Lock box (Ofer Abarbanel online library)

In banking, a lock box is a service offered by commercial banks to organizations that simplifies collection and processing of account receivables by having those organizations’ customers’ payments mailed directly to a location accessible by the bank.


In general, a lockbox is a post-office box (PO box) that is accessible by a bank. A company may set up a lockbox service with its bank for receiving customers’ payments. The company’s customers send their payments to the PO box. Then the bank collects and processes these payments directly and deposits them to the company’s account. Typical costs are several cents per transaction to as high as one dollar or more.

Lockbox services are sometimes called “remittance services” or “remittance processing”.

One benefit of the lockbox service to the commercial customer is that it can maintain special mailboxes in different locations around the country and a customer sends payment to the closest lockbox. The company then authorizes a bank to check these mailboxes as often as is reasonable, given the number of payments that will be received. Because the bank is making the collection, the funds that have been received are immediately deposited into the company’s account without first being processed by the company’s accounting system, thereby speeding up cash collection.

Wholesale and retail

Lockbox services are generally divided into wholesale and retail.

Retail lockboxes are for companies with high volumes of consumer-oriented payments such as utility payments, loan payments, etc., and these remittances often include a standardized “payment coupon”.

Wholesale lockboxes are for corporate-to-corporate payments and tend to be higher dollar amounts than retail lockbox transactions. These transactions usually do not include a standardized payment coupon and require more manual effort for the bank to process.

Electronic conversion

With the advent of cheque truncation, it has become common to “capture” images of the checks and associated documentation (payment coupons, for example) into a digital format for use in computer systems (i.e., TIFF, JPEG or PDF files). These files can then undergo OCR and data validation when character confidence is low and then further specialized processing may take place. Banks often use specialized mail processing and document scanner equipment that can scan hundreds, or thousands, of checks per minute.

Specialized software increases the productivity of the banking customers allowing them to receive electronic data and images from the bank and automation exists that can quickly move the images into document-management systems, work-flow systems and accounting systems. In the health-care industry, this data is converted into edi 835 5010 ERA format (electronic remittance advice).

Due to the Check 21 Act, most lockbox services convert checks to electronic images, and the paper checks are shredded and the electronic checks are sent electronically to the originating bank.

Online bill-payment services

Many online electronic bill-pay services are not 100 percent online. The payee might not be set up to accept electronic payments, so the bill-pay service will print out large numbers of paper checks and then mail them to the lockbox, where they will be processed alongside all the other paper checks.


Transferring data from paper to electronic format involves labor-intensive data entry work. This has prompted a movement to “offshore” the data entry of the information on checks to countries (e.g., India) that have abundant employees – which helps in ultimately lowering the costs.[1][2][3]


  1. ^See for example Carretek’s advertising for Retail Archived 2006-10-17 at the Wayback Machine and Wholesale Archived 2006-10-17 at the Wayback Machine operations they do in India.
  2. ^India Times article about ABN Amro transferring work (including lockbox work) to Chennai.
  3. ^edata India Archived 2009-07-21 at the Wayback Machine’s advert for “lockbox processing”.


Ofer Abarbanel online library