Making instant cross border payments a reality

For corporate treasurers, there is a plethora of new technology available on the market, which banks and companies like Infosys Finacle are keen to help treasurers implement into their businesses. But is there appetite from corporate treasurers at this moment in time for such a high level of change?

For James Buckley, VP & Head of Europe at Infosys Finacle (pictured), the drive is for efficiency.

“The issue for a corporate treasurer is they would like – and need – a set of services to manage their money in the most efficient way possible. What that world also represents is the world of analytics in near real time.”

This new-found efficiency also means that treasurers can move from being reactive to proactive actors.

“Whereas for treasurers of yesteryear there was a time lag in terms of understanding what one’s real positions are, waiting for end of day processing, understanding where positions are at end of day in different places with different banks.

“That whole world affords not just real time information, it therefore implies real time analytics. When you get to that level, that implies that the world where the treasurer is having to work out what the most efficient way to manage the money is in a reactive mode starts to change.

“That’s because now you can analyse where your cash is or what cash flows you have, what forecasting have in a much more proactive way,” Buckley adds.

Real-time analytics reduces inefficiencies

Analytics have the potential to make life much easier for treasurers in several other ways too, as real-time efficiencies become semi-automated.

“You can link that to the best possible instrument or mechanism to manage cash in an analytical way as well. So instead of the treasurer having to scratch their heads and work out whether to use an overdraft limit here or an intercompany loan there or go into its treasury operations to raise funds in some way shape or form – that whole world can be aided and abetted by analytics.

“In terms of what it represents for the treasury operations in a corporate sense, it is an opportunity to step up to a next level where the efficiencies of a corporate operation are not automated completely but semi-automated.”

Overcoming asynchronous payments

Real-time payments also help reduce inefficiencies of asynchronous payments as there is less scope for things to go wrong.

“With a world where you’re asynchronous – you have a message to pay and then a follow up type settlement mechanism, that affords itself the inefficiency of the payments going wrong and also imperfect payment instructions can get stuck in systems where the receiving system (whether it’s in the bank or intermediate processor) will try and perfect a payment before it rejects it.

“That whole synchronous world starts to disappear with real time payments. You know immediately when a payment instruction hasn’t been fulfilled and that allows, by a degree of automation, to reduce the follow-on back office work inside the corporates if you have that world where things are done in real-time or near real-time.

“The other systemic change that comes in is you don’t need as many people having to sort out back office operations that are based on failed instructions, problems with tracing etc. etc. if things are done in a much more contemporary fashion,” he added.

Time needed before real-time payments become the norm

Buckley believes that whist high value real time payments in country have been around for years there will be a steady build-up of momentum as real-time cross-border payments become truly mainstream.

“It will be like a pipeline that ratchets up. You can allow cross-border payments at a lower value that are more predictable more easily because you’re not going to end up with a run on the Yuan or a run on the Dollar.

“But the issue gets more difficult as you move up the corporate chain and where you’re dealing with the mega corporates – the Apples of this world and so on, dealing with vast numbers of small payments but then aggregating up big cash flows. That’s where if you’ve got real time payments you need a real time proactive not just monitoring mechanism but a cap, an ability to switch on and switch off those real time flows when you need to at the Sovereign Central Bank  level.

“It’s not the technology that is holding things back; We can replace the old model of correspondent banking and Swift today if the combination of those models together with the control mechanisms that central bankers would need to manage the efficiencies and manage the markets, from a country level point of view.”

‘Plug and Play’ approach to digital cash, liquidity virtual accounts and payments

Buckley believes that Infosys Finacle has a unique solution to make the transition to real-time payments, predictive analytics and liquidity management for the next generation as smooth as possible.

“At Infosys Finacle we have a componentised set of software so what we do and what we can do is a plug and play type of approach to align whatever we have from a technology set to the business initiatives of the particular bank. We don’t have a one size fits all type piece of software that does everything, we have a digital backbone that allows banks to provide greater self-service to their corporates and richer functionality.

“Instead of having quite basic portals they can provide omni-channel capabilities whether it’s on the internet or on tablets or mobile phones, the consumers in corporates can be quite varied and quite different according to the type of business they’re in.

“Some of them are very networked and they don’t really work just in standard back office operations, others require more advanced capability in terms of self-service and want to manage their own destiny in terms of managing their own roles within the self-service operation that they have, that’s something that hadn’t been done generally in the past which we provide.”

Buckley adds that Infosys also provides the ability to pick what we call enterprise components, pieces of functionality at a fairly granular level that gives banks the ability to enhance parts of their operations.

“If a customer wants to use their own solutions, to mix and match functional capabilities in line with their corporate road map, that’s doable”

“It may be for example, that they just want to enhance their virtual account management capabilities to their corporates and that’s a component that we provide,” he says. “It may be that they’re going to use liquidity management from us for a subset of high-end corporates where they want very advanced liquidity structures and they’re only using that particular component, or it may be a combination. Maybe they want to provide more intelligent treatment of payment instructions, we have a payment capability that can do that.”

The key, therefore, explains Buckley, is that Infosys Finacle has the ability to combine a chosen suite of components. “If a customer wants to use their own solutions, to mix and match functional capabilities in line with their corporate road map, that’s doable. Today’s solutions are about flexibility.

“There are various players in the market but typically they tend to have a lump of software that does everything, whereas we can actually mix and match and align to individual agendas, in conjunction with the functionalities they have today and what they’re trying to provide tomorrow.

“As an organisation we switched to an agile agenda, both in terms of the way we build products and the way we build out in terms of implementation some time ago, so we have the ability to fine tune and align what we’re doing to provide the treasury provision operations the corporate operation capabilities that the bank provide as services.

“We have the ability to align in a drip feed fashion which is the way a lot of banks want to maintain and enhance their service capabilities to corporates. They don’t want massive dislocation of capabilities, they want to be able to drip-feed more and more advanced capabilities to those corporates. That’s how instant payments will evolve and make instant cross border payments a reality.”

Don’t miss the first part of our interview with James Buckley – What are the teething problems with real-time payments?