Bank connectivity and payment processes are critical operations for any business. With the introduction of multiple banking relationships, payment processes have become increasingly complex, requiring more internal knowledge and even external expertise.
In a recent PaymentsJournal webinar, Jonathan Paquette, Senior Vice President of Solutions in the Americas at TIS (Treasury Intelligence Solutions), and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, delve into the most common hindrances to bank connectivity and payment strategies, the consequences of not optimizing bank connectivity and payment management on a global scale, and key strategies in implementing bank connectivity and payments effectively.
Common Challenges to the Implementation of Efficient Bank Connectivity and Payment Strategies
According to Paquette, companies typically have multiple bank relationships. Each bank has its own protocols, payment methods, and formats. Bringing all of these elements together under one single and unified connectivity strategy poses a significant challenge. To address these connectivity protocols, organizations have resorted to using outside resources or relying on their internal knowledge base to manage all of these elements.
Another issue is the complexity of systems. The implementation of global bank connectivity and payment processes requires them to be integrated into a back-end system.
“A lot of companies are multi-ERP,” Paquette said. “I think at the minimum a company is going to have an ERP system, likely a TMS. Also, a payroll application, and each one of those systems is going to need to leverage that communication to the bank or have their own independent communication channel to the bank, too. So that’s a big consideration for a lot of companies.”
Paquette added that a designated person who is well-versed in these matters will be best suited to put connectivity strategies into place.
Lack of internal knowledge is another issue organizations face. It becomes increasingly complex to maintain different formats and the various connectivity protocols among the vast number of banking relationships. The revolving door of banking relationships and the IT bandwidth required to support those changes add more complexity to the process.
“And I’ve been very outspoken with our large corporate clients about the need to have external expertise because I’m finding that even some of the largest corporations in the world don’t have the resources to do this type of thing,” Bodine said. “And it is just a bear to manage all this.”
The Consequences of Not Implementing Connectivity Processes Fully
It is not recommended that organizations attempt to implement connectivity processes in a partial or fragmented way. Doing so could lead to a host of problems. Paquette has seen this firsthand, revealing that route inevitably leads to a partial automation of the process. Cash management banks might process 60% to 70% of their transactions via bank connectivity and payments and decide that this requires a tremendous amount of work, thereby ending it there. However, the remaining 30% to 40% still needs to be processed manually. This introduces the possibility of human error as well as security risks.
There is also the question of data aggregation and analysis. Many times, the data is siloed into different sources.
“If some things are flowing from the ERP straight through processing and others are going through an e-banking portal or some other system, right then you’re suddenly finding yourself with all these sort of data silos,” Paquette said. “No way to bring all these data points together for analysis purposes and to make your business better.
“So, all the usual ones, excessive costs, the maintenance and the upkeep of multiple different processes come into the fold as well.”
Said Bodine: “I was writing recently about the costs and the downsides associated with halfway strategies, as I like to call them, and people sort of do the bare minimum and then they forget about it. But they’re not focused on continuous improvement like a full API first strategy or ISO standards to the extent that they are standards, but those are super important.”
Key Strategies for Optimizing Connectivity
The solutions to enhancing the implementation of connectivity will greatly depend on the level of complexity within the business. For example, if it is a treasury operation with one or two banking relationships, then one or two systems would be recommended to connect with. It can potentially be managed in-house as well.
“If you do have resources that are really knowledgeable about this or maybe just the opportunity to bring in some process redesign consultants or bank connectivity experts who can help you get everything connected up through whatever method you might have,” Paquette said.
“Maybe your ERP has a connector and can centralize all this information in.”
For companies that have more than 100 bank relationships worldwide, outsourcing is recommended for this task. With that many banking relationships, it’s inevitable that inconsistencies will be high. Maintaining different formats daily to execute transactions will be a daunting task. Many of these strategies can be reined in by using a connectivity hub where most tasks would be managed by a specialist in a unified place.
TIS Helps Companies Understand Their Payments Process
Paquette noted that it’s vital for companies to understand the way they make payments. It is important that organizations get familiar with how their ERPs send files to the banks, know the inventory of all the e-banking portals available, and be familiar with the manual payment processes that are occurring.
One recommendation he makes to clients is to map out all of these variables. Businesses must process payments in an efficient, secure, and cost-effective manner. Finally, once all of these details are mapped out, organizations must determine what knowledge base they possess internally. If they are missing elements of that knowledge base, the next step is to seek external expertise.