By Patricia Hewitt,Director, Mercator’s Debit Advisory Service
As the continued economic weaknessand soft consumer spending trends force financial institutions togrow ever leaner, the importance of converting paper checks toelectronic payment forms is going to become even more apparent.Theprocessing cost differential, which I’ve been told can be as highas 90 percent, can no longer be ignored and that should drive theindustry to get serious about addressing the two most stubborncomponents of the paper check writing segments:low-value consumerchecks and high-value commercial checks.
This is where solution expertise,best-in-breed development, and scale are going to really mattersince (in order to address this need), financial institutions,consumers, and companies are going to require access to a widevariety of electronic payment options at a low cost and areasonable initial investment.BankServ’s acquisition of NetDepositis a good example of the type of consolidation that supports thisstrategy.In one transaction, BankServ doubled the size of theircustomer base and has access to NetDeposit’s expert solutions insuch growing markets as RDC and healthcare providers; boostingtheir ability to leverage their products to a larger, broadermarket.
However, let’s not be myopic aboutthis, converting paper checks to electronic payment forms isn’tnecessarily a literal translation.There are quite a few ways toapproach this issue including using both positive self-selection(consumers and businesses are presented with efficient anddesirable means of electronic payments) and negative self-selection(consumers and businesses are charged more for transacting viapaper).The market also offers a much wider selection of electronicpayment forms than has been available in the past including debitcards, online bill payment, electronic invoicing, and mobilepayments.Finally, consumers and companies are growing increasinglycomfortable or perhaps in some cases, resigned, to using electronicpayment forms.
However, having access to such awide range of electronic payment options and expert solutionproviders also requires that financial institutions develop astrategy designed to carefully segment their check-writing anddepositing constituency.Then it’s just a matter of designing aprogram to eat away at them.Bon Appetit!