Cost-Reducing Initiatives and New Technologies in Electronic Tax Payments

Transcription

1 Cost-Reducing Initiatives and New Technologies in Electronic Tax Payments Tuesday, August 12 th, 2008 Federation of Tax Administrators Technology Conference August 10-13, 2008, Chicago, Illinois By David Stephenson Vice President of Channel Sales Agenda Defining Electronic Payments Evolution of electronic payments in government Trends of electronic payments in government Cost-reducing initiatives Question and answer 2 1

2 Defining Electronic Payments 3 Types of Electronic Payments Simply put, any payment other than cash and paper checks Includes: Credit Cards Debit Cards PIN-based Signature PIN-less Electronic Checks ACH EBT Pre-Paid Cards HSA/Flexible Spending Accounts Smart Cards Biometrics 4 2

3 Evolution of Electronic Payments in Government 5 History of Electronic Payments in Government Governments began accepting credit cards in the 1970s The emergence of e-commerce in the 1990s led to an increase in the types of services for which cards were accepted as well as to the introduction of the e-check In the 2000s, there has been a rapid increase in card and ACH use for payments such as taxes and licenses, but still room for growth. Increasingly, "smaller" levels of government, such as cities and counties, are offering these services At the Federal level, the Financial Management Service (FMS) has focused on increasing use and acceptance of electronic payments 6 3

4 Evolution of Electronic Payments in Government ACH for payments only Bank drafts Mostly used in the public utility space Remains popular today Point of Sale (POS) terminals (credit cards) Interactive Voice Response (IVR) systems for payments ACH Credit Cards Web applications for payments ACH Credit Cards Point of Purchase (POP) check conversion 7 Evolution of Electronic Payments in Government Web and IVR applications that provide billing information presentment Bank bill pay services Provides convenience for citizen, but can provide challenges to government Takes an electronic transaction and turns it into a paper transaction Integrated Web and IVR applications for real-time updates to clients databases Back office software capable of capturing and transmitting payment data Kiosks Recurring payments 8 4

5 Trends of Electronic Payments in Government 9 Consumer Non-Government Convenience Payments Trends 10 5

6 Citizens/Cardholders Speak 11 Federal Government Collections 12 6

7 State Government Collections 13 State Revenue Collections 14 7

8 Expansion Opportunities for Electronic State Tax and Fee Payments Most states offer electronic payments, but most citizens don t use it Room for Adoption Growth Through Consumer Education 16 8

9 Convenience Payments Facts Unique Requirements 72% of expedited bill payments carry associated fees to the consumer Convenience and last minute payments represent 55% of the transactions in this market ATM debit PIN and PINless Newest option with a 2% market share Reduces payment processing expenses 17 Federal Tax Payment Research IRS survey data suggests that 69% use the online payment services for convenience 14% use the online payment services because they were running out of time panic payment 8% use the online payment services for reward points 18 9

10 Recent Emerging Market Trends MasterCard POS Convenience Fee Program October 2007 American Express POS Convenience Fee Program March 2008 Visa Tax program (permanent) 19 Recent Emerging Market Trends Visa fixed interchange for utilities April 2005 PIN less debit offering for non tax payments to government Expands payment types accepted Bank-issued ATM cards eligible Reduction of NSF checks through immediate verification of funds via debit network PIN less debit offering for tax payments Flat and fixed dollar convenience fee regardless of size of payment (approximately $3.00) Designed to increase usage of electronic payments Capture convenience fee-sensitive taxpayers 20 10

11 Future of Electronic Payments in Government Greater need for security Fully PCI compliant Government entities aware of risks Vendors working with government entities MUST be PCI Compliant Any back office software POS solutions Web applications IVR applications Greater level of integration with back office systems Greater use of kiosks Greater use of consumer education/adoption marketing To achieve maximum benefit from electronic payments Better serve constituents 21 Future of Electronic Payments in Government Heightened awareness of green business practices If two percent of households went to paperless billing and payment, the following impact would occur annually in the U.S.: Save 15,093,962 pounds of paper; Save 181,128 trees; Avoid producing 196,040 tons of greenhouse gasses, equivalent of taking 32,572 cars off the road; Avoid creating 143,960,137 gallons of wastewater; Avoid using 10,294,560 gallons of gasoline to mail bills, statements, and payments Not only environmental benefits, but cost saving to government through these green business practices. Information based on 2007 study by the PayItGreen Alliance, a group of leaders in the financial and consumer billing industries, and evaluated by the Environmental Protection Agency (EPA) (

12 Future of Electronic Payments in Government Expanded use of kiosks in government offices Google Check Out PayPay BillMeLater M-Payments 24 hour settlement and/or same day settlement of funds Micropayments Check 21 Biometrics 23 Cost-Reducing Initiatives 24 12

13 Web/IVR Efficiencies Economics Manual vs. Automated DMV Example (does not include payment processing costs) Source: MasterCard Public Sector Agencies Financial Model 25 Cost-Reducing Initiatives Interchange Management PIN Debit PIN-less Debit Greater use of flat and fixed dollar convenience fee (around $3.00 per transaction, regardless of amount of payment) Expanded convenience fee programs by card associations and card companies Expanded use of kiosks Integration with back office systems which reduce manual processes 26 13

14 Cost-Reducing Initiatives Check conversion and Check 21 eliminates handling of paper checks Enhanced integration of payment data resulting in lower operating costs 24 hour or same day settlement of funds increase interest on funds Greater emphasis on consumer education/adoption Vendor-supported Financial support directly from card associations and card companies Standby Letters of Credit 27 Questions & Answers 14