Making Electronic B2B Payments Is Easier than You Think

1. Making Electronic B2B Payments Is Easier than You Think Dale Sorenson, Associated Bank Sharon Jablon, The Clearing House, AAP Windy City Summit, June 7, 2012

2. What’s Happening? • Yes, checks are disappearing – but primarily with consumers • Superstructure for B2B electronic payments is largely in place • Corporate awareness and practices still lag • It’s easier than you think

3. B2B Payment Patterns

4. Checks Continue to Disappear * CAGR = compound annual growth rate 2010 Federal Reserve Payments Study

5. Check-Clearing Times Shrink Source: Phoenix-Hecht

6. Postage Rates Climb

7. Why Pay Electronically? “2010 AFP Electronic Payments: Report of Survey Results”

8. Barriers to Change “2010 AFP Electronic Payments: Report of Survey Results”

9. B2B: Checks Still Swamp ACH “Typical organization makes 57% of its B2B payments by check” 2010 AFP Electronic Payments study * ACH data from NACHA’s Annual Report Check data from 2010 Federal Reserve Payments Study

10. Electronic Payment Options

11. Payment Networks

12. The Clearing House (TCH) Clears and settles 65 million payments, valued at nearly $2 trillion/day

13. Payment Flow – STP 820 Payor’s Accounting Software or Bank’s Online Portal Payee’s Payables Data Accounting Software Customer Account Number Customer Name Invoice Gross Amount Amount Paid Invoice Number Invoice Date PO Number Discount Adjustment Amount Adjustment Code CTX with STP 820 STP 820 CTX with STP 820 CTX with STP 820 The Clearinghouse/Fed

14. NACHA File for CTX Payment with STP820 101 021000018 3112345670302120140F094101ASSOCIATED BANK JONES PLUMBING X 5220JONES PLUMBING 1311234567CTXPAYINVOICE 030212 1021000010000012 622021000021182389281 0000012001EP10019 0008ACME IMPORTS 1021000010038729 705ISA*00* *00* *30*311234567 *14*9088877320000 *030129*10100010038729 7051*U*00401*000000001*0*P*~\GS*RA*311234567*9088877320000*20030129*1615*1*X*00401000020038729 705\ST*820*0001\BPR*C*120.01*C*ACH*CTX*****1311234567**01*021000021*DA*182389281*2000030038729 705030129\TRN*1*EP10019\N1*PR*JONES PLUMBING*91*123456789012345\N1*PE*ACME IMPORTS 00040038729 705\ENT*1\RMR*IV*3920394930203**30.01*40.01*2\REF*R7*3920394930203*NEW BUILDING PRO00050038729 705JECT\DTM*003*20030123\ADX*-8*01*TD*USED CATALOG 199JAN2003\RMR*IV*254221222500**00060038729 70545*50.01*4\REF*PO*5722319*MARKETING DEPARTMENT ORDER\DTM*003*20030125\ADX*-1.01*00070038729 70504\RMR*R7*21222500**45\DTM*003*20030129\SE*17*0001\GE*1*1\IEA*1*000000001\ 00080038729 822000000900021000020000000000000000000120011311234567 021000010000012 9000001000002000000090002100002000000000000000000012001 X 5 = Batch Header Record 6 = CTX Corporate Entry Detail Record 7 = CTX Addenda Record behind the scenes STP 820

15. Bank Portal for Electronic Payments Running Total of all remittances User inputs Payee information To get to detail Summary information of remittances already established to the payee

16. Bank Portal for Electronic Payments User key enters remittance information

17. Software Support Certified by Promoted by Adopted by

18. Remittance Information and Wires

19. Wire Remittance Information (CHIPS and Fedwire) ISA*00* *00* *17*071000366 *17*021000021 *090129*101 1*U*00401*000000001*0*P*;\GS*RA *071000366*021000021*20090129* 1615*1*X*004010STPW….. Transaction = Payment Data + 9000 characters of remittance information

20. Options for Sending Remittance Info with Fedwire and CHIPS

21. Experience with STP 820 & Accounting Software Verizon Posts to Accounts Receivables - STP 820 module The Clearing House Great Plains Dynamics Accounts Payable – STP 820 module TCH’s Bank Verizon’s Bank ACH Operator

22. TCH Payments to Verizon Challenge • Many checks (1200 per year) to Verizon • Many “pay to” addresses and duplicate invoice numbers (phone #) TCH Electronic Payments Program • Verizon initially did not respond to TCH’s mass request for banking info • But TCH discovered that Verizon processes EDI Electronic Payments for Verizon – “No Brainer” • Unique invoice number is now phone number + date = XXXYYYZZZZ MMYY • Immediate conversion (4-6 weeks) and savings of $1,200

23. Leading Business Practices

24. Miracle at Schwing America • *Banking Fees • Check = $1.12 • ACH = $0.26

25. Steps to Success Convince senior management Persuade vendors that payments will be faster Adopt “belts & suspenders” approach to remittance data Start with voluntary program, thereafter involuntary Automate if you can – but don’t wait on automation

26. February 14, 2011 • Dear Valued Vendor: • As Schwing America continues to improve the promptness with which we remit payment to our valued vendors, we now have the capability to expedite payment further by remitting payment via electronic funds transfer in the form of an ACH payment. • By utilizing ACH payments, you, our valued vendor, will receive payment directly into your checking account instead of waiting for the USPS to deliver a paper check to either your office or lockbox. You will also receive via e-mail a payment advice detailing which invoices were paid and the total dollar amount deposited into your bank account. • In order to start this process we need to gather the following information from you: • Vendor Information: • Your standard information (Name, address, Tax ID etc.) • Contact Person • E-mail of the contact person – this will be the e-mail address used to receive the payment advice. • Vendor Bank Information • Vendor Authorization • To start this process we ask that you complete the attached form. • Please note that all sections must be completed. • Once you have completed the form, both signing it and dating it we ask that you scan and e-mail the form to ap@schwing.com or fax the form to 651-287-0413. • Since payment via ACH is both faster for you and less costly for us, this payment method is now our preferred payment method. Presently, payment to you via ACH is optional; however, in the near future Schwing America will require that you accept ACH payments or be assessed a processing fee to cover the cost of remitting payment via check. • Should you have any questions or require additional information, don’t hesitate to contact me. • Best regards, • Paul W. Steffensen • Paul W. Steffensen • Treasurer • An electronic copy of this letter can be found by going to http://www.schwing.com/pages/news/index.html and selecting the corresponding press release. • 5900 Centerville Road w Saint Paul, MN 55127 w www.schwing.com w Phone: (651) 429-0999 w Fax: (651) 429-3464 • Subsidiary of Schwing GmbH Vendor Solicitation • You will receive payment directly into your checking account instead of waiting for the USPS to deliver a paper check. • You will also receive via e-mail a payment advice detailing which invoices were paid. • In the near future Schwing America will require that you accept ACH payments or be assessed a processing fee to cover the cost of remitting payment via check.

27. MapQuest for Payment Pioneers Starting point: Land of Checks Trip to: Electronic Payment Zone Distance: Shorter than you think • Start out by recognizing that you can change now or change later, but change is unavoidable • Merge accounting and banking systems with either low-tech or high-tech solutions • Don’t be afraid to experiment in order to control risk and obtain insights

28. Contact Info Dale.Sorenson@associatedbank.com Sharon.Jablon@theclearinghouse.org