Forte Financial Blog

Bankers More Pessimisstic than Businesses (American Banker)

In conjuction with its Executive Forum, American Banker (subscription required) reports on two research studies conducted during the second quarter by Greenwich Associates indicating that bankers are more pessimistic than their business customers about the economy.

Courtesy of American Banker:

Economic Outlook

Borrowing:

Learn more:

Executive Forum 2Q '08
Bankers, Clients Views on Cycle Diverge
American Banker (subscription required)
Thursday, July 10, 2008
By Gary R. Crum

Equity Analysts Focus on CFOs Rather than CEOs

Are CFOs ready for the spotlight? According to CFO.com research from Greenwich Associates reveals that for the first time an annual survey of Wall Street equity analysts ranked the credibility of a company's finance chief as more important to the overall IR effort than that of the chief executive.

But it was the endorsement of the CFO's that captured the most attention in the report. "In a slowing economy, analyst focus shifts from broad questions of strategic positioning relative to future growth potential to nuts-and-bolts measures of cash flows and financial health," said Greenwich Associates consultant Bill Bruno. As a result, he says the firm is recommending that clients to make sure "their CFOs are ready for the spotlight."

Said Bruno, "Analysts today are often much more interested in questioning and judging the capability of the CFO than in talking to the CEO. But many CFOs have backgrounds in accounting or finance as opposed to sales, and many have not received the same type of speaking and presentation training common among CEOs. Our data suggest that, outside of ensuring transparency in our accounting, one of the best things you can do to buttress your IR effort is to get your CFO some good communications training."

Analysts Now Turn First to the CFO, Not CEO
Stephen Taub
CFO.com, US
June 9, 2008

NACHA's Business-to-Business Payments Strategy [NACHA Payments]

[This is just one of my series of posts from the NACHA Payments 2008 conference in Las Vegas.]

NACHA's Business-to-Business Payments Strategy [NACHA Payments]

Alenka Grealish
Manager Director, Banking Services, Celent, LLC
Julie Hedlund AAP
Senior Director, Business Payments, NACHA - The Electronic Payments Association

Synopsis from Conference Program

While electronic B2B payments through the ACH continue to increase each year, the majority of B2B payments are still made by check. NACHA has defined a business payments strategy and is moving forward with proposed solutions to increase B2B payments via the ACH Network. This session presents the solutions under development and those that are contemplated to make the ACH Network a more viable consideration for business-to-business payments.

My Observations & Comments

NACHA is working with Celent to conduct market research focused on the small business market. Phase 1 consisted of four focus groups, Phase II was a qualitative survey of small businesses, and Phase III will be a market demand assessment (later this summer). This session featured small business payment research (from Phase II) that was literally hot of the press -- NACHA didn't see the data until the afternoon before because Celent had just finished tabulating the results of the survey. As yet, NACHA and Celent haven't digested the findings but for now they shared the high level results. It was very interesting.

NACHA B2B Payments Vision

Hedlund advised that as yet NACHA has not formulated a B2B strategy - they are in the midst of gathering data to inform the future strategy - but they have formulated a vision, as follows: 

• Buyers and sellers to have ready access to the payment requirements of thiner trading partners; 
• Sellers to specify remittance information to accompany payments; 
• End-to-end processing of invoices and related electronic payments.

NACHA B2B Initiatives

Ultimately, the objective of the B2B market research effort is to understand the market demand for NACHA B2B initiatives currently underway and proposed (listed below) and determine how and where to apply NACHA resources: 

• BIZ (Invoice Flipping) - Seller sends a payment request to buyer via ACH network with specified remittance. Buyer sends corresponding ACH credit. 
• EBIDS- Buyer views summary data from online banking site, pays via ACH credit. 
• Secure Vault Payments (SVP) -Buyer views invoice at seller's website, routed to their bank to initiate ACH credit payment. 
• Payment Directory - an enabler of the other payments initiatives

Research Findings

Over all, small businesses have a lukewarm opinion of their bank. They do not associate the bank with improving business processes. Small businesses are receptive to electronic payment, especially if it is integrated into their accounting software (overwhelming QuickBooks) in a turn key fashion.

Small business are preoccupied with getting paid, not how they get paid. They are open to ACH credits (as distinct from ACH debits, once they understood the difference) and are not as concerned with security when dealing with ACH.

The largest source of payment pain is in reconciling the incoming payments with open invoices. Business people surveyed indicated unwillingness to pay for ACH payment but they are willing to pay for a solution that eases the reconciliation effort. The challenge is for banks (and other providers of payment solutions) to prove the ROI to the small business owner.

Impressions of specific NACHA initiatives:

BIZ - As long as the solution is streamlined, and simple they like it. Like electronic payments, prefer an open network where they can pay anyone.
EBIDS - Convenient, once some changes are made to support complex invoices and the ability to view and select multiple invoices for one payment. Sellers are not interested in hosting/archiving eInvoices.
SVP - This was perceived as a niche solution. Viable for online payment in situations where a credit card is not accepted.

eInvoicing

Demand is largely convenience driven, 10% of small businesses are consistently interested in process improvement. Financial institutions that can capture the attention of this segment of the market can retain them for life as long as they, too, continuously improve their products. Sellers are moderately challenged when it comes to eInvoicing delivery. Buyers are much less challenged (it's easier to receive than to send).

ePayment

Interest in electronic payment is lacking - although sellers are more interested in buyers (it's all about facilitating incoming cash). Financial institutions and payment providers haven't made a compelling enough business case to overcome the status quo - checks work,. why fix something that is not broken? One third of business people perceive that it is easy to switch to electronic payments, they do not perceive float s a big deal. Some increased concern re: security, but not much. The major concerns are around the cost of changing their accounting process and the time/effort involved in entering data into the system. This underscores the importance of turn key solutions and a sales story focused on efficiency and streamlining back office tasks.

Q&A and Audience Comments

The study did not address trading partner size, although one can assume that small business electronic payment is often driven by the preference of their larger trading partners.

Standards must be as open as possible - without proprietary solutions from banks or software providers - in order to migrate large numbers of small business transactions from electronic to paper. Hedlund underscored that "NACHA is not interested in developing proprietary solutions."

One unsolicited finding from the market research is that AmEx is held out by small businesses for their dispute resolution services - they purposefully choose to use their AmEx card to protect themselves. Small businesses are very happy with AmEx and it was noteworthy that they do not view their bank(s) with the same degree of satisfaction.

NACHA is working with QuickBooks and its competitors to address small business payment needs. Indicated that QuickBooks is "interested and willing to listen, recognize that we are on the cusp of a significant change of behavior and want to drive it."

Related Presentations

I missed the session, but PaySimple also presented market research on small business payments. You can download the slides here.

>> Return to index of my posts from NACHA Payments 2008

Top 10 CFO Concerns (latest survey results)

Results of the latest quarterly Duke University/CFO magazine Global Business Outlook Survey are published in the May 1 CFO Magazine. Weakening consumer demand is the number one cause of concern (for the second quarter in a row) but issues related to credit markets, the housing market bust, and fuel/commodity costs are all in the top 10.

In addition, CFOs are anxious about their customers' creditworthiness and the financial health of their suppliers. Finance executives are concerned about their own companies' access to capital as well.

Learn more:

Top 10 Concerns of CFOs
Kate O'Sullivan
CFO Magazine
May 1, 2008

Technology Adoption: Variation by Country and Technology (HBS)

[via HBS Working Knowledge]

How long does it take the average country to adopt a typical technology? The surprising answer: nearly half a century, or 47 years. "There is, however, substantial variation in these lags, both across countries and across technologies," write HBS professor Diego A. Comin and colleague Bart Hobijn of the Federal Reserve Bank of New York. Their working paper available for download, "An Exploration of Technology Diffusion," looks at the whys and wherefores of these adoption lags—the time between invention and diffusion—for 15 technologies in 166 countries. Technologies that Comin and Hobijn studied were related to transportation, telecommunication, IT, health care, steel production, and electricity.

Abstract

We develop a model that, at the aggregate level, is similar to the one sector neoclassical growth model, while, at the disaggregate level, has implications for the path of observable measures of technology adoption. We estimate our model using data on the diffusion of 15 technologies in 166 countries over the last two centuries. We evaluate the implications of our estimates for aggregate TFP and per capita income. Our results reveal that, on average, countries have adopted technologies 47 years after their invention. There is substantial variation across technologies and countries. Over the past two centuries, newer technologies have been adopted faster than old ones. The cross-country variation in the adoption of technologies accounts for at least a quarter of per capita income differences.

Exploration of Technology Diffusion
Diego A. Comin and Bart Hobijn

Download the paper: http://www.hbs.edu/research/pdf/08-093.pdf

Back Office Conversion: Too Little Too Late? (TAWPI Conference)

[I am in Las Vegas for the TAWPI Payments in Transition conference – these are my notes from one of the sessions. An index of all of the sessions and links to the rest of my notes is here. - EMc]

Back Office Conversion: Too Little Too Late?
Bob Meara, Senior Analyst, Celent

[program blurb] A new report from Celent, “Back Office Conversion: Too Little Too Late?,” includes results of a survey of 300 retail treasury staff conducted by Celent in July 2007. The survey revealed surprising interest in retail check conversion, given POP’s seven-year history of lackluster transaction volume. This session will review details of the survey findings.
[presentation]

My notes/observations:

BOC was developed to address failure of POP: no impact to POS workflow, no impact to consumer, no POS hardware or system integration. Yet compared to ARC and RDC, BOC has achieved only lack-luster adoption one year along. Why?

BOC is RDC – can be back office at retailer (as it was designed) where check conversion is primary, can be part of larger RDC or image cash letter solution (one of many capture points).

Retailers expect banks to provide solutions, yet Cash Management banks have a broad portfolio of products and bank solutions address only a small portion of check acceptance costs. Other parties are better positioned to address the problem: mostly 3^rd party providers. Banks ill equipped to serve multi-locations, whereas other providers have many years experience servicing retail POS locations.

Solution providers and their various approaches. 5 big banks are offering BOC, plus lots of other providers. 3 approaches: 1) capture, correct, balance at back office 2) capture and have 3^rd party correct and balance 3) deferred capture at 3^rd party location, utilize MICR line capture at POS coupled with balancing and correction later. By a 2 to 1 margin Treasurers prefer store level balancing – perceive that if store level personnel balance it will be less work for corporate later. But store operations are resistant to taking on more work. Thus, the importance of a consensus approach with treasury, retail operations, IT [music to my ears as a change leadership consultant] – often retail store ops will veto any changes to POS process and technology. What about vault capture? Most retailers do not use couriers (or at least not at every store location). Mostly store personnel used to make deposits.

Two thirds of retailers check verification/guarantee services. Mostly TeleCheck and Certegy. Already have MICR capture devices at POS and have integrated software. Or ISO model… ISO sells solution. ISO or 3^rd party serves as aggregator and partners with a presentment bank. Send ACH rather than cash letters to multiple banks. Not requiring retailer to change banking relationship.

Declining check usage at POS is large factor in lack-luster BOC adoption. Checks less than 10% of POS transactions (15-20% CAGR rate of decline depending on retail segment). Vs. 1999 when POP was introduced, or 2004 when RDC was introduced:

Why invest? Small segment of payments – more logical to outsource. Favorably impacting BOC adoption utilizing the 3^rd party model.

POP Renaissance – why now? Retailers have what they need to implement BOC (MICR capture, POS printing capability), customer fear is less of an issue, but how do I handle returns??? If using POP bundled with check verification/guarantee services, the process looks better. ACH is ideal for returns, additional presentment, already using lower cost method and increase collection rate. With checks volume continuing to decline, retailers increasingly consider check processing an annoyance, and desire to outsource all together. And you can’t underestimate the Wal-Mart effect – if they are doing it, it merits a second look. BOC actually prompted treasurers to re-evaluate POP. Nearly 2/3 of retailers surveyed were actually comparing POP and BOC in competing pilots.

BOC at Financial Institutions. ARC and BOC for intelligent routing. Decision gateway. Most FI not ready for these solutions. Still working on day 2 image workflows. Need to fully leverage Check 21 before attempting more elaborate solutions. But it’s the way things are headed.

ACH returns going up, increasing costs. Check feeds going down. Most RDC clients are low check volume, don’t care about marginal settlement improvement. But what about Image Cash Letter? Mostly using ARC already in conjunction with tools they have in house to manage availability.

BOC at FI is not compelling. But 3^rd party processors wanting to aggregate large volumes of items (where pennies count) are interested in BOC. Ultimately this will lead to modest trx volume, but it will take a long time.

Retail check conversion will peak in 2009-2010:

Legend:
Light gray bars – checks as a % of POS
Dark gray bars – % POS items converted
Yellow line # retail checks converted

>> Return to index of TAWPI conference sessions

Flight to Quality

New research from Greenwich Associates indicates that corporates are willing to settle for lower investment returns in exchange for reduced risk on short-term investments. 293 CFOs, Treasurers, and Assistant Treasurers were surveyed in February and the results are compared to results of a similar survey in May of last year.

Learn more:

• Treasury & Risk
• Greenwich Associates

Prediction Markets Improve Forecasting and Risk Management

(graphic courtesy of The New York Times)

Corporate decision makers are honing their accuracy by tapping into the collective wisdom of employees and customers via web-based prediction markets. An article to today's New York Times explains:

Corporate prediction markets work like this: Employees, and potentially outsiders, make their wagers over the Internet using virtual currency, betting anonymously. They bet on what they think will actually happen, not what they hope will happen or what the boss wants. The payoff for the most accurate players is typically a modest prize, cash or an iPod.

The idea isn't new, but it is gaining traction in larger companies. The article cites efforts by InterContinental Hotels, GE, and Hewlett-Packard to improve forecasting, reduce risk, and accelerate innovation.

Starting a year ago, a group in the purchasing unit at H.P. began prediction markets on the price of computer memory chips three and six months ahead. The prediction markets, Dr. Huberman said, were up to 70 percent more accurate than the company’s traditional forecasting models. The more accurate predictions, he said, can be used to finesse purchasing, marketing and product pricing decisions.

The article includes many examples, including how Best Buy is using prediction markets to predict not only demand for specific products but whether new stores will open in time.

See also this column from last summer by James Surowiecki in the New Yorker about prediction markets used to identify best selling books and anticipate the popularity of movies. Surowiecki expands on his ideas in his book The Wisdom of Crowds (available from Amazon).

Excerpt  from Surowiecki's New Yorker column:

MediaPredict, however, is wagering that in the real world success is, at least in part, predictable, and it follows a model that, over the past decade, has proved surprisingly effective in forecasting a wide range of events: the prediction market. Prediction markets function like futures markets, except that, instead of betting on the future performance of a company or a commodity, people can bet (often with play money) on things like election outcomes, current events, and product sales. Rather than relying on the gut instincts of a single decision-maker, prediction markets tap the collective intelligence of everyone playing the market. The most successful media prediction market is the Hollywood Stock Exchange, in which traders collectively forecast the box-office performance of Hollywood films, Oscar nominations and results, and the performance of individual actors, with striking accuracy. The market on average picks more than eighty per cent of Oscar nominees correctly, and hasn’t missed more than one Oscar winner in the past four years. More important, it has also done a good job of predicting box-office performance. According to a study by Anita Elberse, a professor at Harvard Business School, the market’s forecasts are off, on average, by sixteen per cent—far from perfect, but a track record that most studio marketing departments would be proud of.

Surowiecki warns that in order to be reliably smart - smarter than the individuals in the participating group - a predictive market must have the following characteristics:

1. Diversity of opinion to draw on different points of view, from participants with access to different information;
2. Independence of members from one another to avoid thought leaders influencing the opinions of others;
3. Decentralization to ensure that local and specific needs are taken into account;
4. A reliable method for aggregating opinions to ensure that all results are taken into account, but avoids the perils of decision by committee. This is the trickiest part.

Learn more:

Betting to Improve the Odds
By STEVE LOHR
The New York Times
April 9, 2008

The Financial Page
The Science of Success
by James Surowiecki
The New Yorker
July 9, 2007

The Wisdom of Crowds
by James Surowiecki
Published 2004

Corporate Collections Suffer as Economy Worsens

Today the National Association of Credit Management released its monthly Credit Manager's Index. For the first time since the index was calculated in February 2002 the combined manufacturing and services index has fallen below 50, indicating an economic contraction.

[Excerpt from CFO.com] accounts receivable departments have been feeling a major crunch. Credit managers told The National Association of Credit Management (NACM), which conducts the monthly survey, that they've had to send out more late-notice letters to clients, while others report customers asking for more time to pay. "Collecting receivables is becoming more and more difficult," a furniture vendor said. Added a grocer supplier, "Customers just don't want to pay current bills."

Credit Managers Index for the last 12 Months:

As companies struggle to collect cash, pressure to maintain working capital increases just as recent market gyrations and more caution among lenders restricts the availability of credit.

More info

• CFO.com article "It's Getting Much Harder to Receive"
• National Association of Credit Management March 2008 CMI Report (PDF)

Fed: Check Volume Decreasing at a Faster Rate

A study released by the Federal Reserve Board's Financial Services Policy Committee  on Tuesday, based on a sample of 30,000 checks from the image archive Viewpointe, indicates that businesses write nearly 40% of all checks and receive nearly three-quarters of all checks. Almost half of the checks written by consumers are for payments to businesses, either for bill payment or at the point of sale (POS).

Most consumer bill payment checks are being converted to ACH: 2.6 billion consumer checks were converted and cleared as ACH transactions in 2006. However, 42% of sampled checks are ineligible for ACH conversion under NACHA rules prohibiting conversion of checks with missing/no signature, checks greater than $25,000, and checks written by businesses or the government. 

(Graphic courtesy of American Banker)

Today's American Banker story also reports that due to declining check volumes, the Federal Reserve is accelerating its plans to close check processing facilities and anticipates that commercial banks will do the same.

The Fed has announced plans to cut back so that by mid-2011 it will have four full-service item processing centers, in Atlanta, Cleveland, Dallas, and Philadelphia; 17 other centers will remain open but will handle only images. The Fed had 45 full-service processing sites in 2003.

Learn more:

• Federal Reserve Press Release (03/25/2008)
• American Banker article (03/26/2008)

Ranking Treasury & Cash Management Providers (Global Finance Magazine)

Each year Global Finance magazine ranks the best treasury/cash management banks by region and by service category. The March 2008 issue arrived on Friday (just in time to land on the top of my weekend reading pile) and here are the highlights:

Bank Rankings

CITI

Best Overall Bank for Cash Management (Global Winner)
Best Bank for Risk Management (North America)
Best CLS-Linked Bank Offering (North America)

Global Finance praises Citi for innovation and its close collaboration with technology providers to help companies re-engineer their treasury and cash management processes. Highlights include the Citi TreasuryVision portal providing treasurers with greater visibility into their cash, investments, and liquidity and its new Managed Identity Services solution that enhances and streamlines security and identity management in high value corporate payments. Citi is one of the few banks that supports ISO 20022 XML standards. Citi has a 38% share of the third party Continuous Linked Settlement (CLS) system, simplifying foreign exchange processing and allows non-CLS settlement members to access its CLS settlement services through its online portal, CitiDirect.

JPMORGAN CHASE

Best Bank for Cash Management (North America)
Best Bank for Payments & Collections (North America)
Best Bank for Liquidity Management (North America)
Best Provider of Money Market Funds (North America)

JPMorgan Chase withstands increasing competition from foreign banks in US Market, and wins based on its integrated receivables offering, liquidity management, and order-to-pay processes. Its network of 15 image-enabled lockbox processing centers is linked with Receivables Edge (see my earlier post) a web-based interface for consolidating payment and remittance info for ACH, wire transfer, and EDI payments. JPMorgan is expanding its remote capture deposit services to include document image capture and promoting Back Office Check (BOC) conversion.  In addition, the acquisition of Xign enhances JPMorgan's payables and procurement capabilities. Global Finance lauds JPMorgan as an early pioneer in liquidity management, building on early innovations by providing third-party sweeping capabilities and "double sweep" which provides intra-day and end-of-day sweep and automated sweeps of excess funds into a centralized consolidated account, available for investment in a wide range of vehicles. JPMorgan Asset Management funds are well integrated into the banks liquidity management solutions and the bank is positioning itself to support special classes of investors such as central banks and sovereign wealth funds. As the leading ACH originator (by an overwhelming majority) and largest US dollar clearing bank JPMorgan is well positioned to serve its commercial customers.

Systems & Services Provider Rankings

Global Finance also reviewed Treasury and Cash Management systems and service providers to determine the best solutions in eleven categories. The winners are:

BOTTOMLINE TECHNOLOGIES

Best Accounts Payable Services

Working capital efficiency is driving the effort to automate and streamline order-to-pay. Global Finance is impressed by Bottomline's strong exception management and workflow tools that enable companies to accelerate the invoice approval process and increase the number of payments eligible for early payment discounts. Bottomline recognizes that paper is not going away anytime soon, and provides outsourced invoice data capture (not just invoice images).

SUNGARD AVANTGARD RECEIVABLES

Best Accounts Receivable Services

SunGard has one of the most comprehensive accounts receivable solutions on the market, according to Global Finance. User lower their days sales outstanding (DSO) by reducing disputes and streamlining the receivables process. Features include credit risk management, collections, dispute resolution, electronic invoice settlement, cash forecasting and analysis and reporting.

ARIBA

Best Invoice Presentment & Payment

Ariba provides both payments and remittance management. It is partnering with Orbian to provide supply chain financing. Over 120,000 suppliers are in the Ariba network, and efforts are underway to increase that number.

ORACLE

Best Payroll Services

Global Fiance notes that by consolidating various acquisitions Oracle delivers rules based payroll management that allows users to easily and dynamically control changes to employee benefits. It has modules for country-specific payroll needs, providing a global solution.

MASTERCARD WORLDWIDE

Best Corporate Cards & Expense Management

Expense cards provide efficiency, but the real value comes through transaction reporting, data integration, and authorization management - areas in which MasterCard has invested heavily over the last year. Sophisticated authorization, transaction routing, and alert controls can be customized using MasterCard inControl. SmartData offers enhanced spend data reporting, and Travel Dashboard provides travel program business intelligence.

FISERV/CHECKFREE

Best Electronic Commerce Provider

CheckFree claims that a significant percentage of the 14 billion annual ACH transactions are processed using their software. CheckFree has an EFT network, bill presentment and payment solution, too. Fiserv aims to combine CheckFree's capabilities to its own core banking solutions for small and mid-sized banks.

SUNGARD AVAILABILITY SERVICES

Best Loss Prevention /Business Services Provider

Global Finance is impressed by SunGard's comprehensive Availability Services that address all aspects of business continuity planning - data, IT, networks, and people - and enable companies to restore business as usual after a calamity.

CPAS SYSTEMS

Best Pension Plan Administration Services

Pension software from CPAS is used to administer thousands of pension plans around the world. Global Finance praises the solution's strong workflow and data management capabilities, web-access and self-serve features. An Express version is pre-configured for rapid implementation.

EDS

Best Technology Service Provider

Acknowledging stiff competition from Indian high margin business process outsourcing providers, Global Finance still thinks EDS is tops for remote infrastructure management via its utility based model and large geographic footprint.

SUNGARD AVANTGARD

Best Treasury Workstation Provider
Best Treasury Management Software

More than 1,600 companies use SunGard AvantGard for treasury and risk management. Recent focus on straight-through-processing and collaborative financial management in order to increase efficiency in the end-to-end supply chain. SunGard was an early champion of ASP and hosted solutions, providing an answer to companies without a dedicated treasury management system. Acquisition of ZRT's Globe$ and TWS solutions provide comprehensive data to support treasurer's risk and cash forecasting solutions.

 

Source:

Global Finance
World's Best Treasury Providers 2008
March 2008 (pages 40-57)

Latest CFO Outlook: Gloomy

CFO Magazine and Duke University recently concluded their latest quarterly Global Business Outlook survey of more than 1,000 CFOs of private and public companies worldwide. The global CFOs anticipate that inflation will rise to 3% this year and nearly 90% believe the economy will not rebound until 2009.

Here are the "lowlights" from CFO.com

• Fifty-four percent say the United States is now in recession.
• Optimism reached its lowest point since the study launched its optimism index six years ago. Pessimists outnumber optimists by a nine-to-one margin, with 72 percent of finance chiefs more pessimistic than about the U.S. economy they were last quarter. Just 8 percent more optimistic.
• Weak consumer demand and turmoil in the credit and housing markets are the top macro-concerns of top finance executives. The high cost of labor ranked as the top internal concern.
• Credit conditions have directly hurt 35 percent of companies through decreased availability of credit and higher interest rates (up 118 basis points on average). Sixty percent of the companies have put off expansion plans in response to credit market unrest.
• The CFOs expect capital spending to increase only 3.3 percent, while price inflation  rises 3 percent over the next 12 months.
• Only 13 percent think the U.S. economy will hit bottom and begin to rebound in 2008. Another 40 percent say the rebound will occur in the first half of 2009, while 47 percent feel recovery is more than 15 months off.

Darkness Visible: CFOs See Recession Through 2009
David M. Katz
CFO.com | US
March 12, 2008

Detailed results here.

Latest Fed Reserve Payments Study

It's been three long years since the Federal Reserve published its previous payments study. A lot has changed in the payments world since 2004 and the latest study results confirm what we've all been experiencing: electronic payment is now dominant.

At the time of the the last study - 2003 - the number of electronic and paper payments were roughly equal. Now, more than two-thirds of payments are electronic.

Press Release
Summary Report (complete results will be published in early 2008)

Government ePayments - Worldwide Ranking

How often does civil service outrank business in terms of efficiency? Very rarely. But when it comes to electronic payment governments worldwide are making serious progress.

A new study by the Economist Intelligence Unit measures the extent to which 43 countries have adopted electronic methods for key transactions such as tax payments/refunds, automotive costs, social welfare benefits, business registration and government procurement. The study also considered the countries' payments infrastructure and the influence of educational, economic, and political factors. Canada tops the list, followed by the UK. Germany and the US are tied for #3. Indonesia, Nigeria, and Ukraine scored the worst. There were some surprises - Japan is ranked #17, after Italy a country that is generally not well regarded when it comes to bureaucratic efficiency.

Effective strategies:

• The payment system should be appropriate to the users (citizens vs. business) and not so technologically simplistic that they rapidly become out of date.
• The means of disbursing payments (G2C) should be as easy and useful as the means of collecting taxes (C2G). 
• Security is key.
• For transactions where identify, fraud, and documentation considerations preclude online services the online channel should be used to provide information, downloadable forms, and appointment scheduling.
• Start with high volume, widely used, relatively standardized transactions (the low hanging fruit) and save more complex transactions (road tolls, government loans) for later.
• Governments should promote basic banking services - public or private - to unserved populations and encourage widespread availability of internet access.
• Payment plans should integrate solutions for the informal economy - this applies in both developing and some wealthy countries.
• Openly communicate long term plans so that private-sector partners and citizens can plan accordingly.

Download the 14 pg report here:

Government E-Payments Adoption Ranking (GEAR)
Economist Intelligence Unit, sponsored by VISA.
October 2007

(via Payments News)

Latest Mobile Payment Projections (from Jupiter)

New forecasts from Juniper Research show that around 52 million consumers will adopt new mobile technologies such as NFC (Near Field Communication) and other physical mobile payment methods to pay for everyday goods and services by 2011. This will help drive the physical mobile payments market to $11.5bn by the same year.

Other findings from the report include:

• Mobile payment applications and services are already available in most regions in a variety of formats where they are being adopted in either a trial or commercial mode with favourable user feedback.
• Industry players (including retailers, handset vendors and the financial community) in the Far East and the US are seen as particularly receptive to the idea of using RFID or NFC to facilitate mobile payments for physical goods and services.
• Members of the mobile payments value chain must develop a mutually satisfactory, robust business model, guaranteeing revenue to all parties

Learn more:

Mobile Payments: Strategies & Markets 2007-2011
Jupiter Research

B2B Payments Gradually More Electronic

Results of a new survey from the Association of Financial Professionals (AFP), released in conjunction of the annual AFP conference in Boston this week, reveal that business are gradually adopting electronic payments. The study is a follow up to a similar survey conducted in 2004.

Summary of key findings:

• The number of check payments has decreased. The typical organization makes 74 percent of its B2B payments via check (the rest via ACH, cards, or wire), down from 81% in 2004.
• Larger corporates moving more quickly. Not surprisingly, larger organizations with higher volume are making more electronic payments.
• Major suppliers targeted. 43 percent of respondents are likely to convert the majority of their B2B payments to major suppliers to electronic rather than check payment in the next three years (up from 28% in 2004). 33 percent of respondents are likely to convert the majority of their B2B payments to minor suppliers.
• Top 3 benefits of electronic payment identified by the respondents: 1) cost savings, 2) improved cash forecasting, and 3) straight-through processing.
• Top 3 barriers to electronic payment identified by the respondents: 1) information technology and integration constraints, 2) inability of trading partners to send or receive automated remittance information, and 3) difficulty in convincing customers and suppliers to adopt electronic payments.
• Progress toward integration. 59 percent of organizations have integrated their accounting systems with their ACH payment systems and 40% have done the same for card payments.
• Purchase cards and wires growing. Three out of five organizations reported an increase in purchase card usage over the last two years, especially for small dollar purchases. 43 percent of wire transfer users increased their wire volume during the same time frame.

More B2B payment news here.

Corporate Treasury: Focus on Internal Efficiency & Improving Technology

Business Finance magazine and JPMorgan Chase surveyed 500 corporate Treasurers to better understand the trends impacting their departments and what keeps them up at night.

Large Companies ($2 billion + annual revenue) vs. Smaller Companies (under $100 million)

79 percent of large companies identified internal efficiency as the factor of greatest importance in the treasury area. Among smaller companies, 73 percent identified the economy as the most important factor impacting the treasury function. M&As, the third-ranking factor, were cited by 61 percent of the larger companies but only 27 percent of the smaller companies.

However, the large/small dichotomy again showed in the responses to globalization, the factor ranking fourth overall. Globalization was cited as an important factor by 51 percent of larger companies but only 35 percent of smaller ones.

The Transition from Paper to Electronic

Although the paperless office will never happen in anyone's lifetime, companies continue to express interest in moving from paper to electronic processing. The three big drivers here are the opportunity to gain greater operational efficiency (cited by 70 percent of the respondents), the chance to lower the cost of electronic clearing (50 percent), and the ability to optimize the availability of funds (40 percent). Despite the recent attention on green business practices, only 11 percent of respondents cited environmental concerns as an influence.

Learn more:

Top of Mind
Survey: Tressury's Methods in Flux
by Alan Radding
Business Finance
October 2007

Fortune 500 Companies with 3+ Women Board Members Outperform Peers

Fortune 500 companies with the highest representation of women board directors attained significantly higher financial performance, on average, than those with the lowest representation of women board directors, according to non-profit Catalyst’s most recent report, The Bottom Line: Corporate Performance and Women’s Representation on Boards. In addition, the report points out, on average, notably stronger-than-average performance at companies with three or more women board directors.

The report found higher financial performance for companies with higher representation of women board directors in three important measures:

Return on Equity: On average, companies with the highest percentages of women board directors outperformed those with the least by 53 percent.

Return on Sales: On average, companies with the highest percentages of women board directors outperformed those with the least by 42 percent.

Return on Invested Capital: On average, companies with the highest percentages of women board directors outperformed those with the least by 66 percent.

The correlation between gender diversity on boards and corporate performance is found across industries—from consumer discretionary to information technology.

About Catalyst
Founded in 1962, Catalyst is the leading nonprofit corporate membership research and advisory organization working globally with businesses and the professions to build inclusive environments and expand opportunities for women and business. With offices in New York, San Jose, Toronto, and Zug, and the support and confidence of more than 340 leading corporations, firms, business schools, and associations, Catalyst is connected to business and its changing needs and is the premier resource for information and data about women in the workplace. In addition, Catalyst honors exemplary business initiatives that promote women’s leadership with the annual Catalyst Award.

Learn more:

The Bottom Line: Corporate Performance and Women’s Representation on Boards
Catalyst
October 2007

TowerGroup: Continued Dominance of Debit & Pre-Paid Cards

Today TowerGroup releases a new report on debit and pre-paid cards. Its research finds that the debit card's increasingly dominant position as a payment vehicle will continue through 2009 and beyond. Prepaid cards will also continue their rapid growth as a result of foreclosures affecting credit scores and consumers continuing to require the benefits of payment card access.

Transactions for debit cards in the United States surged three times faster than those for credit cards from 2005 to 2007, as consumers separated purchases into "lending" versus "spending" products. Debit cards have absorbed a growing share of consumable purchases - such as gasoline, groceries, and other day-to-day consumer expenses - leaving the credit card for durable goods purchases. As consumers and businesses work their way out of a sluggish economy, TowerGroup projects the weakened economy will continue to erode the rate of credit card transaction growth.

Crediting Debit: How Debit Cards Will Grow in a Changing Environment
by Brian Riley
TowerGroup
October 8, 2007

Aite Forecasts Check Electronification

Aite Group releases a report today predicting that check electronification will increase to 75% of checks issued by 2012. The report forecasts that the over all number of checks written will steadily decrease, but that an increasing percentage of checks written will clear electronically. These findings underscore the industry emphasis on turning paper checks into electronic transactions rather than eliminating check transactions in the first place.

Nancy Atkinson, senior analyst at Aite Group and author of the report, observes

The nature of check processing is changing rapidly, and though a number of electronic instruments will dramatically reduce the number of paper checks processed for clearing and settlement, billions of paper checks will still be written each year.

Financial institutions need to seriously consider their time of entry, as early adopters tend to pay additional costs for technological and operational challenges. However, there is no doubt that all financial institutions will eventually need to migrate to ACH conversion or check truncation, though most likely both.

The Magical Disappearing Check or the "Prestige"
Aite Group
Boston, MA, October 8, 2007

Alternative Payments Predicted to Increase Share Online

According to new research from Javelin Strategy & Research credit card share of online payments is expected to decline from 60% today to 44% in 2012. Debit card usage is expected to remain steady.

In addition to PayPal, Google Checkout, and Bill Me Later literally dozens of companies are competing in the alternative payments space. Each is hoping to deliver the most compelling mix of consumer convenience, real and perceived security, and merchant fees.

(graphic courtesy of American Banker)

Online Payments Forecast: Alternatives Payments to Go Mainstream as Consumers Seek Security and Convenience
Javelin Strategy & Research
September 2007

American Banker Coverage

7 Habits of Effective Remote Deposit Deployments

Celent's latest remote capture deposit report highlights the gulf between the very few financial institutions that have successfully deployed RDC solutions and the remaining 3000+ whose results are lackluster (see chart below, courtesy of Celent).

7 Habits for Successful RDC Deployment

1. A robust vision for the RDC opportunity
2. Senior management sponsorship and visibility
3. A realistic risk assessment
4. Significant investment in sales and marketing with clear objectives
5. Involvement of the retail bank at the branch level
6. Specific and incremental sales incentives
7. A sense of urgency

Successful introduction of a new product relies heavily on project management fundamentals.  The most important element of leading effective change within an organization is to define and constantly communicate a compelling vision of where you are going.  This responsibility falls heavily on project sponsors (executive leadership) as well as project leaders.  It isn't necessarily hard to do, but requires constant attention. It's too easy to get bogged down in the technical challenges and small details of a vast deployment and forget to champion the cause.

For practical tips and suggestions for leading change and implementing technology within your organization see the ForteBlog Project Management Series.

Latest research on mobile banking and payments

Online Banking Report has just published a follow up to its recent Mobile Banking Report, this time thee analysis is focused on mobile payments in North America.

Here's the abstract (emphasis added):

While banking and payments are interrelated, when it comes to the rollout of mobile finance in North America, they will arrive in two distinct phases. As we discussed last month (OBR 138/139), the information about payments, what we call mobile banking, will lead the way with real inroads occurring this year.

On the other hand, significant adoption of actual payment transactions, either remotely or at the point of sale, i.e., mobile payments, is still years away. Why? Delivering banking info to the mobile device is far simpler than enabling the phone for payments.

Eventually, mobile device-based transactions will surpass card-based transactions. But even then, consumers are likely to return to the desktop PC to manage payment accounts, set up payments, analyze spending, and interact with the card issuers.

Does this mean it’s too early to worry about mobile payments? Absolutely not.

Financial institutions today can and should use mobile information delivery to enhance the credit/debit card experience and reduce fraud. Not only does this differentiate your payments cards, it readies your customers for the eventual convergence of the mobile device and payments card.

Learn more here.

Mobile Money & Payments
Why credit & debit card issuers should embrace mobile delivery now
Online Banking Report
Apr. 10, 2007; OBR 140/141

Mobile Banking and Payments - Has the time (finally) come?

This week InformationWeek hypes mobile banking and mobile payment - suggesting that the time has finally come for mobile financial services. The article outlines mobile account access recently introduced by Citibank, BofA, and Wachovia - and applauds the utility of simple on-the-go transactions such as checking balances, transfering funds, locating ATMs, and one click calls to customer service, but questions the necessity of bill payment and other more complex transactions from a phone. 

The article concludes with a brief discussion of payments using your cell phone and efforts driven by MasterCard and Visa to generate a market for contactless payments via near field communication. For now, these efforts remain bogged down in the complexity of parcelling out the business model's benefits between financial institutions, cell phone carriers, and payment networks.

However, Mercator Advisory Group recently published a research report suggesting that the time has indeed come for US mobile banking and payments and suggests that business models have evolved to include sufficient fee revenue for all key participants. I remain skeptical, but time will tell. In the meantime, here are Merctor's projections:

• Mercator Advisory Group forecasts mobile banking fee revenues available to the mobile ecosystem of banks, mobile operators, vendors and networks to exceed $1B in 2011. 
• Mercator Advisory Group forecasts mobile payments volume to exceed $6.9B in 2011.
• The evolving business models leave fee revenue on the table for mobile operators, banks and their vendors.  For mobile operators, mobile banking drives minutes of use and multiple fee opportunities.  For banks and payment networks, services fees and switching charges are available.  For the first time, at least some of the interests of every element in the mobile ecosystem are served.   

Your Phone As Financial Central
By Elena Malykhina
InformationWeek
April 9, 2007

US Mobile Banking and Payments: Finding the Seams, Accelerating the Pace
MERCATOR ADVISORY GROUP   
Boston, MA
March 2007

The Multitasking Myth

Recent research demonstrates that multitasking is less effective than previously thought - and in fact, slows you down. A front-page article in Sunday's New York Times summarizes the [compelling] research:

“Multitasking is going to slow you down, increasing the chances of mistakes,” said David E. Meyer, a cognitive scientist and director of the Brain, Cognition and Action Laboratory at the University of Michigan. “Disruptions and interruptions are a bad deal from the standpoint of our ability to process information.”

The human brain, with its hundred billion neurons and hundreds of trillions of synaptic connections, is a cognitive powerhouse in many ways. “But a core limitation is an inability to concentrate on two things at once,” said René Marois, a neuroscientist and director of the Human Information Processing Laboratory at Vanderbilt University.

Some advice for recovering multitaskers:

• Manage your email (don't let it manage you)
  Check your email only at a couple pre-defined times throughout the day to avoid distractions
  
• Block out your time
  Schedule blocks of time devoted to important tasks and do not allow for interruptions (turn off the ringer on your phone, shut the door to your office, etc.)
  
• Pick background music carefully
  Soothing (instrumental) background music is okay, but avoid songs with lyrics.
  
• Concentrate on driving
  [This one is the hardest!] Do not talk on the phone, let alone compose emails on your PDA, while you are driving.

Slow Down, Multitaskers; Don’t Read in Traffic
By STEVE LOHR
The New York Times
Published: March 25, 2007, pg A1