Taking the Pain Out of e-Payment

The world of e-payments does not exactly have a glowing reputation - struggling for years under the weight of grim adoption rates and security concerns. But one company has found that Internet-based e-payment software is pretty painless, and better yet, profitable.

For many executives, the words of Steve Morin, chief information officer for TAC Staffing Services would seem to paint the portrait of a fearless rebel: I can't imagine why any company wouldn't want to streamline its accounts payable (AP) processes and other payment processes, says Morin. It's so intuitively obvious.

Intuitive? Maybe. But technologically feasible? And safe? Those are different questions altogether.

Morin, who oversees information and technology improvements at the $1 billion staffing and workforce solutions company, is not unaware of e-payment's long track record of painful implementation and grim adoption rates by suppliers, as his statement may suggest. Rather, Morin's optimism and confidence is based on an e-payments system that is relatively new ... and very different.

Internet to the Rescue

Today, everything related to e-payment must fight an initial uphill battle against the force of its stereotype. For many executives, the phrase electronic payments can spark as much riotous anxiety as shouting fire! in a crowded room. Security fears over payment and transmission have made companies reluctant at best. 

e-Payment's bad rap is not only due to security issues, but to supplier-recruitment issues. Fears of supplier adoption problems can be traced back to the relatively older model of e-payment via financial electronic data interchange (EDI), which, when it came on the market in the early 1980s, appeared before large enterprises like the best thing since sliced bread. Yet, financial EDI's major obstacle was soon discovered when newly EDI enabled enterprises were left to convince their suppliers to shell out their own cash to EDI-enable themselves. Not surprisingly, after years of testing and trying, financial EDI never achieved more than a 2 percent adoption rate.

But when the Internet began to gain ubiquity in the business world (which really wasn't until 1998), the world for e-payments seemed to open up. Because almost every business had Internet access, the potential for transmitting payment information through the Web  as well as convincing suppliers to use that method  greatly increased.

All Aboard

The new promises of e-payment systems gave hope to Steve Morin and other TAC executives, who, at the time, were feeling the weight of paper-intensive processes. In a complex industry like staffing services, maintaining workforce databases of hundreds of thousands of names, as well as automating payroll and invoicing, is difficult enough. Add to that TAC's relationships with 3,000 other staffing sub-suppliers and niche suppliers from which they source professional work for end customers and you've got a mess that, according to Morin, cries for automation.

TAC began responding to these cries nine years ago when it automated its processes of recruiting contractors and maintaining databases of workers, as well as automating payroll and billing and invoicing. But, as Morin explains, these systems were automated in a very stand alone way. The nuts and bolts of what it took to run this kind of business for many, many years were very much the same in terms of what was automated for many, many years, he explains. But the world has changed and, for many companies, automation of internal systems is not enough to please larger suppliers.  The kinds of companies we service on the high end demand more services from a company like us, beyond just the people we can place with them.

While streamlining payment processes with its end customers was a priority, TAC also needed to consider the more complex process of billing and remittance between itself and its litany of sub-suppliers. Traditionally, the payment process for third-party suppliers began by collecting workers' hours and having the hours validated by the customer. Next, the payment would flow through TAC's accounts payable (AP) system and invoice and payment processes were dealt with via mail, fax and phone.

In an effort to change this paper-intensive process, TAC made the decision to invest in the Clareon e-payment software and service, called PayMode. TAC's decision to go with Clareon was based in large part on its strategy for gaining buy-in from all of TAC's suppliers  that previously insurmountable hurdle for e-payment systems. In fact, Clareon proposes an Accelerated Enrollment Program, as they call it, that is so easy, it's hard to believe. Rather than leaving enabled companies to recruit trading partners to join financial EDI or some other specific network, Clareon goes to each of its customer's suppliers and simply enrolls them to have access to the Internet-based system.

On their behalf and with their endorsement, we sign up their suppliers because their suppliers need to be part of the network, says David Goldberg, marketing communications director for Clareon. We realized this early on, so we created a proprietary trading partner activation program, and it has been very successful to date. And with an enrollment system that takes about 20 minutes at no cost to the supplier, successful adoption rates are no surprise.

Feeling the Flow

Once TAC decided to implement the Paymode system, Clareon began integrating its software with TAC's AP system and configuring the data. Then, of course, payments were tested and tried end to end. On the customer end of the implementation, TAC's Morin thought it couldn't have gone smoother. We are completely done in that we have the plumbing and we have the facility and we have the integration between our systems and theirs, and we are flowing our transactions through them. All of that literally only took a month and a half. I mean, that's incredible.

Although not all of TAC's suppliers are enrolled yet, they already have a good feel for the Clareon system and the enormous benefits to be gleaned from it. With the Paymode system in place, initial payment information will flow through TAC's AP system when a pay run is initiated and, rather than being sent to the check printer, payments will now flow to Clareon via the Web. Within the Clareon system, payments can then be digitally signed and remittance information attached directly as a download from TAC's AP system. So, essentially, payment information leaves TAC to suppliers as a digital package of payment and remittance information, digitally signed and secured.

At that point, Clareon authenticates the payment and sends it, (away from the remittance information), into the Interbank network for settlement. The remittance information is sent to the collector, who can access the information via any secure Web browser. Now, instead of the supplier calling our AP department and asking about the status of a payment, says Morin, they are going online and answering their own questions through the Clareon portal as to when they are going to get paid. So we have offloaded a lot of human processes & and paper.

Although TAC is still in the process of gathering data to measure its return on investment, the benefits in terms of shortened process cycles, human resources and, literally, paper resources are clear already. Our ability to scale is going to be significantly enhanced, believes Morin.

The softer results are clear as well. So when Morin says that customer companies demand more services of a company like us, those services are there. Softer benefits in terms of marketing and best practices have tremendous power, so that when a company asks TAC about its automated processes and B2B processes, Morin proudly talks about the Clareon capability. We've gotten some very good feedback [on this] from prospective clients and existing clients, he says.

Table Stakes

So has all the fear of security and transmission of payment via the computer dissipated? Not necessarily, according to Clareon's customer implementation manager Rudy Gabrielson. However, the resistance is, he admits, a lot less than it used to be.  The issue of security, according to Gabrielson, is fairly easily resolved. If you show up at a table at a customer you are about to sell to and you can't tell them with 100 percent confidence that your product is locked up solid, you might as well go home, he says.

Clareon's confidence, for example, comes in part from its top-notch digital signature system, which is built in a 1024 bit PKI infrastructure. To put that into layman's terms, Goldberg makes the analogy that only the Pentegon can send signatures more secure than that. [Security] is a table stake now, says Gabrielson. It's a conversation you have, and you have to have, and then you move on.

Secure transmission capabilities may be a table stake for e-payment solution companies, but the real question for the future of this market is: Will e-payment capabilities be a table stake for brick-and-mortar companies? After all, competitive advantage can only last so long, as TAC's Morin believes. In fact, when asked to take a stab at how long e-payment capability will last as a competitive advantage, he estimated 18 months. I can't see why this kind of e-payment, information rich, business-to-business transaction capability isn't going to be exploited in a huge way and become the norm.

The idea of electronic payments as a norm is a long stretch from the avoid-it-at-all-costs sentiment of two years ago. It truly is an Internet revolution.