nacha’s bill payment exception (bpe) mitigation opt-in program · bpe04 60-61 state customer’s...

© 2014 NACHA — The Electronic Payments Association. 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.

NACHA’s Bill Payment Exception (BPE)

Mitigation Opt-in Program




2

Summary

• Bill payment exceptions are increasing in rate and volume

– The primary source of exceptions payments are the credit “push” payments originated from banks and third party bill payment processors

– Exceptions increase processing costs for billers, as well as banks/third parties, and erode customer satisfaction

• “One-off” solutions (e.g., exchanging scrub files) can work, but can require multiple bi-lateral agreements/contacts, are manually intensive, and lack standardization

• Fixing third party bill payment requires industry adoption of standards, and the ACH Network/NACHA Rules can be part of the solution




3

Contents

1. Bill payment exceptions benchmarks

2. Payment exception mitigation efforts to date

3. BPE (Bill Payment Exception) banking convention

4. BPE opt-in program




4

The Need to Improve

Bill Payment Data Quality • According to the 2012 NACHA study, there were an estimated 130

million bill payment exceptions in 2011 which cost the industry $720 million (exceptions defined as biller receives funds, but cannot post the credit to the consumer’s account).

– Exception volume represents 0.58% of all bill payments (all payment types, all payment channels)

– An estimated 61.8 million (47% of total exceptions) were originated as ACH payments (could be more considering “drop to check volume”)

• The primary cause of payment exceptions is invalid consumer biller account numbers (i.e., found in the Individual Identification field in the CIE 6 record, possible addenda in CCD-CTX/other type of direct send transmission).

– 98% of all ACH bill payment exceptions were due to Incorrect/missing consumer account biller account

• The top biller epayees are also the top receivers of checks from online banking apps

– These billers are set up for electronic payments but continue to receive checks from the payment consolidator channels.

• More importantly, exceptions degrade customer satisfaction




5 Exceptions are 2-3 times More Common for Bill

Payments Made through Banks/Aggregators than for

Biller Direct Payments

Channel Receiver Exception Rate

Lockbox 7.79%*

Online Bill Pay/Aggregator 0.51%

Biller Initiated

Recurring – Credit Card 0.03%

One-time Credit Card 0.14%

Website – One-time ACH 0.15%

Recurring – ACH 0.22%

IVR – One-time ACH 0.25%

Call Center – ACH 0.81%

Walk-in 0.20%

Other – Agents, Retail, OCAs 0.17%

Many of

these likely

started as

online

banking

payments

Up From

0.40% as

measured

In 2007

Source: NACHA Bill Pay Exceptions Benchmarking Study 2012




6

Industry Issue

Healthcare Changing invoice or visit number instead

of static account number

Municipal Property or invoice numbers that change

every cycle

Utilities Customers not updating account

numbers when they move

Credit Card Truncated/masked account numbers (e.g.

XXXX-XXXX-XXXX-1234)

Credit Unions Account numbers followed by “account

type” digits

Insurance Policy numbers that change every cycle

It’s Not Always “Customer’s Fault”: Related Account Number

Exceptions Associated with Specific Industry Practices




7

Contents








8

Stakeholders Have Deployed Many Bilateral-Technological,

Operational, “Fuzzy Logic” or Other Solutions to Mitigate Exceptions

Solution

Biller routines to post payments with incorrect account numbers

Scrub Files

Consolidator tools for billers to correct account/payment data

Biller profile

Consolidator pro-active requests for biller updates

Biller directory

Consolidator correction of incorrect consumer-provided data

Consolidator processing NOC’s on a timely basis

RT/Account blocks to prevent transmission fraudulent payments

USPS Move Update

Automatic Billing Updater

Recurring Payment Cancellation Service




9

Best Practices for Reducing Exceptions

• NACHA’s Council for Electronic Billing and Payment

(CEBP) developed the “Exception Processing

Management Program” in 2008

– Tools and recommended best practices for data

maintenance

https://cebp.nacha.org/c/Resources.cfm/AID/514

– Recommendations are now incorporated into the NACHA

Operating Guidelines






10

Contents








11

• Bill payment originators would be encouraged to use ACH CIE

transactions with BPE addenda records that include various bill

payer information (e.g. name, address, email address, phone

number) when customer-entered data does not conform to biller

standards (e.g. edit masks) – CIE transaction would be in lieu of “dropping to check” as the default for non-

conforming payments

– The additional data in the addenda could help billers identify the correct account and

post the payment, much as the information of a check/stub is used to post lockbox

exceptions

– At a minimum, the CIE addenda should include the data that would have accompanied

a check

– Billers would then send an NOC/C09 entry to provide the correct account information

to the originator to use in subsequent payments

11

CIE with BPE (Bill Payment Exception) Opt-in

Program for “Problem” Bill Payments

Current Exception Payment Process: “Drop to Check”

Consumer pays

bill via Bill Pay

Originator

Does consumer

acct. no.

pass edit?

BP Orig uses its

DB to verify data

No

Biller receives

epayment (via

ACH, RPPS or

other elec

means)

Biller receives

check

Yes

Biller posts

credit to AR

Can the biller

post?

Yes

Biller may swap

scrub file with

BP Orig

Yes

1 2

3 4

3a

3b

3c

4

BPE Process Flow

Consumer pays

bill via Bill Pay

Originator

Does consumer

account info

pass edit?

BP Orig uses its

DB to verify data

No

Biller receives

epayment (via

ACH, RPPS or

other elec

means)

Biller receives

CIE with

additional

consumer info

in BPE addend.

Yes

Biller posts

customer credit

to AR

Can the biller

post CIE/BPE?

Yes

Biller transmits

NOC/CO9 with

corrected info

to bill pay orig.

Yes

1 2

3 4

3a

3b

3c

4

Good Payment

Exception Send CIE/BPE

instead of check

No Biller returns

CIE/BPE to bill

pay originator

3d




14

BPE Format and Data Elements

Data

Element

Reference

Designator

Position Name Content Attributes

1 2 3

BPE01 01-15 Originator

Customer

Identification

Customer’s online banking/billlpay identification number

assigned by the ODFI. This number will be provided back to the

ODFI by the Biller in the NOC transaction if provided by the

ODFI.

(Instructions: left justify, leave blank spaces/space fill if not

used. ID’s with less than 15 characters are left justified with

blank spaces/space fill following the last character/number.

Example: Originator Customer Identification 12345 is 12345

followed by 10 blank spaces).

O AN 15/15

BPE02 16-40 Street

Address

Customer’s street address (Instructions: left justify, leave blank

spaces/space fill for information less than 25 characters)

O AN 1/25

BPE03 41-59 City Customer’s city (Instructions: left justify, leave blank

spaces/space fill for information less than 19 characters)

O A 1/19

BPE04 60-61 State Customer’s state O A 2/2

BPE05 62-70 Zipcode Customer’s zip code (Instructions: left justify, +4 data optional,

leave blank spaces/space fill if +4 not used)

O N 5/9

BPE06 71-80 Phone Customer’s phone number (Instructions: only U.S. numbers

valid – no country code allowed)

O N 10/10




15

ACH Bill Payment Data Quality – Notification of

Change

• The NACHA Rules allow – and provide guidelines for using the NOC to update consumer account numbers with the biller: – NOCs can be utilized as a solution to updating biller issued consumer

account numbers as the stated in the Guidelines on OG150 under “Correcting Biller Account Numbers Though the NOC Process”:

• Notifications of Change (NOC) should be created by Receivers of CIE transactions (i.e., the payee or biller) and transmitted via their RDFIs to notify consumers and their financial institutions/bill payment service providers when there is a change in the customer’s account number at the payee/biller. An NOC is originated when: (1) the payee or biller changes a customer’s account number due to internal system requirements, or (2) the payee or biller can post the payment, but the original customer account number received from the Originator was not correct. Change Code C09 – Incorrect Individual Identification Number – is used for this purpose. When an NOC is received by the ODFI/Originator, the Originator must update the customer’s payee or biller account number within six banking days or prior to transmitting the next CIE entry, whichever is later.”

15




16

Contents








17

BPE Opt-in Components

• Opt-in Rules – Bill Payment Exception Banking Convention (BPE): Standardized

Formatting for Remittance Information in Bill Payment Exception Addenda Record (version June 23, 2014) defines roles, requirements, data specifications

• Participant Agreement – Participants will need to sign a Participant Agreement, binding

participants to participating according to the opt-in rules (in addition to the NACHA Rules). Participant Agreement defines other responsibilities as well (e.g., pilot term, termination, media interactions, etc.)

• Opt-in goals and metrics – Metrics

– Business practices

– Timeline




18

Goals and Metrics

• Verify the CIE/BPE specification – Can participants create, transmit, receive and process CIE/BPEs and NOC CO9s

according to the specification?

• Determine effectiveness in reducing check volume and related ROI – CIE/BPE originations: diverting transactions out of check stream

• How many checks on average did biller receive from originator before and after pilot? – Hypothesis: check receipt from participating bill pay originators should = 0. After time,

the monthly number of CIE/BPEs may decrease as well once the initial backlog of check payments is corrected

– NOC CO9 originations: • How many NOC CO9s did biller originate (and were subsequent transactions originated

with the correct account number)?

– Related ROI • Can the current manual processes (e.g. check imaging, correction in remote centers) be

automated for reconciliation/corrections?

• Are there any call center improvements/reductions in customer service call related to “drop to check” payments (and customer satisfaction related issues, e.g., delays in processing check payments)?

• Identifying the benefits for billers to have 1 channel vs many for working exceptions




19

Business Practices

• In addition to generating pilot metric data, the opt-in program may also yield business practice recommendations through shared learnings. For example:

– What should a bill payment originator do if, after receiving an NOC CO9 and updating a customer’s account number with the biller, the customer then changes the account number again?

– Are there best practices for bill payment originators to separate the “drop to check” transaction stream?

– Should billers return “drop to check” check payments to the bill payment originators?

– Will biller receivable providers develop solutions (particularly for small/mid sized billers) to received CIE/BPE and originate NOC CO9?




20

Benefits for Participating in the Opt-in Program

• Reduce costs and frustrating customer service issues by eliminating

checks for bill payment exceptions

• Leverage the standards-based and interoperable ACH Network,

backed by the NACHA Rules, for automating exception processing

through a single channel

• Provide straight-through processing for all subsequent transactions

using the Notification of Change process

• Leverage NACHA project management and publicity resources

• Influence design and process

• Receive assistance with participant recruitment/participation with

known organizations

• Share learnings/findings with opt-in group




21

Timeline

Business case complete

2008 Exception Management Program

2012 Bill Payment Exception Benchmarking

Solution identification

2012 Bill Payment Exception Summit

2013 CIE/Bill Payment Exception spec finalized

Complete and submit Business Idea for NACHA approval

Draft Participant Agreement: Q1 2014

Program recruitment phase: Q1-Q4 2014

More info contact: Robert Unger ([email protected], 703-561-3913)

• Program launch: Q3 2014 (organizations may join on rolling basis)

• Term of program: 12-18 months

Decision options: continue opt-in, end opt-in, make mandatory

mailto:[email protected]




22

Opt-in Program Sponsors

• Kathy Romano

– Executive Director-Bill Print, Payment and AR Operations,

Verizon

• Andy Branch

– Senior Product Manager, Electronic Payments, Capital

One (credit card product)

• Steve Hooper

– Senior Vice President, Payment Strategy, iPay Solutions




23

Calls to Action

• Benchmark exception payment volume/cost in your receivables channels

• Billers: Contact the banks/third party processors that are originating payment exceptions – They need to hear from you that this is a problem!

• Banks: Evaluate both retail and corporate product benefits

• Join the NACHA Bill Payment Exception opt-in program to begin reducing exception payment volume through a single channel: the ubiquitous, standards-based ACH Network, backed by the NACHA Rules.

• Contact: – Robert Unger, Senior Director NACHA ([email protected], 703-

561-3913)

mailto:[email protected]

nacha’s bill payment exception (bpe) mitigation opt-in program · bpe04 60-61 state customer’s...

Documents