Mercator Blog

New Life for Wholesale Lockbox
Date: December 4, 2013
Mercator
Research Team
For businesses, the lockbox expedites payment collection and application. Wholesale lockbox, an old cash management tool, is new again thanks to corporates’ increased adoption of electronic invoicing solutions. Even though today’s interest rates are low, high volumes of payments can yield meaningful revenue from gains in float. While the early goal of the lockbox was to move paper faster, companies today utilize the lockbox as part of an overall automation effort focused on getting rid of paper altogether in their invoicing and payments processes. While the effectiveness of lockbox is undisputed, emerging technologies have marginalized the traditional wholesale lockbox as a payment processor.

Although technology has replaced some of the need for core lockbox functions, businesses have not yet eliminated all paper from their invoice and payment processes. Lockbox functions are still needed, just repurposed from their original intent to automate payments. A case in point is the way that electronic invoicing is utilizing wholesale lockbox functionality as the first step to invoice automation. This concept is further explored in the recently released Mercator Advisory Group Research Report titled Wholesale Lockbox Use Resurging Thanks to Electronic Invoicing.

Wholesale lockbox isn’t going away anytime soon. Checks are a business-to-business payment reality. According to a recent payments study by the Association of Financial Professionals (AFP), corporates are making about half of their B2B payments via check. That equates to millions of paper-based payments. Corporate success with “going green” initiatives aside, companies still need and will continue to need lockbox services to effectively process check payments for some time to come.