For Small Businesses, the Buck Starts Here

Posted on Fri, Oct 09, 2015 @ 09:49 AM

  Author: Pat True,

For the past twenty years, I have had the privilege of working with financial professionals in all fifty states through training events and seminars, exploring key issues associated with short term working capital financing.  During these sessions, three common questions emerge:

  1. What are the key benefits of asset based lending to the financial institution?
  2. What are the key benefits of such financing to the business clients?
  3. What can the financial institution do to encourage business retention for services such as this?

After seeing more than 35,000 businesses use accounts receivable funding, I can offer the following answers to these questions.

Why do financial institutions offer accounts receivable financing?

Financial institutions offer A/R programs to make money for their stockholders and to meet the needs of their surrounding business community.  It is no surprise that small business is one of the most profitable sectors for financial institutions.  After all, statistics show that the small business sector is the keystone of the U.S. economy.  Based on the latest data from the SBA, there are roughly 28 million small businesses in the U.S that account for 55% of all domestic sales.  These businesses provide 55% of all jobs and have accounted for 66% of net new jobs since the 1970’s. 

By offering an A/R financing program, a financial institution can attract new customers, retain them, and generate revenue – not to mention fostering the growth and stability of a companies they serve.  When executed properly, they can do all of these things while preserving and improving asset quality.  As each business client grows, that growth leads to a full scope financial relationship through equipment and real estate financing, cash management services and services for employees of the business.

Why do businesses use A/R financing programs?

Commercial customers start using accounts receivable financing programs for a variety of reasons. For some, it represents an opportunity to increase gross sales. For others, it allows them to significantly reduce supplier cost through negotiated discounts. For all, it delivers a peace of mind that comes from having predictable cash flowing into their business.

For most business owners, cash flow is not about how much money they will eventually receive for a sale; it’s about when they will receive the cash needed to run their business.  It’s a matter of timing.

There’s no doubt that owning a small business is stressful. One of the top reasons businesses start A/R financing programs is to decrease worry about money coming in from receivables. Just ask a business owner to quantify the amount of time they dedicate to A/R related issues.      

Several years ago, a lender and a sales representatives were positioning an A/R financing solution with a prospect in Alabama.  At one point during the conversation, the business owner was asked how he would use the money from the initial funds transferred on his receivables.  In this case, the business owner had approximately $75,000 in current eligible accounts.  After paying off his existing line, the business owner was to net about $25,000 in the initial funding of his accounts.  When asked how he would use the money, he mentioned that he intended to go out and buy at least two new pairs of shoes.  The business development manager and the accompanying lender laughed and asked – “Why new shoes?”  At that point, the business owner invited them to look out the window to the front of the building, where there was a mailbox.  The business owner said:  “I hustle out to that mailbox at least six or seven times a day – looking for my paycheck.  My paycheck is not like yours, which comes every two weeks.  Mine is from my customer, and I don’t know when it’s coming.  It may be this week; it may be three weeks from now.  I have burned out at least two pairs of shoes looking for my paychecks.  So that is the first thing I would do.”  Needless to say, that business owner did enjoy the benefits of the program – for more than four years.  This is not to say that it didn’t have to make business sense as well, but peace of mind was part of that sale.

What are the keys to business retention?

Whether the customer enters an A/R financing relationship after conducting exhaustive analytical research or simply through intuitive reasoning, they continue using this vehicle for two primary reasons:

  1. The product continues to meet a financial need.
  2. The service features of A/R financing keep their company running smoothly.

To retain clients, the financial institution must work to confirm that both elements of retention are present.  The only way to accomplish this is to stay in front of the customer, to make sure that they are using such a program to their benefit.

In the end, retention is about two things, need and service.  If both are present, your client is likely to stay.  Most small business owners will seek some method of retrieving cash from their A/R during their life cycle.  Whether they are offering discounts to their customers for prompt pay, accepting credit card or electronic payments, financing their accounts, or selling their accounts, they are trying to unlock an asset that is more or less frozen within the balance sheet.  Many have decided that, as far as A/R financing goes, the buck starts here, where receivable means next day cash.



Tags: commercial lending

Commercial Mobile RDC – The Undiscovered Country?

Posted on Thu, Sep 24, 2015 @ 09:00 AM

Author: Jason Schwabline, 

Desktop Commercial Remote Deposit Capture is mature. It’s a safe place to visit, and most financial institutions offer it and many businesses utilize it. When speaking with bankers, if you ask; “Do you have a commercial RDC solution?”, the answer is usually a resounding “yes!” What I’m focused on here though is the other half of the RDC story…the new, popular destination in the commercial space-mobile: specifically, Commercial Mobile Remote Deposit Capture (mRDC) (that’s a mouthful!).When I think of Commercial mRDC, I envision it as a great uncharted country. It’s a tantalizing, far off place that we all talk about one day visiting, but haven’t yet made our travel plans. Think about the banks that embark now on a solid strategy for Commercial mRDC as the explorers with their backpacks on, headed up the next peak to stake their claim and start reaping the results. So the question becomes, why have so many been so cautious to embark on such a journey?

The thoughts are many, but something I routinely hear about is trust. Trust not related to the bank and its relationship with a business, but the trust that exists between a business and the staff they would arm with a mobile device to take pictures of checks. Businesses have been cautious thus far in offering mRDC, wondering, “Is it safe? Is it secure?” The answers are a resounding “Yes!”, based on previously implemented and successful Retail or Consumer Remote Deposit Capture solutions. Today’s Commercial mRDC offerings are built upon the solid foundation of already proven consumer offerings, with solid Know Your Client (KYC) practices and business rules that can be deployed across channels. It’s a paradigm shift from how traditional solutions arose in the financial space, where banks historically offered strong commercial services that then trickled down into consumer offerings. Mobile has been different, and it’s benefited us all. What better testing ground for the solution than millions of handsets completing millions of transactions daily with unremarkable fraud losses? It’s a focus group most product organizations could only dream of and we as solution providers and FIs have it.

Knowing that the foundations are solid, I propose focusing on the use cases that drive the solution.  Mobile handsets in the hands of employees are at an all-time high. No longer are they a “cool thing to have” but instead are a necessary business tool. Employees untethered in the commercial enterprise help drive improved satisfaction and efficiencies for customers and for the business. With most consumers already familiar with mobile phones, staff training time and the “new process fear factor” should be at a minimum. Fewer lost or damaged checks mean less risk. Monies paid and captured by check in the field can be introduced to the financial system for processing and settlement much earlier than ever before, benefitting both the business as well as the financial institution. Think of the delivery drivers in the field going from customer to customer. Property managers handling a multitude of locations. Service reps on their routes. The list goes on and on. If there are checks in the field, there is opportunity for Commercial mRDC.

So I say to you…is it time? Time to join me on a trip to a place that’s still undiscovered? I guarantee once you get there you will see it’s more familiar than you think.

Cue the chorus from “Low Rider”. (You’re welcome in advance for having that song in your head for the rest of the day.)

Tags: remote deposit capture, Mobile Banking, Mobile Remote Deposit

5 Clear Signs You’ve Outgrown Your Factoring Software

Posted on Wed, Sep 16, 2015 @ 08:00 AM

Author: Marvin McConaghy,

Factoring Software_Five Reasons

Over the years, I’ve sat through more than my fair share of factoring software demos where I’ve heard first-hand the war stories of factors. Some of the best were from those who started small, built their portfolios to an impressive size, and then hit a wall. They found out hard and fast that the old way of doing things would no longer cut it.

In those tales of growing pains, I have detected several recurring themes that are clear signs you’ve outgrown your factoring software:

  1. Volume
    Volume is the number one problem reported by growing factors--their systems simply can’t handle their increased volume. Whether caused by their software, their manual processes, or a combination thereof, once their business reached a certain size and complexity, their system began to falter. Something always needed to be done outside the software and brought in manually — taking up valuable time that could be better spent elsewhere.

  2. Limited Fee Structures
    Next on the list of factor frustrations is the inability to keep up with competitors that are offering more complicated fee structures. They needed to expand their product offering, but given the limited choices built into their portfolio management system, they had to either invent creative workarounds or watch their business go elsewhere.

  3. Support
    Technical support is critical for any software system, but even more so with financial products. Many lenders looking for a better solution were motivated by a need for more timely response to their questions. Others were tired of being charged extra for “asking for too much help.” Great support should be an integral part of your software solution.

  4. Paper
    Many factors feel trapped by a system that forces them to print anytime they want to review an aging, reserves, or client summary. It’s slow, wastes resources, and makes it difficult to share vital data with co-workers, clients, and partners. Paper-based processes simply don’t make sense in this day and age.

  5. Lack of Automation
    Lack of automation typically manifests as ballooning man hours. As your business grows under the current system, you are forced to add more employees to keep up. The only alternative to this increased overhead is to find a system that will automate processes at every turn—that will work smarter rather than harder.

If your factoring operation is experiencing any (or all) of these issues, first let me congratulate you on successfully growing your business. Hard work got you to this state (painful though may have been), and that’s always worth celebrating.

Celebrate growing business

Then know this—relief is out there! Start by examining your software options and be open to automating your processes. Increased efficiency will enable you to lower your overhead while you continue your growth streak—a true win-win.

Learn More About   CADENCE for Factoring

Read Next: Maintaining NIM in a Rising Rate Environment


The Hidden Challenges to Product Integration - Shall We Dance?

Posted on Wed, Sep 09, 2015 @ 08:00 AM

Barbara Vega Author: Barbara Vega,

As a product manager for a payment software solutions group, a request I frequently get from customers is, “Can you make these two products talk to each other?” It sounds like a relatively simple request. All it is direct communication or integration between one software product and another. How hard can that be?

Integrating systems and products, on the surface, may seem like a simple request. It may appear that products have overlapping data or that the end goal of integration is straightforward. It’s elementary, right? I want product A to “talk” to system B. As elementary as it seems, it can be complicated for the products and vendors involved. What FIs really want is for the systems to move in sync with one another, with product A responding automatically to related events or changes that occur in system B. In short, financial institutions don’t want systems to just “talk” to each other, they want them to dance.

Product Integration_It's a Dance

Here’s a look at some questions that reveal the hidden challenges in product integration:

  • Who integrates with whom? System integration is not magic, it requires software development to give systems the capability to interface. At least one of the systems must have a standard Application Program Interface (or API). APIs provide a doorway external systems can use to interact with specific functions within an application. Generally, in an integration project, the parties must determine which vendor’s API to use and how the other vendor will develop the integration module needed to connect to that API.

  • Which system is the database or system of record? When bringing data from a myriad of independent systems together, it must be determined which system contains the necessary, current and accurate source of data. I have found that many times the data is fragmented across systems. For example, the internet banking solution might have the current customer contact information, but the core platform contains current account balances and history.

  • Which system applies business rules and logic? For example, if the integration requested is customizing holds based on the customer relationship, logic might need to be implemented using data in custom fields on account records in the core platform. When business rules and programming logic need to be applied to data to make decisions or calculate a new result, which system vendor is responsible for programming that logic? Where does it make the most sense to be applied? Where will the logic be consistently applied across all channels? It doesn’t necessarily make sense to repeat code in multiple applications.

  • Variable product mixes. When FIs have a plethora of products and systems from different vendors, it could lead to more systems needing to be integrated. Integration requires development effort; thus, integration becomes more complex. We may have one customer that wishes for us to integrate with Mobile Banking Vendor C and Core Product D, while the next customer uses Mobile Banking Vendor E and Core Product F. Those requests potentially equate to four integrations; four development efforts. Variable sets of products make it more challenging and complex for vendors to develop and maintain code.

  • Assuring accuracy and compliance. Synchronization of data and maintaining accuracy is another challenge. It can be achieved, but requires significant testing and continuous oversight to assure accuracy now and going forward. If multiple systems have iterations of the same logic, for instance Reg CC hold logic, assuring that all vendors are compliant and which, if not all, must apply and adhere to regulatory standards is challenging. Which vendor will support the integration? By definition, the integration’s touchpoints exist outside of either system. This often makes it difficult to determine where problems are happening and who should troubleshoot the corresponding areas. Coordinating the efforts between two separate companies to build, test and support a joint integration effort can be taxing. Figuring out where one system ends and the other begins takes time and patience. It’s not just the two software products that have to be in sync, the companies involved have to dance together, too.

I don’t mean to imply that integrating systems and solutions cannot or should not be done. In today’s environment where a seamless customer experience is a consumer expectation, integration is becoming more important than ever (read more about customer experience best practices). Even so, it’s good for financial institutions to understand some of the fundamental questions that will have to be answered when they attempt to integrate two different banking applications or platforms. Quite often, credit unions and banks are surprised to learn how much time, cost, and difficulty is involved in integration. Fred Astaire and Ginger Rogers may make it look easy, but seamless, artful dancing requires an inordinate amount of planning, preparation and practice. If you want your systems to dance together, be sure you’re prepared for the work it takes to make that happen.

Learn More: How to Offer Your Customers a Consistent User Experience

Tags: customer experience, information technology

Maintaining Net Interest Margin in a Rising Interest Rate Environment

Posted on Wed, Sep 02, 2015 @ 08:00 AM

Brad Dahlman Author: Brad Dahlman, 

We all know it will happen, the real question is when?  As the Federal Reserve monitors unemployment inflation and global markets closely, it is widely expected that the federal-funds rate will be increased in the last quarter of 2015.  It has been almost ten years since the Fed raised rates!  The Fed dropped rates from 2006 to 2008 and has held them steady ever since.  An increase in the federal-funds rate would signal a dramatic change and should cause all financial institutions to consider the impact of a rising rate environment on their portfolio.  This will likely cause clients to reassess their products, services, and rates with their existing FI. 

Now is the time to:

  1. Quantify the impact of rising rates on your earnings – thru the use of an Asset Liability Management (ALM) tool or service.
  2. Devise customer facing strategies to protect profitable clients and provide pricing guidance.

Today I’ll focus on the customer facing strategies.

Background - As rates rise, we will feel pressure to pay higher rates to depositors and seek to gain higher rates from loan clients.  Our existing portfolio of fixed rate instruments (fixed rate loans, CDs and variable rate loans with “in the money” floors) will not immediately change.  These rising rates will likely cause an FI’s interest expense to rise more quickly than their interest income­, thereby causing some margin compression.  Since margin has historically represented 60-65% of an FI’s revenue, this margin compression should be of paramount concern. (See below)




Source: FDIC

In looking at margin trends this return toward more normal loan to deposit spreads shouldn’t be a surprise. 

In 2007, our loan to deposit spread was 265bp (7.07% - 4.42%).  It then grew dramatically during the financial downturn as deposits moved to FIs and the fed pushed rates lower.  The result was a healthy loan to deposit margin of 420 – 480bp from 2009 to 2015.  This additional 200bp of spread for the banking industry has been worth over $300 million in additional margin annually, but it is likely to decline as rates rise.



Source: FDIC

As we see rising interest rates, the key client facing questions become:

  1. How do we “protect” our most profitable relationships?
  2. How do we price transactions competitively and aggressively to win profitable business?

How do we “protect” our most profitable relationships?

To protect these relationships the first thing we must do is understand who these clients are.  In most FIs, we see that the profitable relationships are concentrated in the top 20% of clients.   As illustrated below, the top 10% of clients deliver an average profit of $4,623!  These “protect” clients tend to have larger balances, pay higher fees, and have higher spreads than other clients. 

We must identify these clients and build strategies to make sure they never leave.  I previously published a blog titled “Key Client Identification and Retention”, which includes several tactics around protecting these clients including:

  • Segment these clients into various profit tiers (or ranks)
  • Build a series of “benefits” associated with each rank
  • Feed these ranks into your core and CRM solutions
  • Train your employees on how to extend these benefits to key clients


How do we price transactions competitively and aggressively to win profitable business?

When pricing new business we must focus on the proposed transaction and ensure that we are competitive enough to win the business while also maintaining an adequate return. 

Competition is tight but we must avoid “blindly matching our competitors” on every transaction.  This would create a “race to the bottom” with the clients benefitting at the FIs cost.

We must establish targeted returns and provide the lenders tools and education to effectively compete.  A lender must have a tool that allows them to quickly enter in parameters of the transaction and generate various alternative scenarios with comparable returns.

FIs that offer their clients’ options win more business.  Clients like choices: fixed, variable, adjustable, lower rates/high fees, floors, etc.  The options put the client in the driver’s seat but also ensure the FIs returns are adequate.

Pricing is very complex with balance, credit risk, terms, floors/ceilings, and compensating balance all playing a factor into how a transaction should be priced. 

Conclusion: With rates rising and risk of margin compression squarely in front of us, we must make sure our front-line staff have the tools necessary to identify and protect profitable relationships and effectively price new transactions.

  Webinar Recording Download:  How to Improve Your   Net Interest Margin

Tags: Profitability Management

How We Build Products to Improve User Experience

Posted on Wed, Aug 26, 2015 @ 08:00 AM

Derik_Sutton Author: Derik Sutton,

As financial services become more reliant on the technology we leverage to better serve our clients, it would benefit us to view our own product processes through a modern lens.  I believe these principles are not only applicable to building software applications and services, but can also be applied to a financial institution (FI) building a new account type or updating its customer service as it relates to digital customers. Read my recent blog post to learn more about UX/UI best practices. User_Experience

We created a manifesto as a starting point to the team framework.  It is the central point we can reference to make sure we are all on the same page.  The manifesto starts with this statement:

We collaborate alongside engineering, sales, marketing, and operations to consistently design and inspire new and existing products.  We embrace creativity, resourcefulness, and valuing others before ourselves. We live the JHA company philosophy - Do the Right Thing, Do Whatever It Takes, and Have Fun.  

We used the corporate philosophy to guide our framework to ensure that how we worked aligned with the entire organization.  I’ve summarized our primary goals within each corporate principle: 

The Right Thing

  • Deliver an exceptional user experience
  • Provide opportunities of monetization for our customers
  • Elevate the JHA brand

Whatever It Takes

  • Market analysis
  • Product design
  • Technical product discovery
  • Prioritization
  • Documentation
  • Creative collateral
  • Ongoing iteration

Having Fun

  • Build products we want to use ourselves
  • Embrace challenges, reject the mundane
  • Always look for ways to be better
  • Collaborate with our team members
  • Find opportunities to promote others

Once we had our manifesto started (because it is never complete), we then started our “How We Work” document.  “How We Work” is cultural.  We value transparency, constant iteration of our tools and processes, and operating under the trust principle.  Our “How We Work” documents are available to all team members.  Any topic is up for discussion in a weekly meeting that brings our entire team together through video conferencing. 

Our product group works as follows:   

Market Analysis

  • Market research - building competitive analysis, creating white paper summaries, completing heuristic evaluations of existing solutions.
  • Rapid prototyping - low fidelity mockups that give customers something to interact with so they can better articulate their thoughts, emotions and pain points with our concepts.
  • Customer validation - taking initial concepts to FIs and their users to determine market value.

Product Design

  • End user validation - take higher fidelity design (wireframes or prototype) to end users to determine if the product improves their life by solving a problem.
  • Usability testing - evaluate our interaction design by giving tasks to end users and testing our product’s capacity to meet the intended purpose.
  • Iterate - take feedback from usability testing, improve the product and repeat until the product meets MVP status.

Technical Discovery

  • Discovery Team - collaborate to onboard engineering to the problem we’re trying to solve and the solution we’d like to bring to market.
  • Documentation - provide discovery team with documentation so they can start building.


  • Collaborative - determine the priority of new features and/or products.
  • Customer documentation work alongside the internal documentation team to ensure we launch with complete documentation for our FIs and their end users. 

Creative Collateral and Content

  • Empower stakeholders - create all necessary collateral and content in order to empower stakeholders to become knowledgeable about our products and services.


  • Always improving - whether we ship a new feature, a new piece of content, or an entirely new product, we never settle - we continually look for new problems to solve and we thrive on improving people’s lives. 

The intent of the process is to make sure the product team is doing its part to maximize the impact the product can have on our clients and their end users.  If our process fails or is broken, there is a direct impact on our clients, their end users, and the teams we collaborate with. 

We are at our best when we ship products that equally balance the needs of our stakeholders:  

  • End users
  • Financial institutions
  • Product platform
  • JHA organization

Learn More: How to Offer Your Customers a Consistent User Experience

Tags: customer experience

Lockbox Business Continuity – Disaster Planning

Posted on Wed, Aug 19, 2015 @ 08:00 AM

rob_hudecek Author: Robert Hudecek,

Stability remains one of the leading challenges for IT departments, especially when supporting ancillary, yet mission critical applications, for financial institutions such as lockbox item processing.  Server positioning for installed products remains in a constant virtual tug-of-war between business needs, audit requirements, and product constraints. As IT works diligently on the delicate balance between security and usability, management can often feel disconnected from their disaster preparedness for business units within their institution. 

Choosing a philosophy for a disaster recovery (DR) plan can provide a much needed framework to the required tasks needed in recovery. Two of the more common philosophies include Active / Active and Active / Passive

A. Production License / DR License (Active / Active)

This scenario typically requires the purchase and installation of two sets of application licenses with identical server sets.  Both license sets are active at all times. In the event of a disaster, production simply picks up where it left off on the primary to the DR environment.

Application installation teams will typically assist the financial institution's IT on setup of the server sets (which should reside in different locations). Replication of information between the server sets will need to include customer related or change information including databases, metadata, configuration files, and images (as applicable).

  • Pro – DR environment is always active
  • Con – Expense of multiple application licenses. 

Business_ContinuityB. Production License / DR Replication (Active / Passive)

This scenario typically requires the purchase and install of only one license set but two identical server sets. In the event of a disaster, application support typically activates the production licenses on the DR server set.

Application installation teams will typically assist the financial institution's IT on the setup of the servers (which should reside in different locations). Replication of information between the server sets will need to include customer related or change information including databases, metadata, configuration files, and images (as applicable). 

  • Pro – Lower license expense
  • Con – Timing required to spin up DR production environment

Testing License (Active)

Though not directly part of an official disaster avoidance plan, lockbox testing environments can be employed as part of DR as a last resort. Testing environments can require the purchase and installation of a limited but active license. These environments can be employed for version testing, project changes, and even DR testing. 

Learn more about business continuity planning by reading our step-by-step guide. 

Regardless of which philosophy (or multiple) is chosen, a plan is never considered complete unless you use it.  As a result, it is much better to perform a controlled switch-over test, than wait for a disaster to be your first run through.


ProfitStars Lockbox Services Learn More Today

Tags: lockbox services, business continuity

Making the Case for Bill Pay

Posted on Wed, Aug 12, 2015 @ 08:00 AM

Danny_Payne_Updated_small Author: Danny Payne,

Before you say anything, I couldn’t think of a better title.  The real irony is I have worked in the bill pay world for over 12 years and have seen plenty of growth, change, and true evolution.  The better part of my professional career has been spent advising, managing, partnering, or selling bill pay.  So why, after 12 years, do I need to make the case for it?  The answer is simple … more than 10 times a week I am told bill pay is a commodity and old news.  Not to mention, last year Gonzo Banker wrote an article titled, “Is bill pay dead and gone in 5 years?” Now let’s be realistic, dead and gone?  Are the billions of bills that go out to consumers and businesses going to stop?  Are we going to immediately have all our bills automatically withdraw from our account as soon as they are due?  This is where the true dilemma comes in for “killing” bill pay.  The Gonzo Banker article is only looking at one fraction of bill pay (that is currently responsible for almost 50% of the payments made every month).  There is a whole other world of bill pay out there and it is not dying, it is growing by the day. 

So making the case for bill pay starts with the definition.  I am going to define bill pay as “moving money from a personal or company account to another person or company”.  Therefore, you could pay a person, a bill, a traffic ticket, or your baby sitter and it is all bill pay.  Now that we have it defined, let’s defend its use and the importance of it in the financial technology world. 

  • Making the case for - Online Bank Bill Pay – Not dead, not dying, and according to our numbers, not even shrinking.  I won’t bore you with the details but more and more people are paying through their online banking account.  The average user is paying more bills and the average financial institution has more users.  I attribute that to the better look and feel and ease of use for most bill pay products.  Any updated product is going to have features that make it easier to add a new biller and easier to click through a make a payment.  Both consumers and businesses are offered unique bill pay options through banks and offer a way for the FI to service their entire group of customers.  The integration of eBills and paper shut off make online bank bill pay a “one stop shop” for paying your bills.  The addition of P2P gives you the ability to pay your billers that don’t exactly invoice you each month, and your friends and family.  Lastly, while bill pay is a cost center for the financial institution, it is also a sticky product, that drives customer loyalty.  Ask yourself if you are interested in moving all the bills you pay at your bank to a brand new bank down the road because checks cost less or they have more ATMs?  I know it makes it incredibly hard for me to think about closing or moving an account when I am paying more than 12 bills a month through my account.Online_Bill_Pay
  • Making the case for – Biller Direct Payments – Growing, evolving, and important to billers large and small.  The use of bill pay at the biller level reaches from your largest utility companies to your smallest utility cooperatives.  It doesn’t stop there, if you bill for legal needs or garbage pickup, you are now looking at options to receive your money faster than a check and more efficiently.  Better yet, there are companies ready to give you both without the massive volume.  Let’s not forget why consumers love biller direct.  They love immediate gratification.  The truth is, more people pay direct to the biller because they pay right at or around their due date.  ACI Universal Payment reported that 62% of consumers demand “light speed” for bill payment services.  The additional ability to use credit and debit cards give the biller the ability to post a payment in real time and update balances and amount due.  Your ability to take care of a late payment with credit can help you dodge collection for another month.  Biller direct is in a war with the previous mentioned online bank bill pay for the loyalty of consumers.  But the truth is, they are not fit for the same type of customer every month.  Although, there is a unique opportunity for financial institutions to get in the market as billers are looking for this technology from their bank or credit union.
  • Making the case for – Alternative methods of Bill Pay – This is the section where growth and evolution is happening.  The ability to pay is everywhere, but the ability to move money is also everywhere.  Many of these options include a social media aspect.  It is hard to ignore companies like Google, Amazon, and Facebook offering pay options along with PayPal acquiring companies like BrainTree/Venmo .  The world is filled with small business and billers who are more than willing to accept a payment method that doesn’t involve checks or the need to pay merchant fees to accept a card payment.  Funding from account to account is making it  easier for people to move money.  While I acknowledge these types of payments chip away at traditional electronic bill pay methods, they are also focusing on a different demographic.  If these larger companies want to focus the time and money on payments, they could be disruptors in the payments world. 

Being a part of a payments company that services both billers and financial institutions, it is an exciting time in this industry.  Bill pay is only part of the entire “payments” world that includes ACH, card processing, RDC, and more.  Financial institutions have the chance to be at the forefront of payments in so many ways by partnering up with the right companies to offer bill pay as a way to gain and retain customers, build revenue and service business customers, and be the service provider for their customers that companies like Google and Amazon can never be.  Much like we strive to be the trusted advisor to our FI customers, financial institutions need to work to be that same for their customers, or other technology providers will.  Learn more by reading these tips on how to grow your online bill pay.

So there you have it, my personal case for why bill pay is relevant, is growing (not dying), and why it is still a very exciting and ever changing industry.  Who knows who or what will be next, or how we will be offering new ways to move money from one person or company to another; but here’s hoping I will be here to see it!

7 Key Attributes to Look  for in a  Bill Pay Provider

Tags: online bill pay, payments

Commercial & Industrial Loans: the stuff dreams are made of

Posted on Wed, Aug 05, 2015 @ 08:00 AM

clarke_farmer Author: Clarke Farmer,

Yep, that title sounded a little cheesy when I read it too.  Humor me for a minute, and read on.

I met with a small business owner this week and we talked about what he wants to accomplish in the nextCommerical_and_Industrial_Lending-1 six months.  The business is in industrial coating and injection molding.

Although he has a nice building, we did not talk about his commercial mortgage.   Rather, he discussed updating some old equipment and adding a new machine.  He talked about welcoming back old customers that had left his high quality for lower prices.  Finally, his near-term plan is to use excess cash reserves to negotiate better pricing with suppliers.  All of this will be possible with a bundle of C&I loans from a local banker in the total amount of approximately $375,000.  His “new” lender agrees.  It won’t be long before he has the real estate loan too.

So, how could I link this common experience to something as dramatic as a business owner’s dreams?  Two ways: 

First, anyone who has ever been responsible for supporting a dozen or so reliable employees and their families knows the stress related to keeping the small business afloat.  Consider the number of people adversely affected if he/she makes a few bad business decisions.  Not to mention the many challenges that are beyond their control. Therefore, having reliable equipment, adequate working capital and strong supplier relationships are critical components to running a sound business.   As a result, the business owner will actually sleep better at night … and a good night’s sleep is often accompanied by a few good dreams.

Second, I have met with enough small business owners to point out that many of them will actually refer to their business very emotionally as the manifestation of a dream or vision.  Nearly every banker I have ever met has one good story about a fantastic business that they helped along the way.  And the owners of that business will be that banker’s customer for life.

With all of these “dreamy” benefits to C&I lending, it’s no wonder that so many banks are ramping up to grow these portfolios.

Consider these statistics from the Q1 2015 call reports:

  • Total net charge offs to loans – 0.11%
  • Total net charge offs to loans (C&I only) – 0.16% (0.05% difference in relation to all loan types)
  • Non-current loans to loans (FIs over $1b assets) – 1.87%
    • Non-current loans to loans (C&I only) – 0.49%
  • Non-current loans to loans (FIs $100m - $1b assets) – 1.28%
    • Non-current loans to loans (C&I only) – 1.27%

The data shows that the C&I lending business is a risk vs. reward dream come true.  The spreads are considerably higher than commercial real estate loans.  While, the loss ratios are trending towards identical or even better in the larger institutions.

In addition to the data, a C&I relationship brings advantages in terms of knowing the customer.  Lenders that have the equipment and/or working capital have their finger on the pulse of the borrower.  Monitoring these relationships affords a far more intimate knowledge of the current performance and future needs of the client.

Does your institution want to compete for commercial loan relationships without increasing portfolio risk?  Dream on …


Learn More at Our Commercial Lending Center

Tags: commercial lending

Biometric Technology on the Rise for Authentication and Payments

Posted on Wed, Jul 29, 2015 @ 08:00 AM

Penny_Webb_Headshot_50x50 Author: Penny

There has been a lot of talk (and some actual movement) in the financial service industry around the increased use of biometrics. The use of biometrics as a layer of security has long been an option for authentication efforts initiated from a personal computer, but there was lackluster acceptance in most segments of the payments industry. Thanks to rapid expansion in the mobile space, however, expanded use of biometric security is now one of the fastest growing means of authentication, while reliance on traditional passwords as a primary source of identification is becoming obsolete.

Apple’s incorporation of a fingerprint scanner in its latest smartphone models is one primary factor in bringing biometrics to the forefront for mobile and alternative payment security. The iPhone fingerprint sensor is clearly a front runner and the most widely recognized biometric security feature in use today. Many companies have jumped on Apple’s Touch ID bandwagon as a means of handling payment authentication. Biometric_Technology_fingerprint_authentication

Not all smartphones have a fingerprint scanning device, but they all have a camera and voice recorder. Enter the selfie as a biometric screening option. While talk of facial pattern recognition as a means of authentication started in earnest in 2013, institutions such as USAA, MasterCard and Barclays are a few of the companies leading the charge by including it in product releases in 2015. This year, USAA will offer its customers face recognition and voice recognition as authentication options. MasterCard and Barclays have face recognition pilot programs underway with the expectation of deployment later in the year.

How face recognition and voice recognition work

The facial recognition feature uses the smartphone or PC’s camera to view the customer’s face. It also requires the user to blink on demand in order to verify that what it’s seeing is an actual person rather than a photo. The phone or PC captures a photo to complete the payment authentication.Biometric_Technology_facial_authentication

In the case of voice recognition, the institution securely stores a recording of a customer’s voiceprint. When initiating a payment, the user is required to read a randomly generated phrase on queue in order to verify their speech patterns by comparing it against stored patterns.

Although some institutions’ solutions store an actual photo, fingerprint or voice recording, in most cases the solution stores a unique code generated by an algorithm based on data derived from those original sources. For each new authentication attempt, the device uses the same algorithm to extract a new code from the fresh fingerprint, picture or voice recording, then compares the new code against the stored one to determine if they are similar enough to warrant authentication. This method restricts the user’s (or the financial institution’s) ability to recreate the original source data and reuse it to thwart the authentication system.

Other emerging biometric security methods

A few other biometric options that are in their infancy are Vein Pattern Scanning and the Digital Tattoo. In Vein Pattern Scanning, the palm of the hand is scanned in a manner similar to the techniques used in a fingerprint scan. The individual patterns are used as payment confirmation. Google’s Advanced Technology and Products group in partnership with VivaLnk developed the Digital Tattoo. It consists of a nickel sized, paper thin adhesive which is worn on the skin. This product’s initial application provides electronic authentication to unlock the user’s smartphone. It remains to be seen whether this technology can transition to the payment space.

Microsoft is also jumping in the mix with a new product called Hello, which is designed for use with the Windows 10 operating system. MS Hello uses face recognition for its layered authentication approach. The Microsoft solution will not use the PC standard camera, but will require an infrared camera, reporting that they didn’t feel the standard camera approach was secure enough. In a statement from Microsoft, “Windows Hello has a 1 in 100,000 false accept rate, which is very high. It’s a lot safer than a password, which we know, can easily be forgotten, lost, stolen or hacked.”


A true multifactor approach to authentication has long been a requirement for financial institutions. Relying on passwords or other currently available sources for authentication will no longer be enough to authenticate customers and make payments secure. As they mature, the expanded use of biometric options as part of the payment and authentication process may substantially strengthen authentication efforts in the future, potentially making the online environment much safer for us all.



Tags: payments

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