From the April/May 2012 issue of Treasury & Risk magazine

Agile Payments

Efficiency remains a key goal in the area of payments – but as treasurers continue to focus on counterparty risk as well as straight-through processing and straight-through reconciliation, the ability to adapt the company’s payments strategy to changing conditions has become a greater priority.

For multinational corporations, having a robust payments infrastructure is important – but in today’s volatile environment, treasurers are increasingly looking to take their payments one step further. While visibility, efficiency and automation continue to be core objectives, companies also want a payments infrastructure which is flexible enough to adapt quickly and seamlessly to changing conditions – a quality that can best be described as ‘agility’.

At a high level, an agile strategy is one that enables the company to respond to changing conditions – whether external or internal – quickly, efficiently and smoothly. Agility can be a competitive advantage, particularly when faced with uncertainty. In the current challenging economic climate, this quality is particularly useful: if the road ahead is full of hairpin turns, would you rather be driving a juggernaut or a motorbike?

Meanwhile, whereas companies using multiple proprietary banking systems must contend with a proliferation of payment messages and formats, a bank neutral approach – typically SWIFT connectivity – offers companies a way to standardize these.

Companies looking to connect to SWIFT must choose between setting up a direct connection to SWIFT in-house or adopting a service bureau approach. The latter may be a more viable option for companies lacking the technology resources required for in-house connectivity. Either way, an important aspect of the project is integrating SWIFT to the company’s ERP system. By connecting the ERP system directly to SWIFT, companies can benefit from straight-through processing (STP) across their payment activities, from initiating and confirming payments to checking the status of specific transactions.

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