Research and Markets: Can Least-Cost Routing Result in Cost Savings and Efficiencies for Financial Institutions?DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com/reports/c19961) has announced the addition of Least Cost Routing A feature of a telephone system that automatically connects an outgoing telephone call with the telephone service that costs the least to that location at that time of day. Depending on how it is programmed, least cost routing will either drop down to the second most-efficient service if : Panacea Some antidote or remedy that completely solves a problem. Most so-called panaceas in this industry, if they survive at all, wind up sitting alongside and working with the products they were supposed to replace. Or Pandora's Box Pandora’s box contained all evils; opened up, evils escape to afflict world. [Rom. Myth.: Brewer Dictionary, 799] See : Evil ? to their offering. Can least-cost routing result in cost savings and efficiencies for financial institutions? For the vast majority of financial institutions, the answer is...no. As electronic bill payment adoption continues to surge, bankers are paying increased attention to the potential benefits of least-cost routing (LCR See least cost routing. ). LCR refers to the electronic bill-payment process whereby financial institutions (FIs) select one of several potential routing alternatives and thereby (theoretically) lower per-transaction and overall processing costs. For FIs, a requisite for LCR is access to the information needed to make informed routing decisions, as well as the systems and resources to ensure delivery, service customers, and handle and route returned and exception items. While the complexities underlying LCR are anything but simple, this report creates a framework to help financial executives make an informed decision for maximum return on investment within their payments franchise. On one side of the debate are FIs, especially those with large numbers of both retail and commercial customers, and a cadre (company) CADRE - The US software engineering vendor which merged with Bachman Information Systems to form Cayenne Software in July 1996. of LCR vendors. On the other side are bill-payment processors and aggregators with, in many cases) decades of legacy data and the expertise to make informed routing decisions and minimize payment processing costs while ensuring quality. These processors tend to question the notion that individual FIs can match their payment efficiencies and legacy data. This report identifies the essential elements of LCR and provides a framework for evaluating payment-routing-related decisions. Least-Cost Routing - Defined LCR is the series of decisions used to map or "route" information from one point to another--in this case, information related to bill payments. Specifically, LCR decisions include the parties that hand off or "touch" payments from the moment a consumer initiates a payment to the time a biller's bank (receiving depository institution Depository institution A financial institution that obtains its funds mainly through deposits from the public. This includes commercial banks, savings and loan associations, savings banks and credit unions. ) receives the payment. In theory, once entered, payment routing information can be stored and used to route future transactions via the least-cost alternative(s) available. The least-cost route might be any of the following: --Creating an internal book entry --Developing a bi- bi- word element [L.], two. bi- 1 or bin- pref. 1. Two: bilateral. 2. Both: binaural. 3. or multi-lateral FI gateway arrangement (e.g., Spectrum) --Using one of several processors (e.g., CheckFree, Metavante, Online Resources, etc.) that in turn may use a remittance Money sent from one individual to another in the form of cash, check, or some other manner. Financial statements sent by a creditor to a debtor frequently refer to the process of submitting a monthly remittance. REMITTANCE, comm. law. processor, such as MasterCard RPPS RPPS Remote Payment and Presentment Service RPPS Rockaway Park Philosophical Society RPPS Retropatellar Pain Syndrome RPPS Retired Pay Personnel Systems RPPS River Parish Practical Shooters (Louisiana) , and make further LCR decisions --Drafting or debiting consumer accounts and then crediting billers electronically or mailing a check Important in the notion of LCR is that payment information is current and accurate. As will be addressed later in this report, however, payment information is often not static. Key topics covered in the report: --Least Cost Routing (LCR) - defined --LCR prerequisites --Conclusion - Can LCR result in cost savings and efficiencies for FIs? Primary Data: Interviews with bill payment processors and software providers and banks (ranging from community to top 10). For more information visit http://www.researchandmarkets.com/reports/c19961 |
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