It Is When, Not If Your Commercial Bank Will Offer Digital Disbursements

Electronic Digital Dispursements

While the eulogy for checks has already been written, the pallbearers are now in place. This week, Bank of America launched Digital Disbursements, a new payment application that allows organizations to make payments to customers or vendors digitally instead of issuing a check. This is a person-to-person application restructured for organizations such as small businesses, middle market companies, larger corporations, non-profits and municipalities. Payments are routed from one company to many customers securely directly to the payee’s bank account or prepaid card using either their mobile number or email address as an identifier.


Digital Disbursements is the largest and one of the first product releases of its kind. Soon business-to-consumer electronic payments will be a major trend in banking and this is just the start. The benefits are so overwhelming that it is only a matter of time before adoption becomes widespread. While Digital Disbursements is a Bank of American product, we expect Wells Fargo and JP Morgan Chase to be very close behind. Further, we have some insight into how community banks can quickly match these large banks utilizing similar technology.  


The product has the following advantages to community banks compared to dispursements using paper checks:


  1. Cost Reductions: End-to-end disbursement costs are reduced from an average of $1.70 per item to approximately $0.37. Since cancelling and reissuing checks go by way of the tail fin, secondary processing cost is dramatically reduced. This is to say nothing of escheatment management which is probably one of the worst time sucks in banking. For payees, production of payments can occur in a fraction of the time and postage costs are eliminated.
  2. Customer Experience: Payments arrive faster, with more accuracy and with a better, easier to understand accounting trail. As a result, electronic disbursements provide a better customer experience compared to paper checks.
  3. Core Product: Electronic disbursements, combined with electronic accounts payable, invoicing, electronic receivables, sub-account management and payroll cards form the cornerstones of the cash management platform that all commercial-oriented banks will compete on in the future.
  4. Marketing: Payers can include and manage an interactive message/promotions along with the payment.
  5. Privacy: Cash recipients do not have to disclose their account number, address or other bits of personal information. Once registered, recipients are alerted via text or email, thus privacy is increased.
  6. Security: Check forging, fraudulent deposits and ID theft gets dramatically reduced.
  7. Control: Banks and payers have better control disbursement helping liquidity management.
  8. Trendy: Application is both mobile and environmentally friendly, two important trends that play well with consumers.  


Organizations that particularly benefit from digital disbursements are those that send rebates, refunds and claims payments on a regular basis. Hospitals, municipalities, insurance companies, utilities, product manufacturers/distributers, auto dealers and others have all been early adopters and can recognize immediate and substantial benefits. The product solves many challenges facing bankers, payers and payees and will soon be commonplace.


As this product becomes mainstream, the cost for processing paper checks will increase on the margin as check volume drops and fixed costs will compose a larger percentage of incremental processing. This will make handling paper checks more and more cost prohibited for banks (and payees). The end result will be that community banks will either have to capitulate or cease servicing their business customers with check disbursement.  


For more information about the product, we are putting together some materials and a webinar on the digital disbursement business-to-consumer product for community banks. If you would like more information on the options, costs, set up process, risks and opportunities for this product, please register below and we will send you out an invitation and/or educational materials. To receive an invitation to an upcoming webinar and/or receive further information, please register here: