The electronic payments revolution is underway!
Electronic payments have been around for over a couple of decades and almost every organization globally from Fortune 500 corporations to small mom and pop shops use electronic payments for sending and receiving business payments. Despite the exponential growth of electronic payments, US continues to remain one of the largest users of checks – demonstrating that there still exists a large potential for further consolidation! Banks are introducing new payment products that is further fueling the electronics payment footprint – the biggest and by far the most successful of these initiatives has been SEPA payments across the Eurozone – back in the US, same day ACH is a relatively new product that is slowly gaining traction as a viable alternative to ACH and wire payments.
In terms of how organizations use and make electronic payments, there is a whole spectrum of how manual or automated these processes are depending on the size and systems footprint of organizations – starting with payments made manually over bank proprietary electronic banking platforms on the one end to fully automated SWIFT enabled solutions on the other end.
Existing payments automation systems are mostly inefficient or under-utilized
Some level of automation around payment processes is quite common these days across organizations of different sizes – most commonly for treasury and/or A/P and A/R processes. However, a closer look at these automation processes throws up many inefficiencies and waste in terms of design, structure and application.
- Multiple, fragmented payment processes and payment related systems
- Lack of standardization in file formats and connection protocols – ERP, TMS and in-house systems generating different payment formats and connecting to banks in a multitude of ways
- Multiple connections to from different components within the organization to the same banks
- Lack of central visibility to all payments and associated processes
- Processes based primarily on bank proprietary formats and connections – making companies very dependent on their present banking providers
- Redundant teams managing and monitoring disparate payment related processes
- Legacy and native systems with unsupported enhancements – making the system rigid and non-scalable
- Using outdated file formats that create limitations on data that can be transmitted and received Vs using SWIFT XML formats like ISO XML20022 that are more scalable and flexible
Why more organizations are moving towards payment hubs to bridge the gaps
To address the inefficiencies addressed above, organizations are moving towards adopting payment hub models – payment hubs were originally used by banks to centralize their payment messaging, but are now being increasingly used by corporations similar goals.
Payment hubs act as the focal point that centralizes the receipt and transmission of all payment and financial messages in and out of the organization regardless of payment type, format or geographic location.
- On the enterprise side it integrates with various disparate payment and cash management systems that include ERP systems, A/P systems, A/R systems and treasury workstations to receive payment files and information for transmission to banks and transmit information and data received from banks such as electronic bank statements, payment confirmations, lockbox data etc.
- On the outbound side it connects with various banking partners globally to transmit payment files and receive electronic bank statements, lockbox data, payment confirmations/acks, rejection notifications, etc.
- By virtue of enabling enterprise wide centralization, payment hubs are able to optimize payment processes by eliminating waste and redundancy and streamlining and standardizing payments processing across all enterprise applications, payment types and banks.
Medullus LeanCash™ payment automation solutions
As part of our LeanCash™ offering set intended to streamline treasury and finance function, we offer a full service turnkey virtual payment hub development and setup to ensure maximum optimization of your enterprise wide payment processes. Some of the features of our solution includes:
- Seamless Integration with multiple internal systems and platforms associated with payment and cash management processes and with external providers such as banks, credit card processing vendors and other payment solutions providers – all major connection types and protocols such as FTP, AS1, AS2, AS3, AS4, HTTPS, EBICS (Euro) supported
- File Mapping & Exchange through our “drag-n-drop” interface – supported formats include standards like EDI, XML and SWIFTNet formats including ISO XML 20022 – custom bank proprietary formats also supported. Efficient file mapping structures allow companies to combine and normalize financial messaging from across disparate systems.
- SWIFTNet Compliant connections and protocols fully supported
- Collaborative Implementations including coordination with banks to develop and test file formats and connections as well as working with internal IT teams to ensure compliance with policies and guidelines
- Alerts and Notifications to control and monitor processes – rejection notifications, payment processed notification, missing bank statements, etc.
- Inbuilt Controls and Intelligence to spot and flag evident anomalies like duplicate payments or payment files, suspicious payments, etc.
- Reporting Module and Data Archives to keep track of historic activity and run metrics to measure performance indicators – this can be used to measure internal payment processes as well as measure performance of banks related to payment processes.
- LeanCash™ Payment Hub Command Center – user friendly and streamlined central front end to monitor and control all enterprise wide payment processes in one place – this allows efficient management of all the connections and enables organizations to build centralized expertise to manage these processes
Check out the Geek Speak section of our blog Unleashing the full potential of Shared Services to see how we use APIs for system integrations.
To conclude, our LeanCash™ payment hub acts as a single gateway for all payment and cash management processes across the organization to increase efficiency, eliminate redundancies, improve control over funds by providing a central view of cash flows and mitigating risks associated with these processes. Also, last but not the least, using the centralized scalable payment hub model makes these processes bank-agnostic to a large degree – reducing dependency on particular banks and their processes!
Medullus LeanCash™ is a tried-and-tested solution that draws upon lean concepts to streamline Corporate Treasury by eliminating waste in processes and functions which helps to manage liquidity and risks in the most optimal way.
Our products and services are geared towards making improvements in Treasury & Finance processes to bring big gains with minimal impact. The low hanging fruit is sometimes difficult to find in a large organization with myriad of processes and systems. Take the 1st step in identifying these high value/low risk improvements – get your LeanCash score, benchmark against other organizations that have obtained their score and improved them. It does not cost anything to find out where you are as compared to industry-best-practices!
Blog post by: Tejnain Singh. Reach Tej @ email@example.com
Tej is a seasoned treasury and finance professional with over 17 years of extensive experience across organizations like GE, Deloitte, SABIC and Valeant Pharma. He has held senior positions in treasury operations and cash management and has led multiple strategic initiatives in the areas of payment automation, treasury system implementations, business process simplification and shared financial services among many others. Tej is a Chartered Accountant from India.