The SunGard’s 2015 Payments Study: Putting Fraud and Fees Under the Payment Factory Microscope is a must read for all corporates who are considering a payment factory solution. The study nicely identifies some of the reasons why corporates are assessing their bank relationships and the number of accounts they hold, and reveals interesting information around why a payment factory ought to be implemented.
Read the report for full details, following are my key takeaways:
Wham BAM (Bank Account Management), Thank You Ma’am
Through corporate initiatives such as electronic bank account management (EBAM) and Treasury Management Software (TMS) implementations, corporates are needing to understand completely their global bank relationships and the number of bank accounts
In addition to technology developments, regulation is demanding US corporates particularly to take charge of their global bank relationships and bank account set up. The US Bank Secrecy Act through its FBAR (Foreign Bank Account Reporting) Regulation ensures that corporates must better understand their banks and bank account set up around the world
3. Eggs, 1 Basket. We all know what’ll happen next…
Having understood their current bank and bank account landscape corporates are mindful of the fragility of the financial system, and regional geo-political changes that may trigger a bank to suddenly change its location, focus and operations. As a result Sungard found that corporates are not looking to strictly reduce the number of bank relationships, rather corporates are seeking to broaden them
How a Payment Factory Can Help…
4. Payment Fraud Prevention
Imagine a corporate with 1000 bank accounts over which there is little central visibility, bank statement reporting — its pretty much impossible to know how payments are being made through those bank accounts and the security and controls therein.
Now picture a Treasury environment where the accounts – they may not necessarily be drastically reduced in number – have been centrally validated, a streamlined bank connectivity solution has been implemented and a centrally managed reporting process is in place.
Which of these environments do you think is more prone to payment fraud?
5. Bank Connectivity Costs
Its not necessarily the cost of a single interface – after all, a single internet e-banking or host to host interface with a bank is hardly going to break the bank, eh? (pun intended!) But multiply that interface across multiple banks and many countries and soon you have a crazily busy bank connectivity architecture with multiple solutions and workstations all of which need to be implemented, supported and maintained.
6. Cash Visibility
With spaghetti-like bank connectivity, it is almost impossible to know where your cash and how much cash is available in your organisation in real time. This in turn impacts the entire Treasury and operating business.
7. Payment Centralisation
The Sungard Report raises a really interesting point here around centralisation. Sungard explain that it is not enough to have a centralised payment processing centre, through various systems and interfaces or perhaps through a global payment policy.
Sungard propose that payments need to completely streamlined to give the corporate true centralisation, control, compliance and cash visibility
8. Bank Connectivity
The Sungard survey found the top 5 bank connectivity channels, in the stated order, as follows:
- Host to host
The survey also found that corporates are dropping e-banking in favour of third party solutions that utilise SWIFT connectivity
9. Payment Factory – Key Benefits
- Improved end to end controls
- The implementation of common global data standards
- Improved and real time cash visibility
- Secure and streamlined bank connectivity
- Cost savings through a reduction in bank fees, bank connectivity solutions, people and greater process efficiency
- Data analytics
The Sungard study is food for thought for anyone in the payments space. Even if you’re not considering a full blown payment factory, the study highlights interesting key trends that major corporates are thinking about. It would be really interesting to see how payment factory implementation is happening by region. I would have thought that in Europe SEPA would be ripe territory for corporates looking to realise further improvements in their payment processes.