Paper Still Reigns in Remittance

Companies are more concerned about posting payments the same day than establishing straight-through processing.

Though straight-through processing (STP) is often held up as the standard for handling payments and the related remittances, companies are much more concerned about receiving remittance information in a timely manner than in setting up STP practices, according to a new study by Aite. The research and advisory group surveyed 240 companies about when and how they received and sent remittance details on business-to-business payments.

“[Straight-through processing is] not something companies are demanding,” says Nancy Atkinson, a senior analyst at Aite and co-author of the study. “When the industry gets to point where more than 50% [of remittance information] comes to them at the same time as the payment, then they’re going to start to demand straight-through processing.”

Aite estimates U.S. companies send 15.5 billion remittances a month. But the survey shows just 10% of remittances accompany payments and use a standard format, elements that would pave the way straight-through processing. In fact, according to the survey, more than 40% of remittances require some operator intervention.When asked the factors they consider when choosing a remittance channel, only about a third of companies said being able to process payments in a straight-through manner was very important to them, while 78% said that timeliness was extremely important.

Standardization continues to be a challenge for STP, Atkinson says, especially at smaller companies.

“What’s most interesting is, clearly paper still has a strong hold,” Atkinson says. “It’s going to continue to be used for a long time.” Though e-mail is gaining in popularity as a way to send remittance information, many companies still use mail.

Sixty percent of companies use paper checks and drafts to make more than half their payments, and 70% receive more than half their payments that way. Eighty-eight percent of companies always or almost always send their remittance information by mail when using paper drafts or checks. U.S.-based companies post 60% of payments received in the form of checks and drafts the same day.  

Aite’s survey shows that it’s usually the payer that chooses how to send the remittance, rather than the seller. Companies of all sizes did indicate that they like to use e-mail as a delivery channel for remittances, but Atkinson warns that e-mail may not be as free as people think it is. Companies that do not have systems set up to feed remittance information into internal accounting systems often have to print out e-mails and key them into the system manually. “There are certain advantages, but in and of itself, it is not necessarily going to solve everything,” she says.

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