Strategic Outlook. RDC: The Next Generation An integrated receivables platform. Takeaway. What s in this Paper?

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1 Strategic Outlook RDC: The Next Generation Takeaway Corporate treasury and receivables managers are demanding solutions that integrate seamlessly with banking and internal applications To improve efficiencies and customer retention, banks are creating receivables hubs (or platforms) that integrate disparate data sources and payment systems eliminates redundancies, improves information management and supports faster time to market for new products and enhancements Integrated receivables platforms will require increasingly sophisticated recognition technologies that extract and process relevant transactional data from images gathered at the point of capture What s in this Paper? The Situation... 3 RDC as Receivables Platform... 3 Getting at and Using Receivables Information... 4 Improved Productivity with an Integrated Receivables Platform... 5 Integrated Receivables: The Customer Experience... 5 Conclusion... 6 parascript.com

2 Executive Summary Extracting and managing data for payments and receivables management can be a herculean task, yet businesses are demanding better integration of this crucial service with key benefits including labor cost reduction, reduced float, and better reporting. Financial institutions are starting to respond to this need through shared platforms for payments and deposit processing. These platforms are evolving from Remote Deposit Capture (RDC) technologies and integrate seamlessly with corporate treasury systems, as well as with banking systems that support the entire client relationship, resulting in lower operational costs and better customer service. Advanced recognition technology at the point of service will become crucial to the success of these platforms. 2 parascript.com

3 Receivables Today Checks make up 40% of consumer bill payments at large U.S. businesses, while ACH transactions account for 27%, and card payments 15%. 50% of U.S. companies are negatively impacted by inconsistent payment handling due to multiple tender types and lack of real-time remittance reporting. The number of days sales outstanding on the books of large U.S. firms average 44.5, well in excess of the standard of 30 days. Source: Aite Group The Situation The most important contribution management needs to make in the 21st Century is to increase the productivity of knowledge work and the knowledge worker. Peter Drucker In business today speed and accuracy are critical to remain competitive; and yet the critical function of receivables management often gets overwhelmed in sheer volumes of paper and data flows which become overwhelming for companies and their banks. Checks are a big reason why. Despite newer alternatives, checks remain a favored payment method for businesses and consumers alike. A 2012 survey by the consultancy Aite Group revealed that 70% of business-to-business (B2B) payments are made by check. Among small businesses (those that take in less than $50,000 a year) checks and cash are the preferred forms of payment, according to the consultancy Celent. And in 2010, nearly six out of 10 consumers in the U.S. used checks for at least some payments, the Bank Administration Institute reports. The volume and variability of check types, and associated remittance data present a very real challenge to banks that depend on receivables management as a high-value revenue-generating service. Newer, more sophisticated payment methods such as ACH debits, credit and debit cards, mobile payments and electronic checks further complicate matters, since each tends to be developed independently within different bank silos supported by multiple legacy systems. This makes it increasingly challenging to provide a robust customer experience. RDC as Receivables Platform Corporations across the globe report difficulties collecting revenues after a sale and require a means to improve efficiency in collecting receivables within payment terms....moving forward, financial institutions should invest in consolidated receivables hubs to provide corporate clients best quality service and meet the requirements of a rapidly changing business environment. Steven Murphy, Research Director at CEB TowerGroup. Several banks and technology vendors are addressing this challenge with integrated receivables hubs that leverage advanced recognition, processing and reporting technologies into a single application platform running what is essentially a highly evolved remote deposit capture (RDC) solution. RDC was developed originally to support the capture, imaging and exchange of electronic check files in lieu of physical presentment of checks. Yet the underlying technologies are sufficiently robust to handle many forms of payments, including ACH, cash and card transactions. An integrated receivables hub eliminates process redundancies and improves productivity through the more efficient use of information and resources. Using this 3 parascript.com

4 approach banks can manage the processing of all forms of payment, regardless of collection channel, and deliver consolidated reports that clients use for updating A/R and other internal systems. Information from lockbox receipts, checks and card payments from field offices, ACH credit and debits, image cash letters, mobile payments and deposits from customers and/or staff, even cash from electronic smart safes, gets consolidated into a single data stream and delivered in whatever format makes the most sense for each client. No piles of paper to reconcile, no data to rekey everything is seamlessly integrated. The benefits of this approach are significant for both banks and business clients. They include: Accelerated application of payments and related data Simplified exceptions processing Improved data collection, sharing and analysis Central to the success of an integrated receivables platform are sophisticated recognition tools developed to work in the most challenging business applications. Reduced financial and information float Better use of resources through the elimination of duplicate processes and applications Enhanced risk management and fraud prevention Faster time to market with product and service improvements The opportunity to create comprehensive image archives of payments and remittances Getting at and Using Receivables Information Payments is the business of managing data. The more data there is, the more accurate the data, the more valuable it becomes. John Leekley, Founder and President of RemoteDepositCapture.com. Central to the success of an integrated receivables platform are sophisticated recognition tools developed to work in the most challenging business applications. These tools locate, analyze and extract critical payment and remittance details from paper-based sources, regardless of the type of payment or the type or location of information. Invoice data, amount owed, amount paid, memo line instructions, payee/ payor information, endorsements and other critical data can be captured and analyzed in a single pass. Recognition tools are also critical for fraud detection. Computer verification of signatures repeatedly prove their accuracy over human counterparts, and are not limited to signatures on checks. Electronic signature pads, which capture vector-based movements, are an underutilized authorization tool that we are likely to see more of. These recognition tools function with high tolerance to variations in formats, background noise, size, or whether information is machine printed or handwritten, then output that data to other bank and client systems. Handwritten and computer-generated checks, single item remittances and complex B2B remittances only begin to scratch the surface of possibilities. 4 parascript.com

5 Improved Productivity with an Integrated Receivables Platform Traditional Workflow Workflow Using Integrated Receivables Platform Corporate receivables - checks, card payments, ACH items, remote deposit files, cash and wires and supporting documents arrive at lockboxes, regional and home offices, and/or agent banks by way of numerous physical and electronic delivery channels. Information is manually keyed from payments & control documents, after which transaction and client data gets posted to A/R system. Payments next get separated from control documents, are totaled and verified, and deposits created. Payments get processed using the appropriate platforms (ACH, card, remote deposit, electronic cash handling, wire transfer). Typically, this processing is done by the company s cash management bank, although thirdparties, like credit card processors are also employed Corporate receivables continue to arrive in various formats from multiple delivery channels at lockboxes, corporate offices and/or agent banks. Deposits are registered and processed through an enhanced (robust) RDC platform that includes sophisticated recognition tools and reporting functionality. The platform outputs a single stream of information to corporate treasury detailing all payments and related receivables information in a format pre-ordained by the corporation. Treasury takes delivery of consolidated data stream and passes on that information to the bank for posting and to the requisite internal applications Reports detailing these transactions are prepared and delivered manually to corporate treasury, as well as to various internal bank applications. Treasury in turn parses the data, then prepares and distributes detailed reports for use with various internal applications (e.g.: A/R, cash position, credit/risk exposure, archival). Integrated Receivables: The Customer Experience To more clearly illustrate the benefits of an integrated receivables platform, consider an example of a recreational products distribution company (ACME Corp). ACME has a mixed customer base of stocking retailers, who are billed on a monthly basis, as well as non-stocking retailers, who pay COD. ACME maintains two warehouses separate from its corporate headquarters. It keeps a banking relationship with a regional bank that offers an integrated receivables platform including lockbox, on-site, and mobile payment services. Until recently, payments were aggregated at ACME s main office for data entry and deposit. Checks were delivered in the mail or worked their way back via intra-office mail from drivers, regularly extending cash float by several days at a minimum. With the new integrated receivables platform provided by its bank, ACME now has three points of entry and processing: 5 parascript.com

6 Monthly payments with associated invoice data are remitted directly to a bank lockbox COD payments (checks, credit/debit cards with associated invoice data) are captured by the driver s handheld and immediately processed Miscellaneous payments (e.g. monthly payments inadvertently addressed to home office) are deposited directly from a desktop RDC device Technologies have created an entirely new customer experience with substantial benefits to both the customer and the bank. As a result, ACME s Days Sales Outstanding is substantially reduced, providing operating cash sooner. ACME s accounting department is no longer spending valuable time entering and reconciling payments information, and instead receives a regular, consolidated datastream and report from its bank which has lowered the bank s processing costs and hardened its business relationship with ACME at the same time. Recognition is critical to the success of this deployment, automatically and intelligently capturing both payment and associated invoice information and aggregating it for central capture. Regardless of the type and origination of the payment, technologies that extended from more traditional RDC technology have created an entirely new customer experience with substantial benefits to both ACME and its bank. Conclusion Financial institutions and their clients would be well served by investments that improve the efficiency of receivables operations and enhance cash, risk and credit management. And several banks are leading this trend. Now, with the convergence of advanced recognition, processing and reporting technologies into a single receivables platform, banks can customize comprehensive receivables solutions for a range of constituencies. And continuing improvements in recognition tools promise high-quality performance rates, enabling these platforms to deliver higher levels of customer service, translating to more services revenue and higher customer satisfaction/retention. About Parascript Parascript is a leading developer of cursive, handprint, and machine print recognition technology. Leveraging digital image analysis and advanced pattern recognition, its software enables business automation in areas like forms processing, postal and financial automation, fraud prevention and medical imaging. Parascript s award-winning technology draws on a proven 15+ year track record and processes billions of document images annually. Fortune 500 companies, postal operators (including the U.S. Postal Service), major government and financial institutions rely on Parascript products, which are distributed through its partner network, including: IBM, EMC, Bell and Howell, Fiserv, Selex Elsag, Lockheed Martin, NCR, Siemens, and Burroughs. Visit Parascript online at 6 parascript.com