Magazine article Business Credit

Credit Professionals Must Play Sales Role to Move Payment Efficiencies Forward

Magazine article Business Credit

Credit Professionals Must Play Sales Role to Move Payment Efficiencies Forward

Article excerpt

Change can be a slow process. Without some stakeholder pushing change forward, it takes time for new ideas and tactics to gain acceptance.

"It's hard to change behavior," said Robert Unger, senior director at NACHA, the Electronic Payment Association and speaker at NACM's 120th Annual Credit Congress in Las Vegas. "Incentives can help drive behavior."

Business-to-business (B2B) payment behavior is one illustration of the snail's pace of progress. The preferred way for customers to pay creditors is still by check despite higher costs, a longer wait time for funds to become available, fraud potential, duplicate payments and so on. It is becoming increasingly clear that a push is needed to adopt a quicker, typically electronic, means of payment, preferably not via credit cards with their business-impairing interchange fees. Perhaps no area of business is better positioned and stands to gain more in day-to-day efficiency than credit.

"Promote the benefits," Unger urged.

Behind the Numbers

Technology for payments has taken several leaps in recent years. And though paper check payments from consumers to businesses dropped by as much as 20% between 2006 and 2012, B2B check payments have held stable since, according to data presented by Credit Congress speaker Claudia Swendseid, of the Federal Reserve Bank of Minneapolis and the national Remittance Coalition, of which NACM is a member. Aside from speed of payments, Swendseid cited Fed statistics that indicate the following about check payments:

* 20% of corporate fraud-based financial losses are attributed to check payments (approximately double that of ACH payments).

* 43% of the greatest single-loss events are attributable to checks (double that of wire payments and more than quadruple that of ACH).

* 71% of check-based payments are subject to potential fraud attempts (nearly three times that of ACH and 23 percentage points greater than wires).

During a June teleconference on driving greater electronic payment adoption, HighRadius Vice President of Product Management Jay Tchakarov noted that 81% of ACH participants said their organizations had experienced an increase in the number of incoming electronic payments in recent years. This dovetails with a much larger 2015 Association of Financial Professionals (AFP) study that found 81% of those surveyed also noticed an uptick. Both back up statistics that processing payments via checks can be several times more expensive than using automation- and technology-based means.

"There's a lot of interest in that for efficiency and to reduce cost," said Tchakarov of increasing electronic payments. "Processing checks is five times more expensive than ACH."

Selling the Benefits

Several Credit Congress speakers this year, despite presenting on a wide variety of topics, mentioned that credit professionals are considered salespeople in many ways. To gain buy-in at the company level, the credit manager must sell the reasons to do things differently. If it will improve the speed or likelihood of getting a payment, it is absolutely the job of credit managers to educate themselves on the benefits and the numbers to back it up. Then, they must wear the sales hat, so to speak.

"A lot of people wonder: How do we increase adoption here? The answer is: There needs to be a focus," Unger said.

Unger noted that NACHA statistics show three main factors dividing those with high percentages of electronic payments usage versus those with low adoption. …

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