Cash & Liquidity ManagementCash ManagementAFP 2016 vendor review: Breaking boundaries in FS

AFP 2016 vendor review: Breaking boundaries in FS

This guest blog to tie in with the recent US Association for Financial Professionals' (AFP) conference 2016 in Orlando examines cutting paper and automating processes in the payments chain via message standard integration and better on-boarding.

The recent 2016 AFP Annual Conference in Orlando, US, was filled with insightful speakers and valuable dialogue among treasury attendees. But now it’s ended what are the topics that came up time and time again, and what lessons can be learnt?

The main ‘take-aways’ from the AFP Conference 2016 for me were the need to cut paper and automate processes, such as cheque clearing in the US, and in other payment chains. The drive to do this via better message standardisation, or at least via integration hubs that can impose the required standardisation, was a key topic of conversation.

On-boarding with banks was another perennial topic that cropped up in Orlando, US, on 23-26 October as well, with the emphasis on trying to make it quicker, easier and more efficient, while still complying with the raft of anti-money laundering (AML), know your customer (KYC), tax and other regulations that apply in this area.

Cutting paperwork & automating processes

Companies can process upwards of thousands of cheques a week, especially in the US where usage is still high relative to other countries. This process is time-consuming, inefficient and expensive for corporates, and uses up resources that could be better used elsewhere.

The AFP Payments Cost Benchmarking Survey last year, for instance, found that sending a paper cheque is 10 times more expensive than the internal or external cost of sending and receiving an account clearing house (ACH) payment – $3.00 vs. $0.29, respectively. Plus, receiving a paper cheque is more than 5 times as expensive—$1.57 vs. $0.27, respectively.

In addition to the high costs, paper cheques are also more susceptible to fraud. Organisations that were victims of different kinds of payment fraud in 2011 were more likely to experience check fraud (85%) than ACH (28%) or wire fraud (5%).

So if this paperwork is inefficient, risky and expensive, what can companies do to solve this issue? It would seem that the best approach to this problem would be to look into automating these processes through a self-service portal. Integrating automated solutions that reduce cost and labour would not only benefit companies, but companies’ employees as well. Automation is a boon to corporates and treasurers alike.

Solutions are available for this purpose that adopt a workflow that enables payment to beneficiaries without corporates needing to collect personal details from the beneficiary in order to make the payment, but rather through using less sensitive details such as an email address or mobile phone to link the beneficiary directly to the bank for payment transfers to the beneficiary.

Message integration

Integrating payment hubs, as well as implementing SWIFT automation, can reduce banks’ risk and ensure better compliance for all parties involved. However, integration can seem like a huge undertaking for many companies. How do you begin? Does it mean that you have to replace your entire system infrastructure? Not necessarily.

What if you looked at it from a different angle? Think of it as a data integration problem, rather than an infrastructure problem: it’s possible to integrate data from subsidiaries into existing systems.

It is important to take advantage of the platforms and tools that can empower and enable your company to gain a competitive edge.

The key in selecting the right integration platform is to find a solution that offers access to a comprehensive library of message plug-ins that enables rapid and efficient integration. Often in such projects, it is the integration aspect that incurs the most cost and time to complete integration projects. A ready-made set of message standards plug-ins reduces project time dramatically and the corporate enterprise can gain the benefits of ‘joined-up’ data organisation.

Corporate on-boarding for banks

In corporate on-boarding there are two streams of work that take place: the AML/KYC due diligence process and the actual technical on-boarding of payments and data flows.

The AML/KYC aspects of the work involve unavoidable manual checking in line with regulation and these take time, even if you do use a utility to help out. The technical on-boarding aspect is where the process can be potentially streamlined in my opinion. In essence, this is about implementing a way to systematically accept and transform the message formats that the corporate can provide to the bank and efficiently apply business logic and exception management as data and payment flows enter the bank’s systems for processing.

To ensure that on-boarding is profitable for banks, the process needs to be rapid, reliable, systematic and easily and economically maintained. If the process can be streamlined and automated, this will create an on-boarding experience that is business-led rather than IT project-led. It would also mean that banks can profitably on-board corporates of all sizes every time, achieving faster time to market, less complaints and more revenue.

One possible way of doing this is to integrate a configurable processing engine that enables banks and corporates to rapidly define the on-boarding of new file-based sources of customer-initiated transactions. Realisation that this is possible, and desirable, was evident at the 2016 AFP Conference.

Going forward

The future of treasury and finance is perpetually transforming. However, with the right tools and strategy, companies can arm themselves to handle any of these transformations in ways that were not previously possible. It is critical to embrace the technology and processes that are available—otherwise you can risk falling behind.

In my opinion these were the biggest technological concerns of the banks and corporate treasurers attending the 2016 AFP Conference. You can also do something about these automation, payment message standardisation and on-boarding concerns as well. It is more difficult to do anything about the more general economic concerns and prospects for each individual region that were the other main topics of conversation at the conference.

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