analysis of all payment types - wild apricot€¦ · • offering payment types can improve...
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Optimizing PaymentsEfficiency, Risk and Incentives
May 21, 2018
Agenda
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• The History – Where Did We Start?
• The Future is Now
• Why is This Important?
• Balancing Your Payment Environment
• Payment Types – Pros and Cons
• Payment Acceptance Costs
• Trends in the Payment Industry
• How to Optimize
• The Future
The StartSpaceship Earth
The History – Where Did We Start?
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The Communication Progression
Carving, Painting, WritingImmovable Papyrus - Transportable Books – Knowledge Consolidation
Printing PressKnowledge for the Masses
Cars Expanding Reasonable Business The Internet
Information herein is considered proprietary and confidential.
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Blockchain Technology
The Future Is Now
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Today’s Technology Focus
– Security– Speed– Savings
Payment Technology Enhances Profits
Abstract or Indirect Profit
– Think of opportunity– Improve the customer relationship and experience– Benefit your suppliers business for B2B payments
Cost Center vs Opportunity Center
Why Is This Important?
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Your accounts payable environment has transitioned away from ‘how you pay’.
RatiosDays Payables = Accounts Payable/COGS x 365Cash Conversion Cycle = Days Inventory + Days Receivable – Days PayableCash Turnover = 365/Cash conversion CycleYou are using your working capital more efficiently
When?Your suppliers’ terms are no longer your terms, to a certain extentYour payment float is increased
Where?AnywhereVirtual CardsPayments via smartphones/tablets Internet Satellites
Why?Challenge the status quoWhy do you have to pay now? Pay laterWhy am I being sold this product?
Thinking Big Picture
Balancing Your Payment Environment
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Liquidity• Timing can be more important than you think• Intraday vs. EOD• Do more with the same - Opportunity Center
mindset• Earnings Credit Rate (ECR)
Example• Starting Balance = 100• Credits = 7• Debits = 7
TotalCredit 1 1 1 1 1 1 1 7Debit 0 0 0 0 0 0 -7 -7Net 1 1 1 1 1 1 -6 0Balance 101 102 103 104 105 106 100 103 Average Balance
Purchasing Card TotalCredit 1 1 1 1 1 1 1 7Debit -1 -1 -1 -1 -1 -1 -1 -7Net 0 0 0 0 0 0 0 0Balance 100 100 100 100 100 100 100 100 Average Balance
No Purchasing Card
Balancing Your Payment Environment
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What is a ‘Payment Environment’?
What are the challenges?
• Complex and confusing terminology
• Many unique products
• Hidden costs
• Sales tactics may drive profit to vendor and not maximize benefit to business
• Understanding how each payment type can affect your business
Payment Types – Pros and Cons
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ChecksPros Cons
Check Float Overall CostCustomization Fraud
Widely Accepted Bounced ChecksPhysical Deposits
ACHPros Cons
Lower Fees Fraud TrendsSpeed Shared Banking Information
Security Over Checks No Funds Guarantee
Purchasing CardsPros Cons
Options Processing FeesSecurity AcceptanceRebate Fraud*
Streamlined AP/ARFloat
Payment Acceptance Costs
Costs to Consider– Maintenance/Labor – Interchange– ACH enrollment and maintenance– Time and financial loss dealing with fraud– Re-associating remittance advice with payments
11*Aite Group’s Q1 2016 survey of 2014 U.S. Healthcare Providers with less than US$50 million in revenue
Example - Checks– Buy, maintain, print, burst/separate and envelope with postage. – AP employee receives invoice– Reconciliation and matching– IT support for internal programs– Mailroom processing– Scanning checks/invoices and keying information if applicable
Payment Method Avg. Amount Transaction Processing Cost
Staff or Labor Costs
Total Costs
Virtual Card 148.92$ 3.48$ 6.39$ 9.87$ ACH 156.11$ 1.68$ 9.42$ 11.10$ Check 146.61$ 2.57$ 12.23$ 14.80$
Cost of Acceptance for a Single Commercial Reimbursement Transaction
Trends in the Payment Industry
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70% of businesses will shift majority of payments to electronic payments
21% are already significantly using electronic payments (e-payments)
51% of B2B payments were made by check in 2017
*2016 AFP Electronic Payments Survey
Trends in the Payment Industry
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*2018 AFP Payments Fraud and Control Survey
Trends in the Payment Industry
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*2017 & 2018 AFP Payments Fraud and Control Survey
In 2016, 74% of organizations were victims of payment fraud and over 60% of those victims experienced losses in excess of $25,000
85%87%
82%
77%
71%75% 74%
5%
11%14%
27%
48%46%
48%
20%
43%
34%
39% 32%30%
23%
29%
22%
27%25%
30%28%
5%8% 9% 10% 11% 11%
13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015 2016 2017
Trends in Payment Fraud Activity(Percent of Organizations that Experienced Attempted and/or Actual Payments Fraud)
Checks Wire Transfers Corporate Credit Cards ACH Debits ACH Credits
How to Optimize
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Optimize by Understanding• The available products• Your environment• Your customers• How each option will affect your business• ROI
Funds and Program Consolidation
Payment Type• Checks• ACH• Purchasing Cards• Virtual Card
– Ghost Card/Account– Single-Use-Account (SUA)
Optimize RiskOptimize Cost
Optimize RelationshipsOptimize Processes
Optimize AR/AP
Optimize Profits
How to Optimize – Healthcare Example
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Current - Complex Payment Scenario
Purchasing Cards• Physical cards for office supplies, travel & entertainment (T&E) and
employee events and servicesACH • In-network claims reimbursements, payroll and a small portion of
out-of-network claimsChecks• Majority of out-of-network claims reimbursements
Opportunity - Virtual Cards & ACH
Benefits• Rebate potential, streamline AP, increased floatConcerns• Interchange costs, provider relationships
Conclusion - Give Options and Communicate
*InstaMed – Trends in Healthcare Payments Seventh Annual Report: 2016
How do providers receive payer payments?
Optimizing Payments - Inbound
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Provide your customers with a better experience while driving internal efficiencies• Security• Speed• Savings
CategoriesIn-PersonE-PaymentsMobile PaymentsIn-AppInternet-of-Things (IoT)Connected Cars
Payment TypesCredit CardsDebit CardsACHChecksMobile WalletsPayPalCryptocurrency
What you know about outbound payments can have a significant impact on how you manage inbound payments.
How to Optimize – Inbound Example
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Provide your customers with a better experience while driving internal efficiencies• Security• Speed• Savings
Declining Balance Pre-Paid• Reduced # of Transactions• Faster Customer Experience• Reward Opportunities
Options Driving Value• 43% of businesses offer 3+ payment options• 4% offer 10+ payment options
What you know about outbound payments can have a significant impact on how you manage inbound payments.
*IBM, August 2016; Global Online Payment Methods: Second Half 2016
How Does the Future Solve Today’s Issues?
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Blockchain• Security
– Most secure technology
• Speed– Fastest settlement time – 4 Seconds
• Savings– Cheapest transaction type – no middleman
Beyond the Transfer of Money• Smart Contracts• Customized platform• Trusting the system - not the person• Public vs. Private Blockchain
Examples• Healthcare• Finance• Music Records/Licensing• Diamond Business
The Future
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Moore’s Law – Transistors per Microprocessor1971 – 2,000 2017 – 19,000,000,000
Mobile Technology Trend• Games• Social media• Texting• Email• Internet
• Business
Costly multi-day settlement processes
Instant international B2B payments – Secure and Low
Cost
The Future
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New Understanding
• Know what to ask and why
• Positives and Investment rather than Burden and Cost
• Offering payment types can improve supplier and customer relationships
• Communication can enhance profits
• Lifecycle Costs vs. Immediate Costs
• Preparing for the future
• No solution is “one size fits all”
Your Payments Your Environment Your Opportunity
Thank you!Q & A