Treasury and payments professionals are encouraged to adjust collections to avoid disruptions from changes to USPS First-Class Mail delivery standards.

Payments processing for businesses may soon be impacted by an upcoming delivery service standard update for United States Postal Service (USPS) First-Class Mail customers. Known as “Delivering for America,” the 10-year plan eliminates air transportation and modifies ground routes for domestic First-Class Mail. The change is expected to go into effect sometime in Q4, 2021.

Some regions may experience longer mail delivery times. According to an official USPS service standard proposal fact sheet, current three-day First-Class Mail volume would be subject to a three-, four-, or five-day standard depending on the distance between origin and destination.

Business leaders utilizing mail-based Lockbox or third-party, paper-based payments processing services are encouraged to speak with a U.S. Bank relationship manager to determine what impacts will be made to operations. Depending on geographic location, companies may have several options to mitigate effects from the plan.

“It’s really a two-sided issue,” said Beth Voelker, VP and senior product manager with Global Treasury Management (GTM) at U.S. Bank. “If the majority of a business’ lockbox payments are sent locally, they might not even notice a difference,” she said. “On the other hand, for our larger clients who receive payments in their lockbox from all over the country, they might see a big difference in delivery times.”

Mitigating disruption: Exploring solutions with payments industry experts

For companies who process any volume of payments via Lockbox services, Voelker said, they will experience more than just a delay in mail delivery times.

“When you’ve got the potential for even one- or two-days’ delay in your payments deliveries, you have to start thinking now about what that could mean for your working capital management, liquidity, reporting … even how that might affect your reporting accuracy,” she said.

Opportunities to mitigate potential negative impacts from the USPS plan include Image Look, modifying lockbox locations for geographical delivery time advantages, or simple-yet-effective digital and faster payments AR solutions such as RTP® (Real Time Payments), ACH (Automatic Clearing House) and other types of digital collections.

“We have a lot of clients and interested prospects already offering digital solutions,” Voelker said, “but a fair share of their customer base is still committed to Lockbox-dependent payments so it makes sense for them to consider which of our nine physical lockbox locations they’re using, and possibly open a lockbox at a new location where we have a processing site.”

Voelker emphasized that although shifting locations or adding a new lockbox processing site may not be the best solution in every case, the immediate value for clients is the conversation.

“We can’t determine what’s ‘best’ for any client or business without listening and understanding their goals first,” she said.

Digital Accounts Receivable: Benefiting companies and meeting customer demands

Sheryl Wilhelmy, VP and Biller Solutions Product Group Manager with GTM, said although the change in mail delivery may at first seem like an obstacle for AR (Accounts Receivable), “the real story here is opportunity.”

“The simplest way to frame this is that USPS is eliminating air service for First-Class Mail delivery, and that could be significant,” she said, adding “but we’re thinking about this and speaking with businesses proactively and there are actually a lot of ways to not just adapt but improve your business operations and deliver a better experience for your customers.”

In addition to business leaders seeking to save time and money with digital solutions and payments processing, Wilhelmy said clients are expressing an uptick in demand for digital convenience from their customers.

“All the lessons we’ve learned from the pandemic are pretty clear: consumers are expecting the convenience and speed of digital payments, and they base a lot of their daily decisions on that expectation,” Wilhelmy said.

U.S. Bank: Your trusted transformation partner

“We want to assure our clients and any businesses interested in lockbox payments servicing that we are not abandoning this service,” Wilhelmy said. “Some companies may very well decide that a new digital payments solution might be their best way forward, but there are also historically check-intensive industries where the transition would be far more difficult and we’re here to help those clients mitigate disruptions, too.”

Voelker and Wilhelmy agree that the best action to take for any lockbox payments user right now, regardless of their service provider, is to speak with a U.S. Bank Relationship Manager to analyze the impacts of the upcoming First-Class Mail service change and explore opportunities to mitigate or avoid disruptions for their payments processes and customer service experiences.