchants by “knowing their customers”.  Financial institutions have traditionally been a trusted asset to their customers and will often times be the preferred business partner over a third party in the payments arena, provided the service offerings are there.  By recognizing that the deposit is in many cases not the source of frustration in merchant receivables processing, a new emphasis in solving the challenges illustrated above can further solidify the relationship.  Reconciling receivables is a cost center duty…and businesses are becoming more compelled to outsource these duties in order to focus on their core business (as is apparent with transaction fees generated by current commercial services).

The Fly in the Ointment

Though traditional remote deposit capture and lockbox / receivables processing provide some of the answers, in order to be truly competitive in the payment processing market, financial institutions need to extend beyond the traditional check payment reconciliation to include “meaningful” accounting details to all merchant deposits received.  This includes an aggregation of both paper (i.e. coupons, checks, invoices for mail in, branch location, walk in, etc.) and electronic (i.e. bill pay, credit card, draft, stored value, kiosk, mobile, etc.) sources.  Today all these sources are fragmented and often left up to the merchant to sort out.  By working with the merchant and recognizing their current and future payment considerations, a financial institution can become truly relevant; completing the revenue cycle with a receivables hub.  This initiative will allow financial institutions to remain an essential business partner for the merchant both in their deposits and the details supporting them.

We still may not be able to find a quiet seat at the coffee shop…but at least we will know where our payments are.