Study: Stumbling Blocks Arise in Straight-Through Processing
A business Holy Grail is straight-through processing (STP) to help speed payments processing but a new study, conducted by Boston-based Aite Group in association with Longmont, Colo.- based Parascript, a recognition solutions provider, suggested that there are big stumbling blocks especially for the small businesses that are the typical target market for credit unions.
For many financial institutions, the good news is that they have in place services that will help businesses speed up payments processing – but the bad news is that adoption, outside of the very biggest company, remains anemic. The study indicated that some 67% of large corporations use lockbox services, compared to just 18% of smaller organizations.
At many companies, receivables processing is a continuing issue. In a release, Parascript noted, “About one-third of midsize companies state that the timing of payments is their company's top challenge with regard to receivables processing, and that processing receivables requires a lot of manpower.”
With small companies, the hurdle is yet higher. Parascript noted: “Small businesses are more likely to make payments by paper check than mid-market and large corporations, are more resistant to switching to electronic payments/electronic remittance communication.”
The appeal of STP, per the report, is faster processing as well as more use of automation which would allow for cuts in costs.
Nonetheless, the report pessimistically observed: “While [financial institutions] and third parties offer lockbox services to automate and streamline companies' receivables processing, remittance-details data capture and reporting, middle-market companies use such services only minimally. The middle market, especially those companies approaching the upper end of the category (US $500 million), should be particularly interested in lockbox services.”
As for what financial institutions can do to stimulate use of their STP services by mid-market and smaller businesses, the report spelled out the to-do’s: “[Financial institutions] should ensure that middle-market companies are fully aware of their receivables processing solutions. [Financial institutions] need to over-explain the benefits of this technology and price the offerings attractively for this market.”