messaging & paymentsmessaging & payments some payment types & methods 7 banks • low...

MESSAGING & PAYMENTS

Proprietary & Confidential: Strategic Treasurer © 2017

January 2017

Co-Presented By:


Messaging & Payments

About the Presenters

2

Today’s Co-Presenter:

Strategic Treasurer

Strategic Treasurer is a consulting firm advising on treasury, financial risk and risk technology issues.

Experience: 30 years – 12 years leading ST - serving corporate, government, education and not-for-profit institutions

Today’s Co-Presenter:

Jacob Aruldhas

ECS Fin produces innovative software solutions for managing messages and automating transaction processing workflows.

Founded in 1999 as a consulting firm, ECS Fin advised many Fortune 100 companies, coordinating business divisions and technology groups in the areas of enterprise messaging, transaction processing, workflow automation and process optimization

http://strategictreasurer.com/?utm_source=proposal&utm_medium=pdf&utm_campaign=bellin-2016


Overview

3


Context: Complexity from Global Business

Initiating Payments Globally

Complexity and Cost

Business Cases

• Business Case mindset• Corporate Treasury Business Case• Bank Business Case




Increased Complexity

4

N

...

3

2

N NNNNN

..................

3 3 3 3 3 3

222222

1 1 1 1 1 11

Hyper Complexity

Highly Complex

Complex

Simple

Back Office Systems

Paper Electronics

Connections Banks Currencies Countries Payment Types &

Settlement

Organizational growth, acquisitions and global expansion quickly moves and organizational environment from: simple, to complex to

hyper-complexity.



Complexity of Treasury

While growing slightly, treasury is still

thinly staffed.

More centralized = increase in size of corporate

treasury departments

60% of treasury teams are comprised of under

6 people and 70% of treasury departments are

either static or decreasing in size.

Organizations are realizing the importance of a

well-structured treasury department and are

understanding the benefits associated with

adopting a centralized structure, versus a

regional or segmented structure. In addition,

the increase in the size of treasury

departments shows that a greater emphasis is

being placed on treasury as a whole, especially

as globalization increases and the complexity

and risk experienced by corporates with

regards to regulatory restrictions, security and

market volatility grows.

Source: 2016 Liquidity Risk Survey

How large is your global treasury organization, including analysts?

No Change Increased Decreased

How has staffing in your treasury department changed over the past two years?

38%

22%

12%16%

12%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

56%

28%

15%

0%

10%

20%

30%

40%

50%

60%

<3 4-6 7-10 11-25 >25




Expectations for Visibility and Control


41%

14%

27%

20%

44%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Treasury Invoicing Payments Cash

Reporting

None

We intend to make significant information

technology investments in the next year in

the following areas: 2014-2016

2014 2015 2016

18%

34%

16%

16%

20%

46%

0% 10% 20% 30% 40% 50% 60%

Financial Risk Management

Bank Account Management

FX Exposure Identification

FX Trading and Settlement

Reconciliation

None

We intend to make significant information

technology investments in the next year in

the following areas: (check all that apply)

2015-2016

2015 2016

2014-2016 Cash Forecasting & Visibility Survey

*Multiple Choice/Multiple Answer Question: Answers will not add up to 100%




Some Payment Types & Methods

7

Banks• Low Amount Domestic• High Amount Domestic• International Payments• Real-time Payments

Corporates• Integrated Payables• Integrated Receivables

Banks• Accounting Entries• Check Payments• ACH• RTGS• SWIFT• Real-Time ACH

Corporates• Portals• File Services• Messaging




Defining the Payment Cycle: Corporates

8

• Receive Invoices

• Create Instructions (Manual Entry, Batch Load, Real-time Load)

• Match against invoices, attach documents as needed

• Create proprietary/NACHA/ISO15022/ISO20022 Messages

• Create File Header/Batch Header as needed

• Validate Messages/Files

• Internal Controls – Approvals, Release Times

• Release / Transmit

• Receive and Process Acknowledgement

• Receive and Process Confirms

• Receive and Process Settlement Messages

• Receive and Process Returns (Rejections from Banks)

• Event Management and Notifications

• Exception Handling Interfaces

A Payment Instruction may go through the following stages. Engagement and sequence of validation rules, business rules and

processing rules depends on specific type, context and purpose of each payment instruction.

http://strategictreasurer.com/?utm_source=proposal&utm_medium=pdf&utm_campaign=global-payments-2016



Defining the Payment Cycle: Banks

9

• Inception (Manual Entry, Batch Load, Real-time Load)

• Persistence

• Identify, Assign Context

• Compliance Check

• Duplicate Check

• Process Definition

• Create NACHA/ISO15022/ISO20022 Messages

• Groups by Receiving Bank

• Create File Header/Batch Header as needed

• Validate Messages/Files

• Internal Controls – Approvals, Release Times

• Release / Transmit

• Receive and Process Acknowledgement

• Receive and Process Confirms

• Receive and Process Settlement Messages

• Generate Statements for Corporates

• Receive and Process Returns (Rejections from Receiver)

• Proprietary messages to internal systems

• Event Management and Notifications

• Exception Handling Interfaces




Accountability, Management & Governance

10

Banks

• Statement Reconciliation• System Reconciliation• Cash Management• Data Governance• Reports

Corporates

• Expense Reconciliation• Income Reconciliation• Invoice Matching• Income Receipt Matching




Existing Environments

11

• Disparate connections

• Outdated technologies

• Multiple security mechanisms

• Low Redundancies

• Low SLAs




Challenges for Treasury Operations

• Multitude of connections, systems & processes to utilize, maintain & control

• Lack of centralized visibility into cash and payment file flows

• Lack of standardized payments processes and STP

• Inefficient and error-prone manual processes

• Issue identification and slower resolution / Lack of non-repudiation

• Time and complexity of compliance – auditing payment processes and system users




Initiating Payments Globally

13

£

¥$

€

€

₽

$

R$

₹

Pain (ISO 2022) SWIFT MT (ISO 15022) EDI Proprietary

Camt (ISO 20022) SWIFT MT (ISO 15022) BAI Proprietary




Format Conversion

142016 Strategic Treasurer Treasury Aggregator Analyst Report

Why should we dedicate resources to convert formats?




Information Reporting Cycle

15

2016 Strategic Treasurer Treasury Aggregator Analyst Report




Typical Messaging Environment

16

Positions CA

Fed Wires AZ

Foreign Exchange, TX

IT, IX

FIX Connector

Compliance

Data Center, MO

Accounting

Gateway 3

Reconciliation

Syndications, IL

SAA/SAG

SAA/SAG

Gateway 6

Data Center, NY

Gateway 1

Gateway 2

Securities Lending, NJ

Gateway 5

Institutional Transfers, TX

OFAC

Corporate Actions, PA

IT, NY

Trading Floor, NY

DTC

Reuters

Telerate

Bloomberg

Gateway 4

SWIFT




Streamlining for Control and Accountability

17




1 Service, Multiple Connections, Protocols & Formats

• One service for all external connections

• Data can feed to multiple systems

• Treasury: Reporting Automation

• Bank Reconciliation: ERP

• Accept multiple file formats

• Provide file transformation

• Process payments as well




Fragmented Payment Processing Environment

19

Data Mapping

Data Mapping

Data Mapping

SWIFT

ACH

RTGS

Data Vendors

Sou

rce

Syst

ems

SWIFT Payments

ACH Payments

RTGS Payments

World Check

Validations

OFAC

RTGS Adaptor

ACH Adaptor

SAASNL/SAG

950/940Recon

Cash Management

Reports

Statement Management

Data Mapping

Data Mapping

Data Mapping



Optimized Payment Processing Environment

20

Interface & Dashboards

Schedules Audit Trails Routing Reports Alerts Repairs Compliance

Trading Systems CRM Accounting Other internal source systems

Dat

a G

over

nan

ce &

Rep

orts

Web

En

able

d A

cces

s fo

r O

pera

tion

sNorth America

South America

Europe

Far East

Australia

Branches Exte

rnal

En

titi

es

S

ecu

red

Con

nec

tion

Payment Gateway

Application Integration

ACH Payments

SWIFT Payments

Real-Time Payments

Compliance

Reconciliation

Cash Management

RTGS Payments

SWIFT

FIX

ETC

Exchanges

Custodians

Brokers

Clearing

Web Portals

Many systems making payments globally demands a higher level of management and cost to support each system.




Returns/Exception Management

Process should ideally be handled in a message database

Ability to fix the format of incoming/outgoing messages

Update reference data and reprocess

Cancel and/or recreate message

Space should give users ability to choose a solution




Bank Business Case

22

AdaptorsFiles

MQ SeriesWeb-services

EmailTCP/IP

ProcessReceivePersistIdentify

Set ContextSet ChannelSet PrioritiesSet Category

Set TypeSet Purpose

AcceptanceComplianceDuplicate?Mandatory

Items?

ReconciliationAcks

ConfirmsStatements

DataGovernance

Standby

Source System 1

Source System 2

Source System 3

Source System 4

Source System 5

ACH ModuleApply Rules A1Apply Rules A2Apply Rules A3

Real-time ACHApply Rules D1Apply Rules D2Apply Rules D3

SWIFT ModuleApply Rules C1Apply Rules C2Apply Rules C3

RTGS ModuleApply Rules B1Apply Rules B2Apply Rules B3

AdaptorsACH

RT ACHRTGSSWIFT

ProcessValidateTransmit

Ack Recon

ACH

RTGS

SWIFT

RT ACH

ProprietaryInstructions





StandardInstructions







Corporate Business Case

23




Buy-Side Firm Business Case

24

Interface & Dashboards

Schedules Audit Trails Routing Reports Alerts Repairs Compliance

Trading Systems CRM Accounting Other internal source systems D

ata

Gov

ern

ance

& R

epor

ts

Web

En

able

d A

cces

s fo

r O

pera

tion

sNorth America

South America

Europe

Far East

Australia

Branches Exte

rnal

En

titi

es

S

ecur

ed C

onn

ecti

on

MessageGateway

Application Integration

SSI Management

Money Transfer

Income Recon

Statement Recon

Cash and Liquidity

Reporting

Trade Settlement

SWIFT

FIX

ETC

Exchanges

Custodians

Brokers

Clearing

Web Portals




Conclusion

25

Complexity and cost of business messages and payments continues to increase and must be managed.

We need to understand the process for all elements that are involved (messages, systems, stakeholders, organization).

Ensure flexibility and design: Scalability and Flexibility



Contact Information

26

Strategic Treasurer was founded in 2004 by Craig Jeffery, a financial expert and trusted advisor to executive treasury teams since the early 1980’s. Partners and associates of Strategic Treasurer span the US, the UK, and continental Europe.

Atlanta Office Headquarters

525 Westpark Drive, Suite 130

Peachtree City, GA 30269

Website: strategictreasurer.com

Craig JefferyManaging Partner

Email: [email protected]

Direct: +1 678.466-2237

Jacob AruldhasCEO

Email: [email protected]

Direct:+1 914 661 2563

New York OfficeHeadquarters

50 Main Street, Suite 1000

White Plains, NY 10606

Website: strategictreasurer.com


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