Leveraging Paperless Payments
Transforming payments from a burden to a benefit.
December 8, 2008 – How does a company known globally for progressive, efficient products easily transform an inefficient, straining burden into a streamlined, automated benefit?
That's just the question we asked ourselves here at Toyota back in 2004. One of the most arduous challenges faced in recent years by Toyota's Finance and Treasury groups was the sheer burden of paper. It's surprising that something so simple and basic to business served as a near crippling force to our operation; however, the resources demanded to produce, distribute and manage this paper reached far and wide and had a stranglehold on our processes. This not only forced us to shoulder a hefty burden, but also served as a major distraction away from our core operations.
The situation grew to the point where it simply became a challenge we had to resolve - and quickly - in order for us to keep up with the speed of Toyota's market growth. Initially it appeared as a daunting task; how do you eliminate a massive amount of paper in a short amount of time and turn a major burden into a significant benefit?
The Challenge of Paper
While the basic challenge for our group was rooted in all types of paper, the true culprit for us was the paper check. Toyota has thousands of sales professionals at over 1,400 dealers across the United States. These individuals are typically not employees of Toyota, but rather work directly for the dealerships and are agents for our company. Given the lack of direct communication auto manufacturers generally have with these sales professionals and the corresponding issues around establishing direct deposit for them, we traditionally depended on paper checks for payments to this group. For years this approach seemed like the only legitimate payment method on which we could rely. Yet despite its simplicity in concept, the use of paper proved to be incredibly complex, expensive and inefficient.
The sheer amount of resources, both personnel and financial, we had to invest in our check process was nothing short of massive. First, we had to produce the checks, which sounds simple in concept, but means purchasing large volumes of paper, ink and envelopes. We also had to establish a dedicated infrastructure of printers, computers and software; all major costs when you are talking about continually producing upwards of 150,000 checks annually. And it's not as if we could get expanded use from these resources, since they were generally dedicated to supporting our check-writing operation. Aside from this, we needed to find space to house this production operation and to inventory our volumes of paper, ink and envelopes.
On top of it all, we needed personnel to manage the check production process. This was a significant and perpetual constraint on our team, given that we had finite resources.
Next, we had to distribute these checks, which were regularly sent to over 1,400 dealers nationwide. Typically, the checks would be batched for priority shipment, but each package cost upwards of $10 to $12. So, the distribution costs alone topped $180,000 annually; and that was just to get the check into the hands of the recipient.
After the check's arrival, the real issues typically arose. Given that we were continually sending out incentive payments, there was often a significant delay between a sale and payment delivery. Combined with the limited communication channels with these professionals, the recipient did not necessarily know what each specific payment was for. This would force them to contact the regional or national office which would, in-turn, research the payment origin and communicate it back to them. On top of that, we would get regular calls from these individuals asking about their balance or questioning the amount of a specific payment or asking when a payment would arrive. This added a continual research exercise for our financial group, looking up and verifying check details for recipients, which further burdened our limited resources.
However, one of the largest resource drains was related to lost or stolen checks. If a recipient lost a check they would contact us to reissue it. This meant we had to cancel the check, which often incurred a fee, and go through the entire production and distribution process once again, further adding costs and demanding resources to complete. So, needless to say, the entire process of dealing with paper checks was a nightmare for us and ultimately impacted our ability to efficiently operate.
The Benefits to Finance
In 2004 we came to the conclusion that we had to somehow find a solution that would free up our team, reduce and even eliminate our payment costs and get us out of the check-writing business altogether. Our answer came with a program that quickly and effectively transitioned every incentive payment we made from the inefficient paper check we depended on to seamless, electronic delivery. For the solution we turned to Ecount (now Citi® Prepaid Services), who helped us design a fully custom branded Toyota program that immediately eliminated the burden of paper checks. At the heart of this program is our customized Toyota Visa® Prepaid Card, which every one of our qualified sales professionals receives a personalized version of. Their payments are automatically placed directly onto their card, cutting payment delivery time from weeks to days.
Within weeks we launched and were delivering paperless payments nationwide. In turn, a simple, elegant payment process took over in which Toyota simply sends an electronic file to Citi Prepaid Services and the payments are automatically distributed directly to the recipients onto their Toyota Card; the funds get to recipients dramatically faster with minimal administrative involvement from Toyota and at a fraction of the cost.
In terms of costs, we quickly eliminated both direct and indirect costs with our program. Directly, we had eliminated the need to purchase and inventory paper, ink or envelopes. Our hardware costs to run the check process were also eliminated, requiring less space and personnel to manage. Indirectly we saved thousands and thousands of hours producing, sorting, packaging and shipping checks, not to mention the required post-distribution management and research for inbound questions related to payment origins or balances or payment amounts.
The biggest benefit from Finance's point of view though, is that this process is now completely automated. We've gone from a payment process that flat-out dominated and drained our operation to a solution that is simple, elegant and automated. In fact, it's so automated, we no longer require a major review process for payments (the regional offices periodically review the payments). The seamless, efficient process has totally transformed operations. Simply put, it's been a complete renovation of an outdated and lagging process.
The Benefits to Recipients
Aside from the windfall Finance sees, there are several other major benefits our company and sales professionals enjoy. First, every one of our sales professionals gets a personalized Toyota Card. With this card they can access their incentive funds in variety of ways – by making retail purchases everywhere Visa debit cards are accepted worldwide and withdrawing cash at ATMs. Cardholders also have a robust set of tools available to manage and access information on their funds online or via phone. They can even set up email or text message alerts to get real-time transaction or balance updates – or can call Citi Prepaid Customer Service with inquiries.
With all of these tools, our sales professionals can quickly view the entire flow of funds, which means no more calls to the Toyota Finance team requiring research around payment information or updates, which is a major victory.
Best of all, our sales people love their card – they view it like a medal or badge of honor and show it off. That creates tremendous goodwill and loyalty for Toyota, which is great for maximizing sales performance and minimizing turnover.
Illustrating the Impact
Every element of our program with Citi Prepaid Services is customized with the Toyota brand – the prepaid card, communication materials, the sales welcome kit and even the website. One of the most valuable advantages our program provides is one that we did not anticipate when we launched. The direct communication channel we gained to our sales force has been invaluable and was something we had been lacking. Our sales professionals regularly check the program website; after all, it's where they go to view account and balance information and see payment deliveries. Here, we have the channel to introduce new vehicles, features, promotions and changes to our product lines.
As mentioned previously, these individuals are generally not direct employees of Toyota, but rather work for a dealership, so having a channel direct to them has traditionally been a challenge, but is now eliminated thanks to this Toyota incentive website.
The impact of all this can probably be best illustrated with Toyota's most recent new market entry. Back in 2004 when we launched the program, we were also in the process of entering the U.S. truck market, a challenging market segment that had been traditionally dominated for decades by a few select manufacturers. When we launched our program, we decided to leverage our recently acquired, unique communication channel by putting the newly introduced Tacoma truck front and center on the program website and materials – and even on our Toyota Card. This approach helped us to introduce and reinforce the shift in thinking at Toyota with our sales professionals, who had always seen us as a manufacturer of quality, efficient small to mid-size automobiles.
Our Citi Prepaid program allowed us to not only communicate directly with our individual sales professionals to educate them on our new truck line, but also allowed us to dynamically reallocate our incentive structure and enhance their performance with faster, more efficient payments. It was a solution that came at the right time for us to help us achieve some challenging goals.
Today, Toyota is now the leading auto manufacturer in America and our incentive program with Citi Prepaid Services has played an instrumental role in this success.
Impact Beyond the Business
Another benefit that was not initially at the forefront of our decision to move to electronic payments, but fits in very nicely with Toyota's focus on efficient, clean solutions is its environmental impact. It's difficult to exactly quantify this impact, but I have to imagine we have saved forests full of trees by eliminating so much paper. This serves as a complementary conservation component, aligning nicely with Toyota's consistent drive to be an environmental leader.
Clearly our move towards a paperless solution, though relatively easy from our viewpoint, had a widespread impact on our business and beyond. Simply put, it's a move that has been vital to our ability to keep pace with the tremendous growth of Toyota's business. And although I experienced life before the shift, I now can't imagine life without it.
About Citi Prepaid Services
Citi Prepaid Services (formerly Ecount) is a leading provider of innovative prepaid solutions. Through a consultative approach, Citi Prepaid provides clients with comprehensive electronic payment programs that reduce costs, enhance operational efficiencies and provide an unmatched user experience. Leveraging an extensive payment platform and proprietary prepaid technology, clients around the world depend on Citi Prepaid's custom programs for all types of payments including compensation, promotions and disbursements.