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© 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
© 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.
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
© 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.
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
© 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.
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
© 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.
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
© 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.
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
© 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.
7
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
© 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.
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
© 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.
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
© 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.
10
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
© 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.
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
© 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.
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
© 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.
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
© 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.
16
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
© 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.
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
© 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.
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
© 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.
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?
© 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.
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
© 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.
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
© 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.
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
© 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.
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)