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REDUCING THE PAIN OF PAYMENTSANALYSIS OF PRIMARY CHALLENGES & HOW TO OVERCOME THEM

CRAIG JEFFERYManaging Partner, Strategic Treasurer

ROGER COMINSSenior Product Manager, GTreasury

This presentation is provided by Strategic Treasurer and GTreasury.

WHAT.Analysis of key pain points for treasury regarding B2B payments and solutions for navigating them.

WHEN.Tuesday, April 30, 201911:00 AM – 12:00 PM EST

WHERE.Live online presentation. Replays at StrategicTreasurer.com

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ABOUT THE SPEAKERSGET TO KNOW TODAY’S

SUBJECT MATTER EXPERTS

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CRAIG JEFFERY, CCM, FLMI Craig Jeffery formed Strategic Treasurer LLC in 2004. His 30+ years of financial and treasury experience as a practitioner and as a consultant have uniquely qualified him to help organizations craft realistic goals and achieve significant benefits quickly.

ROGER COMINS, CTPRoger Comins is Senior Product Manager at GTreasury with responsibility for defining the product vision, prioritization, and delivery of the Payment Factory and Partner Ecosystem solutions. He is a CTP and SWIFT for Corporate Qualified Specialist.

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TOPICS OF DISCUSSION WHAT AREAS OF PAYMENTS WILL WE BE FOCUSING ON?

SECURITY, CONTROL, COMPLIANCE, & EFFICIENCY

The central areas where significant payments strain occurs are analyzed in more detail.

At what point in the process do inefficiencies around these areas arise?

ANALYSIS OF PRIMARY PAYMENT PAIN POINTS

As treasury executes payments, what areas cause the most headache?

What about the current environment is causing these pain points? How have treasury’s payment challenges evolved over time?

SNAPSHOT OF TREASURY’S PAYMENT CONSIDERATIONS

What are the various payment volumes, channels, accounts, currencies, etc. in use today?

How are these metrics changing over time? Are payment operations growing more or less complex?

OVERCOMING OBSTACLES VIA ENHANCED TECHNOLOGY

Analysis of specific technologies, workflows, and policies that treasury can implement to achieve greater efficiency and optimization across key areas of payments complexity.

APPLICATION & WRAP-UP

CASE STUDIES SURROUNDING PAYMENTS OPTIMIZATION, FINAL THOUGHTS & KEY TAKEAWAYS, Q&A

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CONTEXT: PAYMENTS IN TREASURY WHAT AREAS OF PAYMENTS EXECUTION & MANAGEMENT DOES TREASURY OVERSEE?

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FROM EXECUTION TO REPORTING: Treasury is charged with holistic oversight of the payments process. This includes payment generation and execution (often from multiple systems), as well as standard “middle-man” functions like message formatting, fraud prevention, and sanctions screening. Treasury must also ensure that timely bank reports are sent back for purposes of updating cash positions and verifying payment statuses.

TMS

ERP 1

Payroll / ERP 2

Payroll

AP / AR

Treasury

PAYMENT GENERATION PAYMENT PROCESSING, EXECUTION, & INFORMATION REPORTING BANK CONNECTIVITY

Sanctions Screening

Data Validation

Message formatting

Cash Visibility

Information Reporting

Fraud Prevention

Straight-Thru-Processing

Payment Automation

Data Aggregation

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POLLING QUESTION #1

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PRIMARY PAYMENT PAIN POINTS WHERE DOES THE MAJORITY OF COMPLEXITY ARISE?

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AREAS OF SIGNIFICANT STRAIN: While there are numerous challenges that can occur during the payments process, practitioners routinely list the above areas as their top obstacles. Confusion and delays resulting from inefficiencies across the payments process can create additional headaches in other areas, such as cash forecasting, bank account management, etc.

Data Validation & Sanctions Screening

Fraud & Security Concerns Visibility to Cash

Disparate / Legacy Technology Stacks

Bank Partners Corporate B2B Payments: Primary Challenges & Concerns

Payments & Information Reporting

TMS / ERP

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GLOBAL PAYMENTS COMPLEXITY HOW DO VARIOUS LAYERS OF PAYMENTS COMPLEXITY INTERTWINE?

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WHERE DOES PAYMENTS COMPLEXITY ORIGINATE? Depending on where an organization operates, payments complexity can arise at numerous junctures. Operations overseas can create compliance and visibility issues, and the use of multiple currencies and banks further exasperates treasury if numerous portals, messaging formats, and currencies are used. Treasury must also navigate security and fraud concerns, limited bandwidth from staff, and the potential use of multiple systems for generating and managing payments.

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POLLING QUESTION #2

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DISPARATE TECHNOLOGY STACKS LEGACY OR SILOED SYSTEMS CREATE INEFFICIENCIES: AN UNFILTERED VIEW OF COMPLEXITY

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Banks

• Portal 1• Portal 2

• Cash Positioning• Reporting• Payments• Debt (tranches only)

Banking Portals

$ $ $ $

$ $ $ $

$ $ $ $

$ $ $ $

Non-Regional Banks

Banking Platforms

Back-up (Banks B-E)

Primary Platform (Bank A)

System 1

SWIFT

NAMER Accounts

ACH/Check

Treasury Aggregator

$ $ $ $

Europe Payments

TMS – Global

• Primarily France • SEPA Payments• Other Payments

(Miscellaneous)

TMS – Europe

$ $ $ $

• Settlement • 6 Funding Wires • Weekly wires for

smoothing

I/C Netting

• Invoices

HBI Zone

Accounting

• Accounting Feeds

• Commercial Finance

ITC XLS

Finance Systems

FP&A 1

Logistics 1

ERP 1 (Global)

ERP 2 (Europe)

G/L (AP) System

Market Data Platform

PMT Files,Wires

Email Approved Wire Form Email

Core 360 Payables, imaging, indexing system

SFTP/ACH & CheckSAP Acct

PMT Hub

XLS Format

1 2 3 4

• Bank 1 • Bank 2

File Sent / Accounting

Wire feed to clear

Excel Feeds

Hedging

• Hedge tracking• Pain Point: Cannot

get wire data out of system

PMT Files,ACH & Check

• Global cash report• Monthly debt• Cash forecast - daily• Counterparty exposures• Input to CFO (Cash Flow

from Operations) report

Reports / working files

Web Ordering

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BANK CONNECTIVITY FINANCIAL MESSAGING FORMAT & NETWORK COMPLEXITY

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EDI 820 (Regional – U.S.)

MT 101 / SWIFT MT (Wires) – limited fields

ISO 20022 / XML (pain) + regional variations

Bank Proprietary – varies by institution

BAI 2 (Prior-day reporting)

MT 940 / SWIFT MT – limited fields

ISO 20022 / XML (camt) + regional variations

Bank Proprietary – varies by institution

Payment Generation Formats Information Reporting Formats

• How many formats do you use vs. how many would you like to use?

• Do these formats vary by region? Are there limitations around size, attachments, text, etc.?

• How is format conversion handled? Is it a manual process or automated?

• How often do exceptions occur or are messages lost? What is the process for handling these?

Sample Bank Connectivity Options

Ripple SWIFT SWIFT gpi Real-Time Payments (RTP) NACHA / Same Day ACH Bacs EBICS

Questions to Ask

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POLLING QUESTION #3

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PAYMENTS SECURITY SNAPSHOTRELEVANT METRICS

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Corporates: In the past year, I think that the threat-level of fraud has:

16%

57%

21%

4%

1%

2%

Significantly Increased

Increased

Stayed the Same

Decreased

Significantly Decreased

Unsure9%

11%

13%

15%

17%

18%

19%

19%

26%

30%

34%

43%

52%

71%

2%

2%

5%

3%

4%

2%

4%

5%

2%

6%

6%

7%

4%

6%

1%

1%

1%

2%

2%

0%

2%

1%

1%

1%

1%

2%

0%

2%

Bank mandate fraud

Wire fraud - system oriented

Ghost payroll / vendor fraud

Fraudulent refunds

Card fraud (P-card)

Ransomware (data encryption)

Card fraud (T&E)

ACH fraud

System-level fraud (System Takeover)

Check / cheque conversion fraud

Payment diversion (changing payment detailson an invoice)

Check / cheque forgery

Cyber fraud (Information / Data / Malware)

Business Email Compromise (BEC)

Corporates: Thinking of the past 12 months, label your company’s experiences with each of the following:

Some attempts, no success

Yes, we suffered a loss

Yes, we suffered a loss. At least one person was terminated or let go

Data Source: 2019 Strategic Treasurer & Bottomline Treasury Fraud & Controls Survey

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POLLING QUESTION #4

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SECURITY & FRAUD CONCERNS ENSURING COMPLETE COVERAGE ACROSS THE PAYMENTS PROCESS

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MULTIPLE POINTS OF EXPOSURE.

• There are multiple points or

junctures within the payments

process that can be exposed to

fraud.

• Some of these exposures occur

within an organization, at a bank or

3rd party, or while data and funds

are in transit.

• Companies must ensure that each

point in the payments process is

protected, and that all of the

parties with a stake in the process

have adequate security as well.

• Security is of vital importance for

the solutions that generate and

execute payments.

Aggregator or Payment Hub

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PAYMENTS COMPLIANCE SNAPSHOTRELEVANT METRICS

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22%

46%

27%

0%

0%

5%

Significantly higher

Higher

About the same

Lower

Significantly lower

Unsure

Corporates: With regard to historical norms, the current level of regulatory oversight and compliance requirements impacting treasury is:

19%

39%

23%

8%

1%

10%

The threat(s) of penalties associatedwith non-compliance

The time and effort spent updatingsystems / workflow to maintain

compliance

The ongoing financial cost associatedwith maintaining compliance

The fear that more regulations willcontinue to be introduced

Other

We are not overly worried aboutcompliance

Corporates: What is the MOST concerning aspect of the current regulatory environment?

Data Source: 2018 Strategic Treasurer Compliance Survey

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GLOBAL PAYMENTS COMPLIANCE MANAGING KYC, OFAC, & OTHER PAYMENTS COMPLIANCE REQUIREMENTS

AN ADDED LAYER OF ASSURANCE: While most (if not all) banks will screen payments as they pass through to ensure compliance with OFAC lists and other sanctions requirements and to verify message details, there are circumstances where a corporate can be held liable for a violation in this area. This is particularly true if the corporate does not have any established screening process in place. Cover this exposure by screening all incoming and outgoing payments and performing data validation checks to ensure messages are properly formatted.

TMS / AGGREGATOR / PAYMENT HUB

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LEVERAGING TECH TO ENHANCE PAYMENTSPAYMENTS AGGREGATION REDUCES STRAIN

STREAMLINING PAYMENTS THROUGH A CENTRALIZED HUB: While the above represents a simplified scenario, the implementation of a payments hub or aggregator for payments can provide treasury with simplified visibility and access to company-wide activity. Routing payments through a central platform allows treasury to manage activity through a single interface, resulting in greater visibility, exception management, and overall efficiency.

TMS

ERP 1

ERP 2

Payments Aggregator

Message Format

Translation

Data Aggregation

Information Reporting

STREAMLINING PAYMENTS: Processes are configured once and then automated. Formats are standardized, data is aggregated through a central portal, cash positions are updated in real-time or near real-time.

Siloed Payment Systems

FRAUD PREVENTION DATA VALIDATION / COMPLIANCE

Bank Partners

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LEVERAGING TECH TO ENHANCE PAYMENTSTRANSITIONING FROM MANUAL PROCESSES TO AUTOMATED WORKFLOWS

ELIMINATING MANUAL CHECKPOINTS: The implementation of a payments aggregator can help eliminate many of the manual processes that have bogged down organizations in the past. Functions like message format transformation, data validation, and even payment generation and execution can be performed automatically through an aggregator, with reporting delivered to the appropriate end system for further analysis and upkeep.

TMS / PAYMENTS HUB / AGGREGATOR

FRAUD PREVENTION DATA VALIDATION / COMPLIANCE

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PAYMENTS SUCCESS STORIESCORPORATE CASE STUDY #1

About the Client: Founded in 1919, Baird is an international financial services firm with $211 billion in client assets. They provide private wealth management, institutional asset management, private equity, investment banking, and capital markets services to clients across the United States, Europe, and Asia. Baird has nearly 3,500 employees across 100 locations globally.

The Challenge: Baird wanted their TMS system to take data as it comes in from the bank and parse it out to identify their client account number among the various strings of digits that come through a BAI file.The best way to do this was through APIs, which allow various systems to send data back and forth to one another, and follow the same principles used in Robotic Processing Automation (RPA).

The Solution: Standard APIs allowed the TMS to speak with Baird’s front and back office systems, and allowed the back office system to tell the TMS that the number it is sending through is good. Any time that there isn't a good match, a similar message will be sent back to the TMS and those payments will get pushed to an exception queue. The treasury team can then look at those payments to see what is missing.

Key Results Increase payment

volume without adding headcount.

Automation of the G/L posting process

Alexander Hamilton Treasury & Risk Award Recipient

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PAYMENTS SUCCESS STORIESCORPORATE CASE STUDY #2

About the Client: A global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. Client operates in more than 460 locations across 85 countries, with over 100,000 customers. The company employs 18,500 personnel and 2018 annual revenues were nearly $30 billion.

The Challenge: Like other corporations vulnerable to imposter scams and additional instances of fraud, the client set out to fortify its payments operations. As part of a global implementation, treasury centralized operations across Europe. There were three main objectives: bank rationalization, adding visibility and controls to payment processing, and automating file transmission.

The Solution: The client worked with TMS provider GTreasury to develop a solution that created connectivity between their largest enterprise resource planning (ERP) systems and GTreasury. With this, AP files that have undergone the rigorous controls managed by AP are now automatically sent through an encrypted file to GTreasury to be forwarded on to the bank.

Key Results 24/7 delivery of

payment files Effective bank

rationalization Alignment of global

payment controls and account visibility

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PUTTING IT ALL TOGETHER WHAT STEPS SHOULD TREASURY CONSIDER IN ORDER TO OPTIMIZE THEIR PAYMENT WORKFLOWS?

PAYMENT CHALLENGES ARE DIVERSE

Treasury experiences payments challenges across a variety of fronts.

Depending on each organization’s structure or workflows, the primary challenges can vary.

Common pain points include disparate technology, complex message formatting, security concerns, bank connectivity, etc.

GLOBALIZATION CREATES FURTHER COMPLEXITY

As organizations expand, the payments complexity that ensues creates further challenges.

Adding new countries, currencies, banks, accounts, connections, formats, etc. will create additional strain, especially if these workflows are not aggregated through a central solution.

STRATEGIC TECH ADOPTION ELIMINATES BARRIERS

The best strategy for reducing complexity is to adopt technology that can eliminate manual or redundant processes.

Because improper use or adoption of tech can also be a challenge, be strategic with your investments. Effective tech deployments will significantly reduce pain points.

PBE INTENTIONAL WITH WHERE AND HOW YOU SPEND

There is no “one-size-fits-all” solution that can immediately solve all your problems.

Organizations must also consider “future-proofing” their tech stack and recognize that shifting technologies will impact their architecture.

Invest in technology that not only solves your current challenges, but that can also drive you into the future.

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LET’S CONNECT.DON’T LET THE LEARNING END HERE…CONTACT US WITH ANY FUTURE QUESTIONS.

STRATEGIC TREASURER

Craig A. JefferyManaging Partner

craig@strategictreasurer.com

+1 678.466.2222

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Thank you for your interest in this presentation and for allowing us to support you in your professional development. Strategic Treasurer and our partners believe in the value of continued education and are committed to providing quality resources that keep you well informed.

GTREASURY

Roger CominsSenior Product Manager

marketing@gtreasury.com

+1 847.847.3706

Want More Insight on Payments?

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