Batch payment is a financial service that allows companies to make multiple payments in a single transaction. Below, we will learn more about the history and evolution of this innovative financial management tool.
Beginnings
The concept of batch payment began with manual batch processing, specifically in the late 19th century. The punched card system (developed by statistician Herman Hollerith) made it possible to process data from the 1890 United States census in an innovative and efficient manner, as punched cards drastically reduced the time required to process census data. For example, instead of taking several years (as in previous censuses), processing data for the 1890 census took only a few months. The method involved encoding information by punching holes in the cards, which were read by a tabulating machine that could automatically count and sort the data.
Using mainframe computers
The use of punch cards not only improved efficiency but also marked the beginning of the application of technologies in the management of large volumes of data, laying the foundation for the modern computing and information technology industry. It is important to note that Hollerith’s technology was so successful that he later founded a company that would become IBM (International Business Machines).
Through the use of punch cards, companies entered data into central computers, which were then processed quickly and accurately, which allowed different repetitive tasks to be automated with greater precision. This technology allowed companies to execute the first batch payments around 1950 to pay payroll, suppliers, and end-of-month reconciliations, which were repetitive tasks on a monthly basis.
This great technological advance allowed batch payment processes, data processing, inventory management, payroll, or billing to be carried out in a more efficient and secure way. For example, batch payment of payroll or vendors was achieved because companies could collect all employee and vendor paychecks into a single batch and process them together on the mainframe.
For monthly reconciliation, Batch Payments for Business allowed businesses to collect and process all financial information for the month, then batch process all the data on the mainframe to ensure the accuracy and consistency of all transactions.
Digital transition of batch payments
The last three decades of the 20th century saw a major technological advancement that benefited batch payments, making the system more efficient and accessible. The biggest breakthrough came in the early 1970s through the late 1980s with the adoption of the automated clearing house (ACH) system, which allowed banks to transact funds with other banking entities, helping to streamline batch payments to vendors and payrolls. Instead of processing each transaction individually, ACH groups multiple payments into batches, significantly reducing costs and processing time.
With the advent of digitalization, electronic payment systems began to be integrated into business processes. Platforms such as electronic funds transfers (EFT) and automated clearing systems (ACH) enabled organizations to process multiple payments simultaneously, reducing costs and increasing efficiency.
Batch payment in the Internet era
At the end of the 20th century, batch payments underwent their second digital transformation, which led to them being adopted by more companies. During the 1990s, the Internet era emerged, which generated the creation of electronic commerce and, therefore, led financial institutions to offer online banking services, which allowed companies and consumers to market different products and services within the web, especially by using credit and debit cards to make electronic payments, either through emerging payment gateways and other digital payment systems, which allowed multiple payments to be made in a single transaction.
Batch payment in the 21st century
During the 21st century, batch payments have benefited from the advancement of technology and its application in financial systems. Batch payments are currently more efficient, secure, and profitable since Fintechs have developed software and online platforms that allow companies to automate their group payment processes, thus offering the possibility of having faster and more efficient financial transactions.
An example of the significant advances and collaborations that the organizations have had, financial institutions and companies in the last two decades, is the adoption and implementation of the SEPA payment system, which has allowed for efficient “batch payment” transactions within the countries belonging to the Eurozone.
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