Remittance Processing

Wholesale       Retail       In-House

Remittance processing can take various forms depending on the remittance size, return documents, and volumes. This topic section was designed to give the corporate treasury manager an overview of the various components which comprise the service, along with performance measures and other items of interest.

Federal Reserve Financial Services
New extended remittance information (ERI) formats allow corporate originators of wire transfer payments to include 9,000 characters of extended remittance information within a wire transfer payment order. The publication explains what the ERI formats are, how they benefit businesses, and offers advice on approaching banks to get started using them.

Service Providers
Requests for Individual Provider Postal Survey Performance
Latest Postal Survey Trends

Results of the 2019-1 study.
Results valid through December 2019

Phoenix-Hecht Postal Survey™ Executive Summary

Remittance Animando!

The 2019-1 Spring Phoenix-Hecht Postal Survey™ produced widespread improvement, best characterized by the musical term animando (becoming more lively). Fifty-seven percent of sites who participated in both the Fall 2018 and Spring 2019 surveys showed improvement averaging more than 3.5 hours and almost 0.15 days of mail (statistically significant). A mere 13% showed deterioration which averaged 2.8 hours but statistically insignificant total float days. Thus, the average participant gained almost two hours and just under the 0.10 day statistically significant level for total float days. This represented the largest improvement during the period depicted by the chart below, narrowly edging out the 2015-2 Survey improvement after a deteriorating 2015-1.

Regional gains were impressive as well. Just over half of sites improved versus just under a fourth that deteriorated. Improvements averaged about 3.5 hours and just under 0.15 mail days. Deterioration averaged over 2.5 hours but statistically insignificant total float days. The average participant gained just over an hour regionally but did miss statistically significant float day gain.

Local results had many similarities with regional. Just over half of participants improved, averaging about 3.5 hours. The deterioration group had about the same average (3.5 hours), but only about one in five participants. The average participant improved just over an hour.

The strength of this survey created quite a positive trend for the USPS since just before the Operating Window Change of 2015. This USPS processing change was touted to be beneficial to remittance mail, and, summing net changes since the fall survey of 2014, there has been about a 3.5 hour national improvement, about a 2 hour local mail improvement, and break-even on regional mail.

Caller Handoff Metric

The “Caller Handoff Metric”, a measurement from the last sort by USPS until the first sort by the processor to the customer level, was not a significant driver of improvement, despite USPS emphasis. Sixty percent of participants had no change in the metric, and an equal twenty percent improved and deteriorated. The processor influences this measurement by the frequency of mail pickups; the USPS delivery plant performs a crucial step in moving the mail from the plant sorting machines to the courier pickup area expeditiously.

The survey mean and median both increased through no fault of the USPS. New participants in the survey had non-aggressive mail pickup characteristics (lack of 7-day a week pickup and not all three shifts covered on weekdays) which exacerbate the handoff measurement. For the record, the survey mean was 11.9 hours and the median was 9.5 hours. The mean was influenced by 13 survey participants with handoffs of 15 hours or greater due to pickup frequency deficiencies.

This year, USPS is resuming testing and deploying measurement within Informed Visibility of the volume of wholesale remittance mail finished on the sorter, then staged in the Caller area, and then physically delivered to the processor’s courier. One remittance plant per USPS Area (7 in total) will be implementing the processes required to capture this data. This progress is important to remittance processors because the handoff, the equivalent of final mile delivery to residential addresses, continues to be an area with improvement opportunities. The measurement described above needs to also include reporting and oversight to affect desired improvements.

Deeper Analysis

USPS commitment to remittance delivery is quite evident from the excellent performance of the past two Phoenix-Hecht Postal Surveys. In the Fall 2018-2 survey, USPS stopped a trend during which all fall surveys had net delivery hour increases. Now this Spring survey has produced an almost two-hour national delivery gain. The survey cannot definitively determine, but there are strong anecdotal signs that the transportation network drove delivery gains. Specifically, we postulate that a greater percentage of remittance mail flew this survey. National delivery gains were just short of two hours; regional and local gains were just over an hour. Readers of this Executive Summary, as they got to the Most Improved City section, likely tired of all the references to West region improvements. But improvement from the most distant region is a very strong indicator that air lift capacities for remittance mail were generous. Often, in a survey with widespread improvements, a shift in delivery pattern is evident and explanatory. This survey had many improvements with only subtle delivery pattern changes. It was as if an influential portion of the mail just arrived a day earlier.

USPS concentration of effort also centered on caller efficiency – the rapid turnover of sorted mail to the processor’s courier. Gains were not particularly evident this survey, but efforts to implement Caller Visibility, additional scans just for this part of remittance delivery, point to future improvements. Processors can be an ally or an obstacle in caller efficiency. All thirteen processors in our survey with a Caller Handoff metric of 15 hours or more have elected to leave mail at the USPS plant for significant time periods because their operational budget limits processing shifts or days. Phoenix-Hecht has been a vocal advocate that corporations using lockbox services must ask their processor for the Caller Handoff measurement. A single-digit handoff speaks volume about both postal plant and processor commitment to remittance processing.


The 2019-1 Phoenix-Hecht Postal Survey™ is best described using the musical term animando, meaning becoming more lively. Fifty-seven percent of participants experienced national hour improvement averaging over 3.5 hours. Only thirteen percent suffered deterioration, giving the survey an average of almost two hours gain. This follows the 2018-2 Fall survey which had no deterioration. Anecdotal evidence suggested the transportation network took full advantage of lighter volumes in the April/May time period. We further infer that air transportation was more aggressively utilized. Postal commitment to remittance remains quite strong as evidenced by an additional four cities (now twelve in all) which posted sub 50-hour national delivery. The only negative of the survey is the extremely high bar set for the Fall survey, when non-First-Class mail volumes rise and strain resources. We eagerly await that survey to get an even more insightful look at USPS performance.

Individual bank results are available from participating processors or can be requested from this web site.

The Postal Survey is the leading independent mail time survey for the treasury management industry. This survey, conducted in late April and early May 2019, measured mail from 170 originating cities into 57 sites in 23 destination cities. For purposes of the executive summary, Phoenix-Hecht® publishes results based upon all originating mail (national) to a receiving site or city, mail originating from the receiving site's or city's region (approximately one-quarter of the nation), or mail from the six to ten originating cities closest to the receiving site or city (local). Individual originating city results are weighted by population to achieve each of the "regional" results (national, regional, and local). Mail hours and mail days do not directly correlate since mail days are stated as banking days dependent upon ledger credit.

Methodology used to conduct the Phoenix-Hecht Postal Survey

Postal Survey is an objective, carefully monitored, statistically validated measurement of total float in a remittance collection system. Postal Survey results are calculated using statistical techniques designed to simulate the corporate lockbox experience.

Lockbox location site selection technology
White paper describing the use of The Collection Model and affiliated databases

Product Usage

The use of wholesale lockbox service has been relatively stable over the past few years. Historically, wholesale lockbox was considered a "large corporate" service but companies of all sizes can realize important benefits from the service.

Wholesale Lockbox Usage
Service Pricing

The pricing of wholesale lockbox services is generally quoted in an unbundled fashion because of the variations of processing requirements. On a standardized account analysis service code 050100 represents the per item cost of processing the check and invoices received in a wholesale lockbox.

Remittance Math

Simple calculations from an account analysis and bank statement over time can detect increasing or decreasing float performance. A company should track monthly such figures as; average daily float, average collected balances or average float as a percentage of ledger balance (account being monitored should only contain lockbox activity). Over time an acceptable level of float should be experienced if all systems are functioning properly.

Observations outside the norm (either above or below average) indicate a need for further investigation. Points above the established norm can be an indication of major deposit deadlines being missed due to delayed mail or a problem in processing. Points below the established norm may indicate a backlog of processing being held until the next day.

Float Factor Tracking
Average Days to Collect

Float Factor Calculation
Float Factor Calculation

Mail Time Measurements
An explanation of the factors that can cause differences between mail time as measured by Phoenix-Hecht and mail times observed in a lockbox study.

Quality Trends
Phoenix-Hecht Quality Index

The Phoenix-Hecht Quality Index is a statistically valid comparison of customer perceptions about bank performance.

Accuracy of Processing and Reporting

Measuring Modeling and Monitoring Your Lockbox
An in-depth discussion of how mail moves through the postal system, how mail times and availabilities are measured by Phoenix-Hecht, how to recognize the need for a lockbox study, how to approach doing a lockbox study, and how to monitor your lockbox performance. Booklet is 50 pages. PDF file has an index.

Image Processing

The utilization of digitalized image processing can improve receivables processing by routing documents electronically for clarification to resolve exceptions, locate specific payments quickly to apply cash and approve credit, and reduce paper storage costs.

Imaging is the creation of a digitalized picture of an object such as a check or invoice which can be displayed, enlarged, annotated, duplicated, stored, routed or indexed for future use. In a lockbox environment, imaging is used to capture pictures of checks, envelopes, invoices, remittance advices and correspondence.
Images courtesy of Bank of America

Mostimage based systems can be delivered via the Internet or on a CD-rom. Companies should work with their bank to develop an imaging strategy. To get the most benefit from the investment, internal work flows may need to change.

The cost of processing retail remittance, while driven primarily by transaction fees, also has a float impact that should not be overlooked. In a wholesale lockbox, float benefits have long been easy to measure. Until recently, float has been difficult to quantify for a retail remittance processing site. Phoenix-Hecht, best known for its Postal Survey (a semi-annual study of wholesale lockbox times), also provides an analysis of retail mail float for corporations

The Retail Mail Analysis has total float times based on difference processing scenarios. As a guide a corporation should use a higher processing assumption for larger volume lockboxes.

Electronic re-presentment of returned checks

Any firm that accepts checks in payment is eventually faced with trying to collect on a "returned item".

Unencoded Checks Other Fed TMA 100224
In-House Processing

Hardware & Software Providers