2020 brought so many changes to the world. Top on that list was how transactions and payments were made. The world was mandated to use several non-physical forms of payment to curb the spread of the virus. However, long before the COVID pandemic, customers were fed up with making payments manually.
Today’s customers want the faster, easier, and less stressful option. As such, something as seemingly insignificant as not providing an alternative payment option is enough to create a customer churn. And there are always competitors lurking to offer them the same services with better payment options. Thus, while one might assume that their customers are loyal, this might not be so when the competition offers them accessibility, efficiency, and less stress.
This is why it is important to consider alternative payment options for both your company and customers. One of such is Lockbox banking. Below, we explain how Lockbox works and how your business can take advantage of it.
What is Lockbox Banking?
Many people believe that it began in 1947 with RCA Corporation, First National Bank of Chicago, and Bankers Trust Company. However, banks had started processing remittances using Lockbox as far back as the 1930s.
Lockbox banking is a service that banks provide to companies to help them streamline receiving payments from customers. To use this service, a company would have to set up a post office box for payments to be sent to. The bank would then retrieve the payment, process it, and deposit it in the company’s bank account.
Of course, this came with a few problems. This includes the time it took for companies to cash checks, the time it took for said checks to be delivered to the banks, and the inaccuracy of data when the payment was finally processed. In addition, as electronic payments were introduced and companies became less dependent on checks, the number of banks that offered lockbox banking reduced.
However, one can say that instead of phasing out, lockbox banking evolved with the times. So instead of catering to customers who would deposit physical checks in post office boxes, the times necessitated that companies that still need a go-between could have that through electronic or digital Lockboxes (eLockboxes).
An eLockbox is a payment service that is similar to the original lockbox service. It is a payment system that allows these transactions to be done through a trusted third party. A company integrates the eLockbox service with its current payment system and offers it to clients. This way, customers can use eChecks, credit cards, and other payment options to make payments.
eLockboxes uses technology to digitize the check payment process in a way that banks cannot currently handle because engineering resources are low and the cost of implementation is high. It also thoroughly eliminates the need for and the use of paper checks.
How Does eLockbox Banking Work?
eLockbox payments are pretty straightforward. Here’s how they work:
First, the customer makes payments through their online banking/bill payment platform. eLockbox consolidates the payment and generates a data file.
Then, payments are processed automatically or flagged if there is inaccurate data. After this, the company receives the payment via a single ACH daily deposit in their accounts. Data is also sent to the company in a compressed file in the format the company requires for accurate posting.
This process is easy, efficient, and straightforward. Moreover, it helps to ensure that all parties are satisfied and happy. It shortens the bank’s payment process while eliminating the labor-intensive process for the company, it is a win-win for all parties.
Benefits of Using eLockbox
eLockbox payments have many benefits for vendors and businesses. Some of such benefits are outlined below:
1. Flexibility
One of the biggest reasons you should consider eLockbox banking for your business is that it offers flexibility to all your customers. eLockbox provides several payment options to customers. If they would rather still write paper checks, the service also allows for this. This means that you do not have to worry about churning customers because of limited payment options.
2. Access to Information
Along with your daily payments, remittance information and settlement dollars are sent to you daily. This ensures that you have all the data you need on hand for audits, account reconciliation, and research. With some technology, you can even integrate eLockbox with your CRM system. This way, you can track how much payment has been made and how much is owed in case of debt. This is also linked with other important information such as transaction history and source.
3. Quicker Access to Funds
eLockbox eliminates the time it takes for the check to travel from the customer to the bank, then to the business through the postal system (mail float). With eLockbox banking, you get quicker access to payments made by customers. The payment will be made directly into the company’s bank account via a single daily Automated Clearing House (ACH) deposit.
4. Better Visibility
If you are familiar with bank-processed payments, you know that visibility of payments is an issue companies constantly have to deal with. This means the bank has made your payment, but it does not reflect in your account immediately. With eLockbox banking, your days of being unsure if payments have been made are over. Instead, you can know sooner that your payment has been made.
5. Accuracy
Sometimes, inaccurate information might appear in transactions. However, with eLockbox banking, it is easy to correct inaccuracy when it occurs. Payments with inaccurate information are always reviewed, while those with accurate information are automatically processed. The review process ensures that the incorrect information is corrected in the current and future payments.
6. Cost-Effectiveness
The eLockbox system is a more cost-effective solution than manually processing payment checks or using regular Lockbox banking. With this solution, transaction costs are reduced to the barest minimum to maintain the business’s profit margin.
Get Started with eLockbox
The eLockbox has a part to play in the future of digital payments. If you are trying to make the process of receiving payments from customers easier, our Lockbox solution can help . Click here to contact us or click here to request a demo.