Lockbox, eLockbox and remote lockbox: Which payment processing method is right for you?

Lockbox, eLockbox and remote lockbox are all methods used by businesses to manage receivables and process payments. Each option offers unique advantages and disadvantages, so how do you know which one is right for you? With that in mind, let’s compare these three payment processing solutions to help your business understand which of these may be best suited to your needs. We'll explore the key features of each service, their pros and cons, and offer insights into how businesses can choose the right payment processing solution for their specific requirements.

Lockbox

In an increasingly digital world, there are still many people who pay their bills either by check or through an electronic bill pay system that might actually convert those electronic payments to checks. These checks might be sent directly to a lockbox address or to the business who then might send them to the lockbox themselves. When the payments are received by the lockbox provider, they will be opened and processed. This may involve depositing checks, verifying payment information, and reconciling payment amounts. Once the payments are processed, the lockbox provider transfers the funds to the business's account. This might happen on a regular schedule, such as daily or weekly.

Pros:

• Simplifies payment processing by outsourcing it to a third-party provider
  
• Offers physical document storage and retrieval options
• Provides access to detailed payment information through reporting and analytics tools

Cons:

• Relies on physical mail delivery, which can be slow and unreliable
  
• May be more expensive than electronic payment processing solutions
• May not be ideal for small businesses with low payment volumes

Great for:

• Larger businesses and enterprises who process more than 2,500 transactions per month.

eLockbox

When consumers make payments through their bank’s online bill pay system, those digital payments are often converted to physical checks that get sent to a lockbox or even their offices. This is where an electronic lockbox, or eLockbox comes in. An eLockbox allows these online consumer payments to be processed electronically through a secure online platform.

Pros:

• Since there is no physical payment, there is no waiting period for payments to come in the mail or for the checks to be processed
• Reduces payment delivery time by up to five days and streamlines the cash application process
• Provides better cash flow visibility since the payments are processed more quickly, which can help businesses make better business decisions

Cons:

• Requires businesses to have an electronic payment processing system in place
• The biller needs to be registered with an electronic payment directory. Tip: Look for a provider that will handle that step with all of the major originators for you, such as Deluxe’s eLockbox solution.

Great for:

• Companies wanting to speed up their payment processing timeline

Remote Lockbox

Rounding out the list, a remote lockbox solution uses the technology enabled by remote deposit capture to create a robust alternative or addition to traditional remittance processing. Remote lockbox allows you to accept check payments remotely and scan them with a remote deposit capture device so you can skip the trip to the bank or the shipment to the lockbox. If you already have a traditional lockbox solution, these scans are sent through the primary lockbox process, so reporting and exceptions for lockbox and RDC or remote lockbox can be conveniently reviewed in one place.

Pros:

• Provides businesses with greater control over the payment processing process
• Allows for quick processing of payments, as payments can be submitted electronically, even by reps in the field that can submit payments through their mobile device
•  Can reduce shipping costs as businesses can handle the payment locally without having to send the checks to a lockbox facility

Cons:

• May require businesses to invest in technology and software to manage the payment process
• May require training and resources to set up and manage effectively

Great for:

• Businesses with smaller check volumes or businesses that want an additional, convenient way to process payments along with their traditional lockbox solution

Finding the best solution for you

It's important to note that the pros and cons of each payment processing solution will depend on a range of factors, including the specific needs and preferences of each business. Businesses should carefully evaluate each option and consider which solution is best suited to their unique requirements.

The best solution for your business may be a combination of these options and, depending on your business’s payment processing needs, potentially all three of them. For example, by combining a remote lockbox with a traditional lockbox solution, a business will have increased payment processing flexibility and improved payment processing capacity. Adding an eLockbox solution, in addition, will then also speed up the cash application process for online banking payments, cutting down on day sales outstanding and helping your business have greater visibility on cash flow.

Still not sure which is right for you? We’d love to help. Learn more about these payment processing solutions and all of the other ways Deluxe can aid in the receivables process.