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Trends in Disbursements

While electronic payments account for only 18 percent of all payments (refer back to Exhibit 2.1), the advantages of disbursement by paper are diminishing.

• ECP has made the clearing process more efficient, eroding some of the clearing float benefits of paper disbursements.

• The willingness of trading partners to negotiate “float-neutral” terms (where the value date of the electronic payment is the same as when a check would have been debited to the payor’s account) is reducing resistance through compensation for foregone mail and clearing float.

• The current interest rate environment reduces the value of disbursement float.

• The cost of fraud and of measures to prevent fraud erases many of the pricing advantages of checks.

• B2B e-commerce requires the completion of the transaction by electronic payment.

• Terminal-based ACH is increasingly used for large value, nonurgent payments.

• Payment security over the Internet through such providers as Identrus (www.identrus.com) permits identity and credit verification, and provides performance and payment guarantees.

• Electronic cross-border, low-value, batch payment options are being developed to expedite global transactions. Some proprietary products are currently offered by global banks to link these payment systems in several countries. Other initiatives such as STEP2, developed by the Euro Banking Association (EBA), is based on open architecture access.

• The letter-of-credit process has traditionally been paper-intensive and time-consuming. The latest developments by companies such as Bolero.net and Trade Card have automated the process and facilitated electronic initiation and completion of the trade. The entire process can now be achieved in days rather than weeks.

Obviously, checks are not about to disappear tomorrow. Their value continues as a mechanism to “pay anyone, anywhere.” Their future will focus on fraud prevention at all four stages of check disbursement—preissuance, issuance, reconciliation, and retention. Imaging technology has assisted in improving the quality of data capture, the timeliness of transmissions, and access to lists of authorized company signers and quick identification of suspected fraudulent activity. Just-in-time printing has resolved many of the issues associated with the safekeeping and issuance of checks.

Taken From : Essentials of Managing Corporate Cash

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