epayments: The Next Step Toward a Paperless Business to Consumer Experience Kentucky Treasury Management Association May 16, 2017

Transcription

1 epayments: The Next Step Toward a Paperless Business to Consumer Experience Kentucky Treasury Management Association May 16, 2017

2 Discussion Outline Introduction Current Landscape Solution Overview Potential Use Cases Getting Into The Details

3 C-Suite View Making Do With Less = Need for Productivity Gains Revenue Growth 4.1% Finance Staffing (FTE) -4.4% Operating Budget -3.8% The Hackett Group 2017 Finance Executive Insight Study 3

4 We are Far from a Check-less Society Latest Federal Reserve View CAGR # Value Average # Value Average # Value Checks Written 22.9B $27.83T $1, B $27.34T $1, % -0.6% Checks Converted 2.7B 0.62T B 0.50T $ % -6.4% Checks Paid 19.7B 27.21T 1, B 26.83T 1, % -0.5% ACH - Credit 8.5B 76.56T 9, B 90.54T 9,145 ACH - Debit 11.9B 52.46T 4, B 54.76T 3,997 Total ACH Payments 20.4B T 6, B 145.3T 6, % 4.0% Debit Card 47.2B 1.87T B 2.29T % 7.0% Credit Card 26.8B 2.55T B 3.16T % 7.4% Prepaid Card 9.3B 0.23T B 0.27T % 5.5% Total 123.4B $166.88T $1, B $177.85T $1, Federal Reserve Payment Survey 4

5 Current Landscape

6 epayment Alternative Driven by Consumer and Corporate Value Proposition CONSUMER CORPORATE Expedited payment access Lower settlement costs 6

7 epayment Alternative Other Key Drivers Millennial Phone Access the average millennial touches their smartphone 50 times each day (entrepreneur.com 2014) Peer or Peer Network Growth Person-to-person electronic-based payments are projected to increase 4x by 2018, reaching $90 billion(statista 2016) Control Over Payment Method consumers looking to dictate how and where they are paid check, ACH, prepaid card Escheatment Costs compliance, control and reporting activities in addition to actual recovered amounts Stop Payment and Reissue Costs for lost or otherwise outstanding payments Obtaining and Securing Banking Information challenges with obtaining, validating and securing banking details needed to initiate electronic payment 7

8 Financial Technology Companies Client Top of Mind Considerations Regulatory oversight Financial strength and adequacy of capital Data privacy / security Safety and soundness Reconciliation More than just facilitating a transaction Need for integration and support of associated reconciliation Accounting presentation of cash = bank statement activity 8

9 Financial Technology Companies Innovation or and Disruption PARTNERSHIP 82% of financial institutions (FI s) expect to increase FinTech partnerships in the next 3 5 years 45% are currently engaging with FinTechs up from 32% in 2016 INTERNAL INNOVATION CUSTOMER ALIGNMENT 77% of FI s expect to increase internal efforts to innovate 84% of customers already conduct Payment Activity with FinTech s 68% for Funds Transfer DISTRIBUTION 27% of FI s are offering services through FinTech s up from 17% in 2016 BARRIERS Primary barrier to innovation: 54% cite data storage, privacy and protection considerations 2017 PWC Global Fintech Report 9

10 Peer to Peer Payment Networks Different Focus and Approach Multi-Bank P2P system comprised of largest financial institutions Acquired by Early Warning which will combine payment capabilities and security Expedited payments now occur across member institutions To be rebranded as Zelle Expected coverage of 65% of US consumer bank accounts P2P Service developed by CashEdge which was purchased by Fiserv Institutions on the platform include Ally, BoA, TD, Citi, Fifth Third, PNC, Regions, Suntrust, US Bank and Wells Currently have over 2,000 registered FI s using the service Combines the social aspect of paying others with convenience There is no charge for ACH or debit transactions News feed allows shows payment activity among friends Not used to pay for goods Can request funds from others Power new Ledge App which is for peer to peer lending Started in 1999 and acquired by EBAY in 2002 before being spun off in 2015 Funds can be transferred via ACH, debit or credit card Acquired Venmo and Braintree Launched in 2008 Funds can be send via , phone number, Facebook, Twitter and linkedin along with business that accept dwolla Use an alternative form of ACH through a network of Dwolla accounts Money is simply transferred via and linked to a debit card account Senders may also use the square cash app on their phones 10

11 Solution Overview

12 Solution Overview High Level Process Flow 1 2 Company submits payment file to bank that contains Payee name, , phone, address, and payment info Bank delivers Payee a notification that Company is attempting to send a payment Payee can accept payment or elect to enroll default options for check, debit and pre-paid cards for those who decline epayment option 4 Bank processes payments 5 Client receives processed payment information and reconciles 12

13 Payee Experience Providing Ease and Effectiveness in Accepting Electronic Payment Bank contacts network to determine if payee is enrolled Payer submits payment through import, freeform entry, or file transmission If payee is enrolled for auto pay: Payee receives an informing them that funds will be automatically deposited in their bank account If payee is enrolled for manual accept: Payee receives an informing them that funds are waiting to be accepted to their bank account Bank sends funds to the payee s bank account and debits payers account Payee receives funds If payee is not enrolled: Payee receives an giving them the options to: Enroll their U.S.-based account through a member bank website or directly through the network website Receive a check or prepaid card Payee selects payment type 13

14 Potential Use Cases

15 Potential Use Cases Likely Suspects Insurance - Claims Payments Healthcare Patient Refunds Higher Education selected uses such as per diem for athletic teams; restrictions on tuition refund (Title IV) Other large volumes of check-based payment activity directed to consumers 15

16 Getting to the Details

17 Getting to the Details Important Payer Attributes Known / Unknown Registered in P2P network? Impacts notification Payee action needed to accept payment Network/ Non-Network Is the payee s bank in the P2P network? Impacts settlement process and timing Expedited / Standard Applies to network banks Bank decision to support expedited vs. standard settlement Affects ultimate settlement timing AutoPay / Manual Accept Applies to registered users Does payee want to automatically accept any incoming payment or review first? Most banks allow for the payee to decide 17

18 Getting to the Details Information Needed to Execute a Payment Payee Name Mobile # (optional) Mailing Address Payment Amount Origination Date Days to Expiration Action New, Modify, Cancel Addenda Fields (3) and Memo Payer Payer ID Settlement Account 18

19 Getting to the Details Payment Notification Payment notification delivered via registered users may configure for text notification Example of notice for unknown payee Get Your Money Now Link directs to network for registration In-network or out of network bank? In-Network: directed to bank landing page and enrollment experience Out of Network: create account, accept terms and enter account information 19

20 Getting to the Details Settlement In - Network Expedited Standard PAYEE Same Day Electronic Payment (< 5 minutes) Electronic Payment within 2 business days PAYER ACH Debit +1 business day (aggregate of epayments) PAYEE S BANK ACH Aggregate Net Settlement of epayment transactions Out - of - Network epayment ACH Credit received +3 business days ACH Debit +2 business days (aggregate of epayments) ACH Receipt by Receiving FI Check Mailed and received within 3-5 business days Funded on presentment Debit Card Pre-paid Card Same day credit (<30 minutes) Created, mailed and received within 3-5 business day ACH Debit +0/1 business days (aggregate of epayments) ACH Debit +1 business day 20

21 Getting to the Details Follow the Status Leading to Reconciliation Discussion Payment Authorized Payment generated and authorized by Payer Compliance Review Delivered OFAC review by Payer bank prior to release to P2P network Expedited payment credited to Payee account Pending Payee Selection Notification sent to Unknown Payee Pending Payee Acceptance Known payee with manual accept awaiting action Released Payment accepted and routed for processing Expired Payment not accepted or claimed Failed Transaction could not be completed i.e. RTN not set up to receive EFT 21

22 Getting to the Details Reconciliation and Monitoring Payment Status Daily update Record for each payment where status has changed Includes ACH effective date Manage Payment search Expired and Failed transaction reporting History payment level with time stamping of status migration Other audit, import activity, etc. Settlement BAI and Web-based Information Reporting Visibility by type 22

23 Getting to the Details Payer / Payee Support PAYER PAYEE Service directed through respective epayment bank provider In-Network Bank: service delivered primarily through payee s financial institution Out of Network Bank: service delivered primarily through P2P network 23

24 Getting to the Details Keys to Success Network coverage and related costs v Proactive education and communication u Obvious availability of payee address w 24

25 Disclaimer This presentation was prepared for general information purposes only and is not intended as legal, tax or accounting advice or as a recommendation to engage in any specific transaction, including with respect to any securities of PNC, and does not purport to be comprehensive. Under no circumstances should any information contained in this presentation be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy. Any reliance upon the presentation is solely and exclusively at your own risk. Please consult your own counsel, accountant or other professional advisor regarding your specific situation. Any opinions expressed in this presentation are subject to change without notice. 25