cost-reducing initiatives and new technologies in

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Cost-Reducing Initiatives and NewTechnologies in Electronic Tax PaymentsTuesday, August 12th, 2008Federation of Tax Administrators Technology ConferenceAugust 10-13, 2008, Chicago, Illinois

By David StephensonVice President of Channel Sales

2©2008 Metavante Corporation. All rights reserved worldwide.

Agenda

Defining “Electronic Payments”

Evolution of electronic payments in government

Trends of electronic payments in government

Cost-reducing initiatives

Question and answer

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Defining “Electronic Payments”

©2008 Metavante Corporation. All rights reserved worldwide.


Types of Electronic Payments

Simply put, any payment other than cash and paper checks Includes:

– Credit Cards– Debit Cards

• PIN-based• Signature• PIN-less

– Electronic Checks– ACH– EBT– Pre-Paid Cards– HSA/Flexible Spending Accounts– Smart Cards– Biometrics

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Evolution of Electronic Payments inGovernment



History of Electronic Paymentsin Government

Governments began accepting credit cards in the 1970s The emergence of e-commerce in the 1990s led to an increase in the

types of services for which cards were accepted as well as to theintroduction of the e-check

In the 2000s, there has been a rapid increase in card and ACH use forpayments such as taxes and licenses, but still room for growth.Increasingly, "smaller" levels of government, such as cities andcounties, are offering these services

At the Federal level, the Financial Management Service (FMS) hasfocused on increasing use and acceptance of electronic payments

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Evolution of Electronic Paymentsin Government

ACH for payments only– Bank drafts– Mostly used in the public utility space– Remains popular today

Point of Sale (POS) terminals (credit cards) Interactive Voice Response (IVR) systems for payments

– ACH– Credit Cards

Web applications for payments– ACH– Credit Cards

Point of Purchase (POP) check conversion


Evolution of Electronic Paymentsin Government

Web and IVR applications that provide billing informationpresentment

Bank “bill pay” services– Provides convenience for citizen, but can provide challenges to

government– Takes an “electronic transaction” and turns it into a paper transaction

Integrated Web and IVR applications for real-time updates to clients’databases

Back office software capable of capturing and transmitting paymentdata

Kiosks Recurring payments

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Trends of Electronic Payments inGovernment



Consumer Non-GovernmentConvenience Payments Trends

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Citizens/Cardholders Speak


Federal Government Collections

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State Government Collections


State Revenue Collections

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Expansion Opportunities for ElectronicState Tax and Fee Payments

Most states offer electronicpayments, but most citizensdon’t use it . . . .


Room for Adoption Growth ThroughConsumer Education

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Convenience Payments Facts

Unique Requirements 72% of expedited bill payments carry associated fees to the consumer Convenience and last minute payments represent 55% of the

transactions in this market ATM debit PIN and PINless

– Newest option with a 2% market share– Reduces payment processing expenses


Federal Tax Payment Research

IRS survey data suggests that…– 69% use the online payment services for convenience– 14% use the online payment services because they were “running out of

time” – “panic payment”– 8% use the online payment services for reward points

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Recent Emerging Market Trends

MasterCard POS Convenience Fee Program – October 2007 American Express POS Convenience Fee Program – March 2008 Visa Tax program (permanent)


Recent Emerging Market Trends

Visa fixed interchange for utilities – April 2005 PIN less debit offering for non tax payments to government

– Expands payment types accepted– Bank-issued ATM cards eligible– Reduction of NSF checks through immediate verification of funds via debit

network PIN less debit offering for tax payments

– Flat and fixed dollar convenience fee regardless of size of payment(approximately $3.00)

– Designed to increase usage of electronic payments– Capture convenience fee-sensitive taxpayers

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Future of Electronic Paymentsin Government

Greater need for security—Fully PCI compliant– Government entities aware of risks– Vendors working with government entities MUST be PCI Compliant

• Any back office software• POS solutions• Web applications• IVR applications

Greater level of integration with back office systems Greater use of kiosks Greater use of consumer education/adoption marketing

– To achieve maximum benefit from electronic payments– Better serve constituents



Heightened awareness of “green” business practices– If two percent of households went to paperless billing and payment, the

following impact would occur annually in the U.S.:• Save 15,093,962 pounds of paper;• Save 181,128 trees;• Avoid producing 196,040 tons of greenhouse gasses, equivalent of

taking 32,572 cars off the road;• Avoid creating 143,960,137 gallons of wastewater;• Avoid using 10,294,560 gallons of gasoline to mail bills, statements,

and payments– Not only environmental benefits, but cost saving to government through

these green business practices. Information based on 2007 study by the PayItGreen Alliance, a group

of leaders in the financial and consumer billing industries, andevaluated by the Environmental Protection Agency (EPA)(www.payitgreen.org)

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Expanded use of kiosks in government offices Google Check Out PayPay BillMeLater M-Payments 24 hour settlement and/or same day settlement of funds Micropayments Check 21 Biometrics


Cost-Reducing Initiatives


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Web/IVR Efficiencies EconomicsManual vs. Automated

DMV Example (does not include pay ment processing costs)

Source: MasterCard Public Sector Agencies Financial Model



Interchange Management PIN Debit PIN-less Debit

– Greater use of flat and fixed dollar convenience fee (around $3.00 pertransaction, regardless of amount of payment)

Expanded convenience fee programs by card associations and cardcompanies

Expanded use of kiosks Integration with back office systems which reduce manual processes

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Check conversion and Check 21 – eliminates handling of paperchecks

Enhanced integration of payment data resulting in lower operatingcosts

24 hour or same day settlement of funds increase interest on funds Greater emphasis on consumer education/adoption

– Vendor-supported– Financial support directly from card associations and card companies

Standby Letters of Credit

Questions & Answers

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