We have taken a cursory glance at some of the technical, organizational, and procedural challenges that are encountered when building a cohesive and successful payments process. Read our first article on how a Payment Hub can help your organization, Payment Hubs: What Are They and Why Do They Matter.
With increasing global complexity and your business and supply chain operations, many corporations find themselves juggling multiple banking partners scattered across the globe, sending and receiving financial messages to a variety of systems, often involving a plethora of manual processes. This growth in complexity results in limited visibility across global bank connectivity and has downstream impacts on vital cash management functions.
Many corporate treasury teams encounter these manual processes while performing payment generation, approval, and information reporting functions. The automation of these payments and related activities can provide immense cost and time savings.
With increased pressure to do more with less, it becomes increasingly difficult to manage the complexity that comes with international growth. Several, disparate payment processes and payment systems will add new constraints on operational efficiencies. The absence of a central hub for managing payments creates numerous manual interventions, which are both error-prone and onerous.
COVID-19 exposed organizations that did not have digitized and automated systems and workflows in place to ensure continuous straight-through-processing, causing rippling impacts to payments and reporting; organizations with physical operations requiring the handling of cash, wire transfers, and checks are one example. The controls in place that traditionally govern these processes are strict and occur in a restrictive physical environment. Organizational reactions to these challenges have been diverse, with some quickly adapting to digital models. The organizations that have struggled through these challenges have faced an increase in manual activities and virtual communications (e-mail driven workflows, and e-mail communication), which have led to heightened risks in process control, governance, and data protection. The need for digitization and automation with fewer humans in the process is now greater than ever to boost resilience and minimize fraud while preserving a centralized view of organization-wide processes.
Many organizations feature multiple systems that play a role in payment execution. It is not uncommon to see TMS (with immediate activity impacting Cash Forecasting, Cash Positioning, Bank Relationship Management, and Payment Management) have separate bank connectivity from ERP (which orchestrates AP/AR workflows, Reconciliation, Accounting, and Financial Reporting). When working with this diversity in technology, organizations are best served by pursuing easy integration for the effortless management of a variety of interfaces.
A Payment Hub takes an agnostic view of data formats and networks of exchange for ease of financial message processing across disparate systems. Once payment is generated from a connected back-office system, it flows through the payment hub for validation and follows a workflow-driven process to ensure that correct checks and translations are applied before routing them to the bank via the appropriate rail. The executed payment confirmation will flow from the bank through the payment hub and into the appropriate source system within the organization. All without any action from a person-in-the-middle. There is no longer a need for a dedicated connection and workflow for each banking partner – the payment hub solves that complexity in the center by accumulating the various connections to create a unified payment operation for the organization while incorporating value-adds like advanced analytics, fraud detection, and prevention, and sanctions screening.
This method of approaching bank connectivity also shields the organization from discarding its current infrastructure in order to kickstart a digital transformation. A Payment Hub offers a variety of integration options to ensure that current systems can exist with new systems. If and when an organization decides to switch TMS or ERP vendors, the bank connectivity does not have to be established from scratch since the change exists between the organization and the Payment Hub. This results in reduced integration costs associated with process transformation, systems implementations, and cloud migrations.
With the agility gained when facing the challenges of growth and change, a Payment Hub may be the ideal place to start your journey towards centralization.
Learn more in our article, Achieve Payment Traceability through the Payment Lifecycle.
June 29, 2021
