What is lockbox remittance processing?

lockbox remittance processing

Remittance and Lockbox processing was created to track the receipt and deposits of check and credit card payment that are sent by mail. When business organisation collect ample amount of donations or payments along with remittance documents then lockbox banking system helps them to reduce their work by simplifying remittance and payment processing.

A remittance processing helps the business organisation and other governmental organisation to enhance the relationship and grow valuable fee-based revenues and deposits. One of the biggest disadvantages of using remittance processing is it requires a large amount of capital and employee management.

The amount of money sent from one country to others has increased drastically over the past few decades. Economic migration is one of the causes of this increase in lockbox remittance processing. With the rapid increase in population and technology, people working out in foreign countries also increases. They made multiple transactions to their friends and families. It was estimated that the transaction was about $895 billion US Dollar was made alone in the year 2018. for some countries, lockbox remittance makes up a sizeable portion of their GDP.

What is Lockbox

In financial institutions like banks and insurance companies, the lockbox is the service that reduces and simplifies and collection of account receivables by those business organisation customers payment mode to a location that is easily accessible by these organisations. Lockbox is also termed as post office box (PO box), which is easily accessible by the business organisation. A business organisation then set up a lockbox service with its bank for receiving customers payments. Then, as prescribed by these business organisation, customers send their payments to its PO box. Then the bank collects and process these payments and deposits them to the company’s mentioned accounts. This can cost a few cents per transaction to as high as a few dollars.

Lockbox services are categorised as wholesale and retail. Retail lockbox is for those business organisation that have huge volumes of customer-oriented payments like loan payments, utility payments etc. Retail remittance often includes a standardised payment coupon. Wholesale lockboxes are generally used for corporate to corporate payment and these payments usually include higher amounts than retail lockbox transactions. These transaction does not include standardised payments. Wholesale lockbox requires good support from the bank to process every transaction.

A lockbox system is a collection of several lockboxes that are managed in such a way that it is available to company customer so that average mail time is minimised for every transaction. A lockbox system is usually supported by banks that earn a good income from as a fee for each lockbox.

?A lockbox system is the best method that reduces mail float for a large business organisation that has a national or international customer base. It is advised to the smaller business organisation with a local customer base to have multiple lockboxes at the local bank because any small mistake can cause loss to business organisation.

Advantages of using Lockbox remittance processing

Remittance processing is the best solution for document and payment processing solutions. Remittance processing is based on the concept of simple usability, with the great capacity to ingest a remittance coupon and it also checks the item for processing. The advantage of using lockbox remittance process are-

  • Simple in nature- Lockbox remittance process is simple in nature. It gets perfectly balanced with both coupons and remittance and scans the batch. the software is designed in such a way that it checks information from the coupons and present them in a clear and concise manner.
  • Easy implementation- Lockbox remittance processing check scanner from leading manufacturers and ensure that if any business organisation is using RDC solution then no hardware must be required for any processing.
  • File Integration- Lockbox remittance processing provides multiple options and customisations that helps third-party applications to utilise the data collected in the process.
  • Flexible reporting options- data extracts and file formats allow the business organisation to extract data from both payment and coupon/ remittance documents. This reduces the efforts require by third party systems and save a tremendous amount of time.
  • Automation- Dropbox remittance mechanise many labor- intensive and manual functions which further reduces total operation cost and processing time.
  • Redundancy- Lockbox remittance processing are linked via secure sources which help to efficiently manage fluctuations in workflow volumes.
  • Speed- Remittance processing allow multiple business organisation to connect with lockbox and maximise their receivables with increased fund availability and manage the daily receipt of incoming and outgoing mail.
  • Control- Lockbox remittance processing helps to drill deep down to be more proactive in business initiative and organisation system capabilities.

The disadvantage of using lockbox remittance processing

Lockbox remittance process charge business organisation on a pre-payment basis. If any business organisation receives a huge volume of small transaction, the cost of lockbox remittance can put financial pressure on these business organisation. Lockbox is sometimes not considered to be a good method of payment because people involved in payment processing are from the senior-most people at the bank and they are easily susceptible for bribery.