New York Banks Try Nine-Digit ZIP Codes on Lockboxes and Hope to Find Marketing Strength in These Numbers
Garsson, Robert M., American Banker
NEW YORK -- Nine-digit ZIP codes are getting their first tryouts in bank lockbox departments here, despite skepticism about their usefulness among cash management product managers and analysts.
Chemical Bank, Citibank, Irving Trust Co., and Manufacturers Hanover Trust Co. are among those that have begun using the new "ZIP+4" program, hoping the faster processing promised by the U.S. Postal Service will make their lockboxes more attractive to corporate customers.
The new codes, which are intended for business-mail users, permit a higher level of automation. The extra four digits allow the postal service to sort down to the carrier route level without human intervention.
Some banks are waiting to see what kind of results their competitors get with the new ZIP codes. Others such as NCNB National Bank and Charlotte, N.C., say the new ZIP codes are not applicable to their lockbox product.
Chemical Bank is perhaps the most enthusiastic about the new ZIPs. Already highly automated, Chemical has purchased special equipment for sorting lockbox mail bearing the nine-digit ZIPs, and it is encouraging customers to use the new postal addresses.
Lockboxes are used by banks to speed the processing of mail remittances for corporate customers. Mail to bank lockbox addresses is collected by banks from the post offices directly, usually several times during the day, and the checks are deposited directly to corporate accounts.
Chemical has made use of unique ZIP code for years, as have almost all lockbox banks. That means that all mail within the ZIP can be picked up directly by Chemical, without additional sorting at its local post office.
By adding the extra four digits permitted in the ZIP+4 program, Chemical can give each customer a unique ZIP code.
That mattters, Chemical says, because the post office sprays a bar code onto each envelope using a four-digit ZIP code, which then enables the bank to sort each envelope by customer account using automated equipment. Until now, lockbox mail has been sorted manually at Chemical, a time-consuming process.
"With a unique ZIP, we average about a 16-hour time savings," said Jorge A. Sandoval, the vice president in charge of Chemical's lockbox operation. "We don't have statistics yet on ZIP+4, but the post office says they sort seven times faster with it." Timing is Everything
Even a minute can count for a lot in the lockbox business, if that minute saved means that a check will be deposited before a bank's ledger cutoff.
Banks typically make lockbox pickups several times throughout the day, although pickups after the bank's ledger cutoff -- the latest time at which a bank will credit a deposit, usually at 3 p.m. -- may not count until the following day.
Because the ledger cutoff is so crucial, one lockbox analyst believes banks may be shooting themselves in the foot by using the nine-digit ZIP codes.
"What's the difference between an 11:59 receipt with one-day availability [i. …