making better payments: best practices for treasury teams
TRANSCRIPT
Making Better PaymentsBest Practices for Treasury Teams
Jason Dobbs
Bob Stark
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Jason Dobbs Manager
Actualize Consulting
Bob Stark Vice President, Strategy
Kyriba Corporation
Today’s Presenters
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Today’s Discussion
Goals and objectives for a payments program
Bank Payment Connectivity
Payment Fraud – prevention & detection
Payment Factories– Integrating ERP Payments– International payment strategies & structures
Technology innovation – blockchain/DLT
Making Better Payments: Best practices for treasury teams
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What are we trying to improve upon?
Setting objectives critical to building a roadmap for improvement
Sample goals may include:– Improve program efficiency via payment
“factory functions”
– Improve working capital
– Decrease cost of payment solutions
– Improve security of payment workflows
– Standardize global processes and improve visibility into payments
Payment (Bank) Connectivity
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Bank Connectivity
The best way to send payments depends on:
• Where payments are originating
• Number of banks, payments and payment types
Corporate Client
TMS provider manages formats / connections
Domestic banks
International banks
Enter Payment
Send Payment
Secure, Authenticated
Route Payment
Treasury System
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Treasury Management
System
Approved payments included in batch to be sent to Banks
Encrypted Batch transmitted from HUB to SWIFT Network
1
2
3
Ack Levels transmitted to Kyriba HUB
Ack/Nacknotification provided to User and visible through dashboards
Payment Connectivity workflow
Want flexibility to support multiple bank
channels
4
1
4
1
4
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Bank Connectivity Options
1
2
3
Host to Host Connections
Domestic/Regional Networks
SWIFT Concentrator Service
SWIFT Alliance Lite2
SWIFTNet Service Bureau
4
5
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Bank Connectivity Options
Connectivity Choice Description Best Scenario
Host to Host (e.g. FTP) Direct connection to the bank
Ideal for high payment volumes per bank
Regional Network (e.g. EBICS, Zengin)
Single country multi-bank network
Multiple banks or high volumes in countries with these protocols (e.g. France, Germany, Japan…)
MT Concentrator Sharing another entity’s BIC
Restricted to MT101’s onlyMany banks won’t accept via
another party’s BIC
SWIFT Alliance Lite2 Direct connection to SWIFT
Lower payment volumes
SWIFT Alliance Access Direct connection to SWIFFT
Higher payment volumesFully managed service
Fraud Prevention
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Fraud is a driving concern
62% of organizations have experienced attempted or actual payments fraud
34% of organizations have been subjected to a cyberattack in the last 18 months
20% of corporates report fraud committed by employees
42% of organizations reported that incidents of fraud attempts increased in 2015
64% of organizations have been exposed to business email compromise (BEC)Sources: Association of Corporate Treasurers and Association of Financial Professionals
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Treasury Your banks
Payment Initiation
Payment Transmission
Fraud Prevention – Payments
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Exposure Points: Must be protected
Each exposure point opportunity for cybercrime Exceptions to standardized process opportunity Good news: there are good ways to protect!
Fraud Prevention – Payments
Treasury Your banks
Payment Initiation
Payment Transmission
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Separation of duties and application of limits are key; Ensure approvals align with dollar limits
Standardization of approval workflow across all banks and all payment types is important– e.g. mandated review of attached documentation
Treasury
Payment Initiation
Fraud Prevention – Payments
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Payment files to bank must be encrypted
Acknowledgements/confirmations must be reviewed
Where available, apply digital signatures (e.g. SWIFT 3SKey) to authenticate exported payment files
Review payments vs. sanctions lists (e.g. OFAC)
Fraud Prevention – Payments
Your banks
Payment Transmission
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Alerts when suspect payments sent to accounts on industry watchlists (e.g. OFAC, EU, UN)
Integrating sanctions lists into payment workflow will offer advance notification
Also helps prepare documentation when payments are legitimate (but still match)
Fraud Prevention – Payment Screening
Ok Alert!Sanctions List Filter
Integrating sanctions list screening into your payments workflow will help prevent and detect fraudulent activity
PaymentsSystems
(e.g. TMS or ERP)
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• Up to 4 levels of acknowledgment (5 if you count CAMT 054)
• Acknowledgements can be viewed in message format or integrated into a payment dashboard
• Goal: monitor each stage of workflow (including initiating to receiving bank)
Fraud Detection – Importance of Acknowledgements
Payment Factories
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ERP and Treasury: duplication of flowsInitiated within ERP(s)
Initiated by Treasury
Banks
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Initiated by Treasury
Banks
Deal Settlements
Centralizing Payments via TMS
Payment Hub (within TMS)
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Routing Payments from ERP
Details
• Payment files integrated from ERP to TMS
• Payments can be fully or partially approved in ERP
• TMS can add additional workflow (e.g. approvals) and will format files to bank requirements
Banks
Payment Hub (within TMS)
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Payment Routing Options
1) Blind routing• Payment files are pre-approved and pre-formatted to bank
requirements• TMS simply transmits payment files to the bank directly
2) Dynamic Routing
• Payments imported into TMS for format transformation, additional approvals and/or application of digital signatures
Routing Payments from ERP
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Create centralized process
–Required for POBO structure of IHB
–Can be a system, company, team
–POBO for IHB structures require intercompany agreements
–Creates flexibility of payments
– Increased visibility
– Increased scalability
Payment Factories
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Four options for payments:
1) International wire (simplest)
2) Locally Routed (less expensive payments but greater setup effort required)
3) Non-cash intercompany (requires an In-House Bank)
4) Non-bank payment (outsourced, peer-to-peer, etc.)
In-House Banks
In-House Banking offers additional benefits, including centralized visibility
into flows and risk exposures
Emerging Technologies: Blockchain
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What is Blockchain?
Blockchain is the technology that underlies the Bitcoin virtual currency
Distributed ledger of transactions – blocks in the chain are the records
Anonymous and secure
Indisputable, as the blocks refresh simultaneously for all blockchain participants
Potential treasury applications: payments, trade finance, confirmations
Blockchain
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Distributed Ledger Technology (a.k.a. Blockchain) potentially bypasses correspondent banking network to initiate peer-to-peer payments
Banks investigating ways to develop blockchains─ Want to leverage distributed ledgers within their technology stack
─ Potential negative: Blockchain becomes only a lower cost method (for banks) of processing payments using existing banking framework
FinTech is developing ways to bypass traditional banking─ Will spawn opportunities for payment outsourcing and reprocessing
─ Issues to be solved = ‘trust’ and counterparty risk
Blockchain for Payments
Summary
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1) Identify objectives• Cost reduction, Quicker payments, Increased
visibility, Improved Controls
2) Bank connectivity• Centralize connectivity• Pick appropriate channels to reach banks
3) Prevent Fraud & Cybercrime• Standardize and Centralize• Align with information security policies
4) Scale for Global Payments• Payment Factories and In-House Banking deliver
efficiency and visibility
Summary: Making Better Payments
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Further reading
eBook: The Business Case for a Payment Hub:Centralizing Corporate Payments to Improve Efficiency and Reduce FraudDownload www.kyriba.com/solutions/payments
Related Blog Posts:• Why treasury shouldn’t rely on banks for OFAC screening• Making payments less risky• One size doesn't fit all - tips for designing a global connectivity strategy
Questions?
Jason M. Dobbs
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Thanks for attending
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