payment process update · 2019. 8. 3. · •payment predicaments and paradise ... •monthsof...

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© 2019 Nacha. All rights reserved. No part of this material may be used without the prior written permission of Nacha. This material is not intended to provide any warranties or legal advice and is intended for educational purposes only.

Payment Process Update

CRF Credit & A/R Forum and EXPO—Seattle, WAAugust 13, 2019

Robert Unger, Senior Director Product Management &Strategic Corporate Relations

Nacha

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The ACH Payment NetworkACH (Automated Clearing House) Network refers to a specific electronic payment network.

– The ACH Network is used for business, government and consumer domestic and international payments

– Funds are moved between bank accounts by the banks

– Payments settle within 1 day for “Classic ACH”; payments settle in the same day for “Same Day ACH”

– The Network is governed by Nacha

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The Awesome Payments News Network

Today’s Headline:

ACH Network Moves 23 Billion Payments and

$51 Trillion in 2018

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Nacha

Establishes the legal foundation for the ACH Network

Provides a common set of rules and formats

Creates certaintyand interoperability

Defines roles and responsibilities

www.nacha.orghttps://www.nacha.org/rules

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Agenda

• Caesar Salad

• Payment Predicaments and Paradise

• Credit Conundrums and Opportunities

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Classic Caesar Salad

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Romaine in Ruins (current scenario)

• 200+ sickened by E. coli outbreak 2018 • Months of investigation revealed that the Yuma outbreak was caused

by irrigation of lettuce using contaminated water.

• Slow investigation process• Regulatory bodies and retailers must collect data from all parties and

piece it together manually to determine the source of the issue. The process can take days or weeks.

• Pathway: Farm, processing facility, transportation, distribution center, delivery to store, selected by customer

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Romaine Rising (next generation scenario)

• Leverage technology to improve food safety• The food system is absolutely too large for any single entity to track.

• Blockchain Food Safety Alliance• “ .. relies on IBM's Blockchain Platform, which serves as a distributed ledger

and provides an immutable and auditable trail of data concerning food products. It allows information to be taken and retrieved at various points in the supply chain, such as production, handling, and retail.”

• New Walmart supplier policy: “All fresh leafy greens suppliers are expected to be able to trace their products back to farm(s) (by production lot) in seconds – not days.”

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• Blockchain is a system of recordkeeping. • When a piece of permissioned information (or “block”) gets entered into

the chain, other computers in the network are notified.

• Blockchain is a form of distributed ledger technology• It is not centralized – but instead “distributed” among ”nodes” each

which owns its own data

• A blockchain itself serves no purpose• An application must be built upon it

What is Blockchain? (hint: it’s not Bitcoin)

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Characteristics of a Blockchain Project

Many players, overlapping

relationships,no direct

contract or contacts

among all parties

Broken business model(s)

Common desire by

players for a better

outcome(economic, compliance, regulatory)

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Applying this to the Caesar Salad Caper

Many Players

Farms, processors,

transportationdistribution

centers, stores

Broken Model

Supply chain information distributed, not easily

shared - days or months to

conduct investigation

Common Need for

Better Result

Safe Romaine

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The Payments Predicament

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The Payments Predicament

• Buyers and suppliers need to exchange lots of information.

1. The “phone book” dilemma:• Exchanging trading partner information is inefficient and

cumbersome – there is no central source

2. Exchanging information introduces risk• Data quality• Fraud

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Payments Use Case: Supplier Onboarding

• Friction remains for obtaining/providing – and maintaining - information for supplier master/customer master so a payment can be sent/received:

• W9/company profile• Compliance warranties• Certifications• Contact• Payment options/instructions• ……

• Current process• May take AP 2-3 weeks to onboard a new supplier• AR needs to constantly respond to information requests – and obtain information for

customer master• What happens when key information changes?

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Current Supplier Onboarding Use Case

AP AR1. Interact directly

2. Use third party/AP networks, which have some overlap, some

unique supplier references

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Supplier Onboarding Paradise

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Applying Blockchain to AP Onboarding

Many Players

AP, AR, banks, third

parties, ERPs,

accounting packages

Broken Model

Information distributed, not easily shared,

unnecessary costs,

continued fraud

Common Need for

Better Result

Lower payment cost

(check vs ACH),

reduce risk

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Credit/Receivables Department Conundrums

• We asked you:

• Is there friction in current credit/receivables processes for obtaining/providing information with customers and third parties?

• This is what you said …….

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Credit Department: Providing Information to Customers (via Third Party – AP Portal)

Yes No0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Responses

Payment information (e.g., ACH routing and account numbers, card acceptance details, address to send checks, wire payment instructions) 82.14%W-9 information (e.g., Tax Identification Number, business name/address, tax classification, etc.) 42.86%Compliance details (e.g., certificate of insurance, OFAC/AML certifications, EEOC, proof of banking letter, tax exemption, etc.) 14.29%Invoices for uploading to the AP portal 89.29%Other (please specify) 14.29%

Many payers use AP portal services to send their payments to suppliers. These portal services in turn contact your AR team to obtain instructions on how to pay your company. Does your AR team currently interface with AP data exchanges such as Ariba, Coupa, Bottomline/Paymode X, AvidExchange, etc? Information requests include ….

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Credit Department: Resource Requirements for Providing Customers/Third Parties with Information

Yes No0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

If yes, has interfacing with these AP data exchanges required additional time or resources from your staff (e.g., IT support, additional staff hours, or other expenditures)?

Responses

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Credit – Collecting Information From Customers

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

Considering your AR and credit processes, what information does your company collect from customers to create a new record in your customer master (check

all that apply)?

Responses

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Credit – Collecting Information About Customers

Yes No0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Does your company use any third-party data providers or services to verify or maintain customer master and

credit analyses? (ex: D&B, Experian, Equifax, Cortera)

Responses

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Is Credit Ready for Blockchain?

• Are there multiple parties in this ecosystem?• Is establishing trust between all the parties an issue? • Do all the parties need to work with shared, complex business logic?• Does the process depend on an extended business network?• Are there many players, overlapping relationships, and no direct contract

among all parties?

• Is the current business model for these processes broken?• Does the current environment add costs/introduce risk?• Are we competing on problems that should be collectively solved?

• Are there a common desire for a better outcome?• Would all parties benefit?• Is there interest/need in changing the ecosystem vs an individual company?

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Applying Blockchain to Credit

Many Players

Credit, AP, AR, banks, collection agencies,

ERPs, credit bureaus

Broken Model

Information distributed, not easily shared,

unnecessary costs,

continued fraud

Common Need for

Better Result

Chain of trust, lower costs, reduce risk,

enhance compliance

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Let’s Discuss ….

payment process update · 2019. 8. 3. · •payment predicaments and paradise ... •monthsof...

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