Mastering account conversion technology

Gidget A. Hall, Vice President and Senior Business Leader for MasterCard RPPS, discusses how banks can handle complex and error-free portfolio account conversions.

Mergers, acquisitions, and other large account change events can really derail your accounts receivable processes. Matching old account numbers to new account numbers consumes resources that could be leveraged more productively elsewhere. Payments that should be coming in electronically can get dropped to paper or don’t show up at all. Payment posting slows to a snail’s pace. Customer satisfaction plummets, and the volume of customer service calls goes through the roof.

To resolve these payment routing and posting issues, MasterCard RPPS introduces the Account Conversion Technology. This new service not only automates the account number conversion process, but it also delivers Notification of Change (NOC) information to originators so that payment account information can be corrected before any future payments are sent.

The Account Conversion Technology enables the MasterCard RPPS network to automatically identify incoming payments that require account number conversion, convert them to the new account numbers, and reroute payments to the appropriate recipient. The entire process, integrated into the electronic payment process, remains completely transparent to both the consumer and the biller.

Then, automated NOCs – a feature unique to the MasterCard RPPS solution – inform originators of account number changes. The notices facilitate the updating of consumer payment profiles, whether the originator chooses to perform the updates proactively or notify affected consumers about needed changes.

The price of account conversion
According to recent research from TowerGroup, unpostable payments – bill payments that a biller receives but is unable to credit, or post, to the correct customer accounts – cost consumers, service providers, processors, and billers over half a billion dollars annually. During account change events, organizations can incur significant hard-dollar expenses managing unpostable payments and the associated client interactions. Billers must typically address conversion issues outside of the electronic bill payment network. In-house solutions often rely on manual research and posting of payments, which causes delays to the updating of account payment information, as well as increased expense.

In addition to the dollar cost, these problematic payments erode client confidence and satisfaction. Indeed, according to the TowerGroup research, the attrition rate for customers experiencing unpostable payment problems can be up to three times greater than that of other customers.

The account conversion solution: a case study
Paced with a challenging portfolio conversion, Mark Voionmaa, Vice President and Senior Product Manager, Treasury Management, PNC Bank, did the smart thing ­­– he called his trusted partner MasterCard RPPS for help. PNC Bank had won a contract with a large credit card company to service its installment loan (IL) portfolio, whose 675,000 accounts were commingled with the credit card portfolio, with approximately 9.5 million accounts.

Conversion obstacles
The first phase of the process, which ran from January through May 2006, was to convert 80 percent of loans (approximately 420,000 accounts) to the PNC system, with the remainder following later in the year. Both the paper and electronic payments presented major issues. On the electronic side, the previous servicing bank was getting feeds from multiple sources: Another financial institution, with payment data from MasterCard RPPS and online processors with direct feeds to the institution; processors with direct feeds to the bank; online originators with direct feeds.

Managing the flow
To get payments flowing to the right places and keep exception items to a minimum, PNC had to find solutions to:

• Separate and correctly route credit card and IL payments
• Separate and correctly route converted and nonconverted IL accounts
• Inform consumers, originators, processors, and walk-in payment providers about the new account numbers associated with converted accounts

The first step was to create, prior to conversion, a new biller ID at MasterCard RPPS for the IL payments. (Credit card and IL payments had been coming in on the same biller ID.) To consolidate all online payments and centralize the conversion processes, originators were notified that at conversion, they would begin sending their payments through MasterCard RPPS. (A single online bill payment provider continued to transmit payments through a direct feed – an arrangement Voionmaa argued against.)

In addition, walk-in payment providers were also directed to transmit payments through MasterCard RPPS at conversion. This helped PNC maintain same-day cutoff for walk-in payments by effective-dating payments back to the originator ID. To sort converted and nonconverted IL payments, PNC distributed an old number/new number file to the interested parties: MasterCard RPPS and the single online bill payment provider.

Flipping the switch
At conversion, MasterCard RPPS began sorting payments automatically, changing the account numbers on converted IL accounts and sending those payments to PNC. The remaining payments were routed to the credit card company and the original bank. After the conversion, MasterCard RPPS began sending out Notification of Change alerts so that originators, processors, and providers could update their systems.

For consumers and their online banking service providers, the conversion was entirely transparent. "The banks had to change nothing," said Voionmaa. The MasterCard RPPS conversion process went exceptionally well, with no misrouted payments, Voionmaa noted. The single online bill payment provider, however, generated 5000 rejected transactions that had to be manually processed. "It's important whom you partner with," said Voionmaa.
“MasterCard RPPS is the network to rely on for the best solutions to complex issues.”

Industry experts in agreement
While Voionmaa, may have participated in the first, very demanding, and highly successful pilot, he is not the only MasterCard RPPS customer to have enjoyed the same great results. The service has now exceeded high expectations in several other pilots, with institutions such as Citibank, and JPMorgan Chase. Each of the pilot conversions had its own specific set of challenges. At Citibank, one of its corporate lockbox customers, a large utility, was about to undertake a system conversion that required the renumbering of 1.5 million accounts – all within three months. Adam Hoffman, Director of Global Transaction Services at Citibank, said the whole process went “smoothly” which meant payments were routed “flawlessly”.

JPMorgan Chase needed to convert two credit card portfolios to a new account-number system. In the end, the result was much the same as Citibank’s. Jeff Kim, Team Leader of Payment Operations, said: “The conversion went flawlessly. The customers were happy. We were happy. My boss was happy.”

Calm waters
Failures in any conversion process generate rejections and exceptions that can roil the waters upstream and down. Hoffman noted that unpostables translate “into a customer service contact for our client, which would have led to an investigation, which would have led to additional cost to serve, which would have led to customer satisfaction issues”. He added: “So there are significant downstream impacts for our client. For us at Citi, we are our client’s partner in the investigation process – so we’d have the same issues.”

Good to go
The successful pilots have begun to generate ideas about other uses for the service. For example, JPMorgan Chase has begun using it to redirect transactions for lost/stolen accounts, which previously tended to drop out of the system. Certainly, all of the participants expect to use the service for future conversions. Asked if they’d do anything differently next time, Kim summed it up for everyone: “I would have approached MasterCard RPPS a lot sooner.”

To learn more about the Account Conversion Technology, contact MasterCard RPPS Sales and New Business Development at 800-535-2130.

About Gidget A. Hall
Gidget A. Hall is Vice President and Senior Business Leader for MasterCard RPPS at MasterCard Worldwide. In her role, Hall is responsible for product management, new product development, and business operations for the RPPS electronic payment network. She has more than 19 years of experience in banking, financial services, payment systems, and corporate finance.  Prior to joining MasterCard, Hall held management positions in organizations including First Interstate Bank of Texas, Mercantile Bank St. Louis, Firstar Bank, US Bank, and CPI Corp.