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Trends in Collections

A major cash management trend has been the movement toward use of electronic payment methods. For the first time in almost a decade, the Federal Reserve reported declines in the number of checks processed in 2000 and 2001. As often happens, consumers adopt new trends faster than the commercial world. While the United States is still a long way from being a nation that collects and disburses electronically, consumer acceptance of some of the new Internet-based services, and digitization of paper formats, are helping to accelerate the trend.

Electronic Bill Presentment and Payment (EBPP)

According to the Harris Poll of April 17, 2002, mobile and Internet technology is used by over 66 percent of the adult population in the United States. Although buying products on the Internet and using a credit card to pay is a generally accepted practice, the process of viewing and settling the bill electronically, known as electronic bill presentment and payment (EBPP), is not. Nevertheless, the service has applications for many industries, from financial service providers to telecommunications companies and utilities.

With the emergence of secure e-mail and wireless delivery, it is expected that EBPP use will rise dramatically. The Tower Group estimates that by 2005 more than 2.4 billion consumer and B2B payments will be presented electronically.

Electronic Check Presentment (ECP)

ECP is revolutionizing the collection process by capturing data from a check and converting it into an electronic transmission that is cleared through the banking system. This not only accelerates the presentment of clearing items, but also speeds the notification of any checks being returned due to stop payments or insufficient funds in the account of the payor. In the case of check truncation in the collection process, the paper item often follows the electronic transmission. In point-of-sale situations, the transaction is converted into an ACH item and the check is often returned to the maker for storage or destruction.

Taken From : Essentials of Managing Corporate Cash

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