Modernising Payments Across the Organisation
By Luc Belpaire, Head of Product and Business Development, FIS’ Trax solution
Corporate treasurers are the nerve centre of a corporation but their roles are quite complex. They manage everything from the corporate cash position to regulatory compliance to risk management to payments. They are also dealing with volatile market events, changes to business models and supply chains, and a new world fraught with payment fraud and cyber risks as well as industry trends such as real-time payments.
In this article, we explore how corporate treasurers can overcome their payment challenges, leverage the latest trends and thus modernise their company’s global payments processes.
In a typical corporate environment, financial processes like accounts payable and payments are managed locally or regionally in a shared service centre. There are often multiple payments systems including accounts payable systems, ERPs and treasury management solutions managing approval processes and execution of payments. Companies also have multiple banking relationships. According to FIS' 2017 Corporate Payments and Bank Connectivity Report that surveyed over 130 treasury professionals, 45% have more than five cash management and 57% manage more than 100 bank accounts.(Figure 1) This results in higher transaction costs and banking fees since each location uses its own staff and infrastructure to support the operation. Less transaction volume means higher bank fees and less negotiation power with banking partners.
With disparate payment environments, corporate treasury also lacks the control and visibility into cash leaving the organisation, making accurate cash forecasting challenging. It also opens the company up to payment fraud. According to the FIS study, 55% of treasury professionals state that increasing controls is a top challenge and driver for a payments project followed by payment fraud at 54% and cash visibility at 48% (Figure 2).
Additionally, cybercrime has become so widespread, complex and frequent. The role of the treasurer has evolved to be a much more active player in mitigating this type of risk. Treasurers are relying on system providers to reduce the likelihood of a cyberattack or any other fraudulent payment event. Those treasurers without the latest in payments technology feel the most exposed and least in control and are addressing that exposure by modernising their payments and bank connectivity processes through improvement projects.
Fig 1: Number of bank relationships
Fig 2: Key payments challenges and drivers
Centralising and standardising payments is key
By streamlining bank connectivity and leveraging SWIFT service bureaus that are managing the implementation and ongoing management of a SWIFT connection for the corporation, companies can begin to simplify the complexity and reduce costs. However, they can further simplify their payments processes. By centralising data from disparate A/P, ERP and treasury management solutions and standardising processes into a single payment factory, companies increase control, gain real-time visibility into cash and reduce payment fraud. According to the FIS study, 80% of respondents have some sort of payments centralisation in place, and 94% plan to have one in the next 12 to 24 months. More than half (57%) of respondents have standardised over 75% of their legal entities. Sixty percent have standardised more than 75% of their payment volume.