making better payments: best practices for treasury teams

Making Better PaymentsBest Practices for Treasury Teams

Jason Dobbs

Bob Stark

© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 2

Jason Dobbs Manager

Actualize Consulting

Bob Stark Vice President, Strategy

Kyriba Corporation

Today’s Presenters


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


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


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


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


Bank Connectivity Options

1

2

3

Host to Host Connections

Domestic/Regional Networks

SWIFT Concentrator Service

SWIFT Alliance Lite2

SWIFTNet Service Bureau

4

5


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


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


Treasury Your banks

Payment Initiation

Payment Transmission

Fraud Prevention – Payments


Exposure Points: Must be protected

Each exposure point opportunity for cybercrime Exceptions to standardized process opportunity Good news: there are good ways to protect!


Treasury Your banks

Payment Initiation



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



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)


Your banks



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)


• 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


ERP and Treasury: duplication of flowsInitiated within ERP(s)

Initiated by Treasury

Banks


Initiated by Treasury

Banks

Deal Settlements

Centralizing Payments via TMS

Payment Hub (within TMS)


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)


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


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


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


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


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

29© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 29

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


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

http://www.kyriba.com/solutions/payments

http://www.kyriba.com/blog/bob-stark/why-treasury-shouldnt-rely-banks-ofac-screening

http://www.kyriba.com/blog/bob-stark/making-payments-less-risky

http://www.kyriba.com/blog/bob-stark/one-size-doesnt-fit-all-tips-designing-global-connectivity-strategy

Questions?

Bob [email protected]

Jason M. Dobbs

[email protected]

mailto:[email protected]

mailto:[email protected]


Thanks for attending

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