Finance
Transforming Payments to Reduce Risk and Increase Visibility
Published by Gbaf News
Posted on December 17, 2013
16 min readLast updated: January 22, 2026
Global Banking and Finance Review
Company
Published by Gbaf News
Posted on December 17, 2013
16 min readLast updated: January 22, 2026
The economic signs appear increasingly positive. However with a sustained focus on both mitigating risk and reducing costs, UK corporates must balance limited investment with cost effective global operations, and this means changing the way the organisation thinks about payments.
Marcus Hughes
From the arrival of the Single Euro Payment Area (SEPA) to the shift towards cloud-based messaging, it is time to consider the implications of significant change to both the global payments landscape and payment technologies.
Marcus Hughes, Director Business Development, Bottomline Technologies, outlines five key steps corporates can take to improve visibility of financial transactions, reduce risk and drive down costs.
Step 1: Beyond SEPA
One of the barriers to successful global trade has been the cost and risk associated with payment transactions. However, the international payments landscape is changing rapidly, and the first step for any organisation looking to streamline payments and improve cash visibility must be to exploit SEPA when it comes into force in February 2014 for Eurozone states.
SEPA will enable organisations to exploit the ISO 20022 XML format to streamline the cost of payments across Europe, sending bulk payments in euros at the cost of a domestic payment transaction. SEPA, however, is just the beginning of a truly global payments model, as the Common Global Implementation (CGI) initiative gains traction.
The vision of CGI is to enable a corporate to use the same message structure for all payments, with all transaction banks, reaching any payment system across the globe. This will make it as simple and cost effective to make bulk payments into Brazil or Russia as it is today domestically. By simplifying implementation for corporate users and promoting wider acceptance of ISO 20022 as the common XML standard used between corporates and banks, CGI will create a platform for global payment factories with standardised payments and collections, including Direct Debits, across the world.
This model will also support the innovative adoption of Payments on Behalf of (POBO) and Collections on Behalf of (COBO), which is seeing growing interest. SEPA includes the ability to make payments on behalf of a different legal entity – a process that can now be transparent and specified within the payment instruction, thanks to the use of ISO 20022. The introduction of POBO and COBO on a truly global scale provides an opportunity to significantly streamline payment processing.
The challenge, however, is to be ready for SEPA – and that means ensuring the organisation can support the ISO 20022 messaging standard. One option is to become part of the SWIFT network to gain easy access to these international payment mechanisms.
Step 2: SWIFT Service Partner
In fact, for any organisation looking to exploit SEPA, and CGI, to reduce cost and gain better control over cross-border payments, the use of a SWIFT Partner for global financial messaging and payments is becoming increasingly compelling.
In recent years, growing numbers of organisations have moved to SWIFT to achieve a safe, secure and standard way of connecting with banks; attain essential cash visibility; and enable fast, efficient movement of money.
However, the cost of managing the SWIFT interface internally is increasingly hard to justify. With SWIFT expertise difficult and expensive to resource, growing numbers of corporates are opting to outsource SWIFT connectivity to a third party.
This model is compelling on a number of levels. Firstly, it ensures future proofing to the regular and on-going changes to the SWIFT messaging infrastructure as part of the service. Secondly, it supports the bank agnostic model that is increasingly in demand, giving corporates peace of mind that they could, if required, rapidly shift between banking partners.
Thirdly, such an offering should provide a raft of additional services that can support significant improvements to the payments model, including SEPA Direct Debits Mandate Management, and multi-currency bulk payments and DDs, based on the CGI model, to support a global payments hub to further drive down costs and improve cash control and visibility.
Many large corporates who originally installed a SWIFT interface in-house in the early 2000s have subsequently decided that outsourcing SWIFT connectivity to a 3rd party service provider is a more cost effective and reliable option.
Whether this is a new solution or a transfer of responsibilities the benefits are clear to the operator and corporates will do well to consider this in their financial plans.
Step 3: Into the Cloud
For any organisation looking both to reduce costs and find an effective way of managing risk, the cloud-based model has considerable appeal. It is secure, robust and provides the unprecedented speed of access to new services required in a fast changing payments landscape.
For those who are considering a new solution there seems little need to bother with the costs and complexities of having an on premise solution. Most, if not all, vendors are moving their software rapidly onto a pay-as-you-go platform with all of the benefits of simple, monthly billing, no capital investment and easy maintenance and support options. Considering that the vast majority of the payments process is outside of the business, within the financial networks, it seems almost illogical to try to maintain internal systems for this purpose.
With the vast majority of corporates now committed to the cloud approach, there are significant cost reduction and efficiency opportunities associated with gaining rapid access to the depth of cloud-based applications available, such as payment, IBAN conversion and validation and DD Mandate Management. Cloud based solutions can also transform the speed and cost of access to additional services, such as reconciliation and data transformation, that will increasingly be required to facilitate the next key step in transforming payments: supply chain finance.
Step 4: Financial Supply Chain
The economic upturn is also reinvigorating interest in international trade and new supply chain finance options can transform the way organisations navigate global opportunities. Changes to payment regulations and international trade practices, such as the introduction of SEPA and simplified EU VAT rules, as well as the introduction of the Bank Payment Obligation (BPO) by SWIFT and the International Chamber of Commerce (ICC), provide a real opportunity to create a highly visible, streamlined financial supply chain.
Underpinning this model is the need for electronic capture of data including buyer and seller names, countries and banks, transaction references and payment terms, as well as basic information regarding the goods being sold. This information typically appears on purchase orders, invoices, transport and insurance documents. Therefore corporates need a way to extract this information from ERP systems, convert it into the required ISO 20022 format and deliver it to the banks for matching in SWIFT’s Trade Services Utility (TSU).
By exploiting SWIFT expertise together with expertise in data transformation, invoicing and corporate on-boarding, organisations can explore the new supply chain finance models and gain lower cost access to the finance required to extend global operations.
Step 5: Compliance
Finally, step five is the ultimate benefit of the shift towards SWIFT and the reduction in compliance overhead. With a standard set of auditable rules and processes, SWIFT overcomes the need to laboriously define and describe multiple and disparate banking rules and processes in line with Sarbanes Oxley requirements, such as Section 404. Using SWIFT in combination with an outsourced bureau that provides workflow to enforce payment authorisation rules enables corporates to standardise and clearly define and enforce processes, such as segregation of duties and multi-level approvals. The result is an easier, less costly and, critically, less time-consuming compliance framework.
It is also important for organisations to be aware of a likely trend by banks to share some of the Anti-Money Laundering (AML) overheads and responsibilities with their payment intensive clients. Having invested heavily in AML compliance, the banks are still enduring severe fines, bad publicity and a significant manual overhead in managing the sheer volume of potentially illegal payments being flagged by systems, against multiple blacklists, during payment sanction filtering.
To reduce the huge number of false positives, some banks are considering pushing back payment scanning to the corporates, essentially demanding that all payments are sanction filtered before being presented to the bank. The onus will increasingly be on the corporate to ensure any payments made to names similar to those on the watch lists or to specific countries/companies are rigorously checked. And while the banks must still continue to scan every payment by law, one can envisage the situation where a corporate not sanction filtering first will face higher transaction charges. This trend is similar to the split-pricing charges already applied by banks on straight-through processed payments and those payments which require manual intervention by the bank.
Payment scanning is, therefore, likely to be a key requirement for corporates in the coming years – a role that could and should be fulfilled in the cloud by a trusted SWIFT bureau.
Conclusion
With cross-border trade set to reach $33 trillion by 2020, according to the World Trade Organisation, the opportunities for international business growth are significant. However, in an increasingly regulatory environment, financial control and transparency are essential.
The introduction of SEPA, CGI and Bank Payment Obligation, in tandem with the delivery of outsourced, cloud-based services, opens up real opportunities for organisations to explore global trade. It is only by changing the way you think about payments and exploring these five steps that the business can improve performance and extend global operations while reducing costs, improving financial control and minimising the compliance overhead.
The economic signs appear increasingly positive. However with a sustained focus on both mitigating risk and reducing costs, UK corporates must balance limited investment with cost effective global operations, and this means changing the way the organisation thinks about payments.
Marcus Hughes
From the arrival of the Single Euro Payment Area (SEPA) to the shift towards cloud-based messaging, it is time to consider the implications of significant change to both the global payments landscape and payment technologies.
Marcus Hughes, Director Business Development, Bottomline Technologies, outlines five key steps corporates can take to improve visibility of financial transactions, reduce risk and drive down costs.
Step 1: Beyond SEPA
One of the barriers to successful global trade has been the cost and risk associated with payment transactions. However, the international payments landscape is changing rapidly, and the first step for any organisation looking to streamline payments and improve cash visibility must be to exploit SEPA when it comes into force in February 2014 for Eurozone states.
SEPA will enable organisations to exploit the ISO 20022 XML format to streamline the cost of payments across Europe, sending bulk payments in euros at the cost of a domestic payment transaction. SEPA, however, is just the beginning of a truly global payments model, as the Common Global Implementation (CGI) initiative gains traction.
The vision of CGI is to enable a corporate to use the same message structure for all payments, with all transaction banks, reaching any payment system across the globe. This will make it as simple and cost effective to make bulk payments into Brazil or Russia as it is today domestically. By simplifying implementation for corporate users and promoting wider acceptance of ISO 20022 as the common XML standard used between corporates and banks, CGI will create a platform for global payment factories with standardised payments and collections, including Direct Debits, across the world.
This model will also support the innovative adoption of Payments on Behalf of (POBO) and Collections on Behalf of (COBO), which is seeing growing interest. SEPA includes the ability to make payments on behalf of a different legal entity – a process that can now be transparent and specified within the payment instruction, thanks to the use of ISO 20022. The introduction of POBO and COBO on a truly global scale provides an opportunity to significantly streamline payment processing.
The challenge, however, is to be ready for SEPA – and that means ensuring the organisation can support the ISO 20022 messaging standard. One option is to become part of the SWIFT network to gain easy access to these international payment mechanisms.
Step 2: SWIFT Service Partner
In fact, for any organisation looking to exploit SEPA, and CGI, to reduce cost and gain better control over cross-border payments, the use of a SWIFT Partner for global financial messaging and payments is becoming increasingly compelling.
In recent years, growing numbers of organisations have moved to SWIFT to achieve a safe, secure and standard way of connecting with banks; attain essential cash visibility; and enable fast, efficient movement of money.
However, the cost of managing the SWIFT interface internally is increasingly hard to justify. With SWIFT expertise difficult and expensive to resource, growing numbers of corporates are opting to outsource SWIFT connectivity to a third party.
This model is compelling on a number of levels. Firstly, it ensures future proofing to the regular and on-going changes to the SWIFT messaging infrastructure as part of the service. Secondly, it supports the bank agnostic model that is increasingly in demand, giving corporates peace of mind that they could, if required, rapidly shift between banking partners.
Thirdly, such an offering should provide a raft of additional services that can support significant improvements to the payments model, including SEPA Direct Debits Mandate Management, and multi-currency bulk payments and DDs, based on the CGI model, to support a global payments hub to further drive down costs and improve cash control and visibility.
Many large corporates who originally installed a SWIFT interface in-house in the early 2000s have subsequently decided that outsourcing SWIFT connectivity to a 3rd party service provider is a more cost effective and reliable option.
Whether this is a new solution or a transfer of responsibilities the benefits are clear to the operator and corporates will do well to consider this in their financial plans.
Step 3: Into the Cloud
For any organisation looking both to reduce costs and find an effective way of managing risk, the cloud-based model has considerable appeal. It is secure, robust and provides the unprecedented speed of access to new services required in a fast changing payments landscape.
For those who are considering a new solution there seems little need to bother with the costs and complexities of having an on premise solution. Most, if not all, vendors are moving their software rapidly onto a pay-as-you-go platform with all of the benefits of simple, monthly billing, no capital investment and easy maintenance and support options. Considering that the vast majority of the payments process is outside of the business, within the financial networks, it seems almost illogical to try to maintain internal systems for this purpose.
With the vast majority of corporates now committed to the cloud approach, there are significant cost reduction and efficiency opportunities associated with gaining rapid access to the depth of cloud-based applications available, such as payment, IBAN conversion and validation and DD Mandate Management. Cloud based solutions can also transform the speed and cost of access to additional services, such as reconciliation and data transformation, that will increasingly be required to facilitate the next key step in transforming payments: supply chain finance.
Step 4: Financial Supply Chain
The economic upturn is also reinvigorating interest in international trade and new supply chain finance options can transform the way organisations navigate global opportunities. Changes to payment regulations and international trade practices, such as the introduction of SEPA and simplified EU VAT rules, as well as the introduction of the Bank Payment Obligation (BPO) by SWIFT and the International Chamber of Commerce (ICC), provide a real opportunity to create a highly visible, streamlined financial supply chain.
Underpinning this model is the need for electronic capture of data including buyer and seller names, countries and banks, transaction references and payment terms, as well as basic information regarding the goods being sold. This information typically appears on purchase orders, invoices, transport and insurance documents. Therefore corporates need a way to extract this information from ERP systems, convert it into the required ISO 20022 format and deliver it to the banks for matching in SWIFT’s Trade Services Utility (TSU).
By exploiting SWIFT expertise together with expertise in data transformation, invoicing and corporate on-boarding, organisations can explore the new supply chain finance models and gain lower cost access to the finance required to extend global operations.
Step 5: Compliance
Finally, step five is the ultimate benefit of the shift towards SWIFT and the reduction in compliance overhead. With a standard set of auditable rules and processes, SWIFT overcomes the need to laboriously define and describe multiple and disparate banking rules and processes in line with Sarbanes Oxley requirements, such as Section 404. Using SWIFT in combination with an outsourced bureau that provides workflow to enforce payment authorisation rules enables corporates to standardise and clearly define and enforce processes, such as segregation of duties and multi-level approvals. The result is an easier, less costly and, critically, less time-consuming compliance framework.
It is also important for organisations to be aware of a likely trend by banks to share some of the Anti-Money Laundering (AML) overheads and responsibilities with their payment intensive clients. Having invested heavily in AML compliance, the banks are still enduring severe fines, bad publicity and a significant manual overhead in managing the sheer volume of potentially illegal payments being flagged by systems, against multiple blacklists, during payment sanction filtering.
To reduce the huge number of false positives, some banks are considering pushing back payment scanning to the corporates, essentially demanding that all payments are sanction filtered before being presented to the bank. The onus will increasingly be on the corporate to ensure any payments made to names similar to those on the watch lists or to specific countries/companies are rigorously checked. And while the banks must still continue to scan every payment by law, one can envisage the situation where a corporate not sanction filtering first will face higher transaction charges. This trend is similar to the split-pricing charges already applied by banks on straight-through processed payments and those payments which require manual intervention by the bank.
Payment scanning is, therefore, likely to be a key requirement for corporates in the coming years – a role that could and should be fulfilled in the cloud by a trusted SWIFT bureau.
Conclusion
With cross-border trade set to reach $33 trillion by 2020, according to the World Trade Organisation, the opportunities for international business growth are significant. However, in an increasingly regulatory environment, financial control and transparency are essential.
The introduction of SEPA, CGI and Bank Payment Obligation, in tandem with the delivery of outsourced, cloud-based services, opens up real opportunities for organisations to explore global trade. It is only by changing the way you think about payments and exploring these five steps that the business can improve performance and extend global operations while reducing costs, improving financial control and minimising the compliance overhead.
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