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E-CommerceGaining Efficiencies in Local Governments
Rolando NavarroOfficial Payments Corp.
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E-CommerceGaining Efficiencies in Local
Governments
Over the past ten years, state and local governments have answered the call of citizens for increased efficiencies and convenience by embracing online services and electronic payments.
Agenda
• History and Growth of e-Payments in Government• Increasing Demand for e-Payments • Benefits of e-Payments
– Local Governments– Citizens
• Challenges facing Local Governments– Technical– Financial– Staffing
• Choosing an e-Payment Vendor Makes Sense• Checklist for Choosing an e-Payment Vendor• Choosing the systems that work for you• Q&A
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History of e-Payments in Government
• Although early government sites largely provided information, in the mid-to-late ‘90s, e-government services began to emerge
• In 2000, the US Government sold more than $3.6 billion via the Web (Amazon sold $2.8 billion that same year)
US Mint sold $150 million online GSA auction site sold more than $3 million US Postal Service sold $27 million
• By 2002, over 68 million adults were using government sites, many to conduct transaction-based business
16% filed taxes 12% renewed a driver’s license or auto registration 11% renewed a professional/recreational license 2% paid a fine
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History of e-Payments in Government Cont.
• By 2005, 62% of government sites accepted credit cards for routine payments
• 80% of government Web site users are satisfied with their Internet experiences
• Users report that the Internet has improved the way they interact with government
49% improvement at the Federal level, 44% at the State and 30% at the local
• By June 2007, government e-commerce/transactional sites were the best scoring category in citizen satisfaction with a 3.5% quarter over quarter increase
• As e-government sites continue to add e-commerce and transactional capabilities, satisfaction improves because government heeds the consumer’s desire to interact with it online
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The Growth of Online Services on Government Websites
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006
None One Two Three or More
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History of e-Payments in Government
The Growth of Online Services at the Federal and Local Level• Over half of all Federal tax returns were filed electronically in 2006• E-filers who opt for Direct Deposit can expect a refund in 2 weeks
or less, paper files typically wait between 3-6 weeks• Filing after April 30 (30% of returns) increased the wait to as
much as 8 weeks or more• In Michigan at the local level the dollars processed went from $8.6 million
in 2003 to $28 million in 2007. In the same 5 year span, the number of transactions increased by 39,000
• In Ohio at the local level the dollars processed went from $17.1 million to $62 million in 2007. In the same 5 year span, the number of transactions increased by 85,000
• In California at the local level the dollars processed went from $99.8 million in 2003 to $516.5 million in 2007. In the same 5 year span, the number of transactions increased by 271,000
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Increasing Demand and Acceptance of e-Payments
ACH Credits/Debits
Credit Cards
Debit Cards
Electronic Data Interchange (EDI)
<10,000 10,000 -
49,000
50,000 –
99,999
100,000 –
499,999
500,000 –
999,999
>1,000,000
% o
f G
ove
rnm
ent
Res
po
nd
ents
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Benefits of e-Payments
Government Agency/Department
Reduced processing costs
Streamlined collections process
Quicker access to funds
Ability to provide additional payment options and feature to citizens
Improved citizen satisfaction with government offerings
Reduce the number of phone calls
Reduce office traffic
Benefits of e-Payments cont.Citizens
Convenience 24/7 x 365 availability Multiple payments channels – Internet, Phone, Kiosk,
Over-the-Counter Multiple payment options – MasterCard, American
Express, Discover, VISA credit and debit cards, and electronic checks
No waiting in line, no postage required
Reliability Real-time authorizations Payment confirmations No login or PINs to remember
Rewards Flexibility to pay balances over time Points, miles and cash back for some credit card
users
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Challenges Facing Local Governments in Offering e-Payments
The decision to offer e-payment services is not an easy one for local governments to make. Some of the many challenges facing local governments include:
• Technical Skills and Experience– System development and implementation– System maintenance and upgrades– System security compliance and certification
• Financial Processing Expertise– Knowledge of banking regulations– Knowledge of credit card and ACH regulations– Experience with settlement, reconciliation and balancing– Experience with chargebacks and returns
• Staffing– Day-to-day staff to handle implementation and operational issues– Dedicated staff to handle customer service issues– Dedicated staff to market the e-payment options– Dedicated staff to ensure security compliance
• Cost
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Technical Challenges
System development and implementation Channels - Internet, IVR, Kiosk, In-Person Payment options – Credit cards, debit cards, electronic checks System availability Departmental or Agency-wide system System bandwidth – peak usage vs. everyday usage Integration with existing office systems Reporting
System maintenance Adding new features Staying current with security regulations System upgrades 24/7 x 365 system monitoring
Security compliance PCI compliance NACHA rules compliance SSL encryption, AVS, CVV, CVV2 Data security Security of physical location of data
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Financial Processing Challenges
Compliance with State banking regulations
Compliance with Credit Card companies and issuing banks
Compliance with NACHA standards
Settlement procedures
Chargeback and reversal handling
Reconciliation and balancing procedures
Co-mingling of funds
Re-presentment of returned items
Reports
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Staffing Challenges
Staff to develop, implement and maintain the system
Staff to set up accounts
Customer service staff
– Availability
– Training
– Phone and email requests
– Spanish speakers
IT/Risk Management/Security staff
– Fraud prevention
– Security compliance
Marketing staff
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Cost Challenges
Staff Implementation Customer Service Maintenance IT Marketing
Merchant processing fees may including Merchant IDs
Security compliance and certifications
Cost of providing multiple channels (Internet, IVR and face-to-face) and payment methods (American Express, Discover, MasterCard, and VISA credit cards; debit cards; and electronic checks
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Choosing a Payment Vendor Makes Sense
The challenges involved in providing electronic payments in-house can seem overwhelming. Choosing an outside third party e-payment vendor makes sense, but choosing the right e-payment vendor is critical to your program’s success.
Checklist for choosing a payment vendor:
Vendor stability Is the vendor financially solvent? How long has the vendor been in the payment business?
Vendor experience How many clients does the vendor have? Who are the vendor’s clients? What markets does the vendor serve?
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Choosing a Payment Vendor Makes Sense Cont.
Checklist for choosing a payment vendor:
System features How diverse is the vendor’s product offering?** Does the vendor meet your data requirements and business rules? How often is the system upgraded and what cost to client? Does the vendor provide a separate testing and development environment? Is the system bilingual? What is the length of a typical installation?
System reliability What is the vendor’s website bandwidth? Has the vendor ever reached
capacity? How many phone lines does the vendor have? Does the vendor have a separate back-up system? Is the backup system completely redundant? Is the backup system in a separate location?
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Choosing a Payment Vendor Makes Sense Cont.
What type of solutions does the vendor offer for integration?
For the Internet Standard Secure Payment Portal Cobranded Application Fully Hosted Application Bill Presentment Application Web Services Integration with your existing software vendor Over The Counter Payments Kiosks
For the Phone system or “IVR” Standard blind pay system DTMF Fully Hosted Application Bill Presentment Application Web Services Integration with your existing software vendor
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Checklist for choosing a payment vendor
Checklist for choosing a payment vendor:
System security Is the vendor PCI Level 1 compliant? What is the status of the vendor’s SSL certificate? Does the vendor have annual independent audits of its system? Is the vendor’s disaster recovery plan tested on a regular basis? What is the level of building security maintained by the vendor? Cameras,
security badges, etc. What employee screening methods are utilized?
Customer focus Does the vendor have separate client, customer and implementation support
staffs? What are the vendor’s average customer service metrics –
length of hold time, average call time, first-time resolution, etc.? What resources does the vendor provide for marketing online payment
services? At what cost? Does the vendor maintain card partner relationships such that your
constituents will benefit by paying with a credit card? Does the vendor offer flexible pricing models?
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The Right Payment Vendor
understands the payment industry
understands appreciates the uniqueness of your organization
provides dedicated sales, implementation, support, and marketing personnel
works your organization to maintain controls, efficiencies and service
works to maximize your existing software solutions by conforming with your file formats and business rules
understands that governments have people’s livelihoods at stake and that managing the government environment is more than handling operations and human resources
works with you to achieve your long-term e-Payments’ vision
