From the March 2013 Special Report issue of Treasury & Risk magazine

Make Your Technology — Along with Your Payments Bank — Work for You

Bank of America Merrill Lynch

Technology is central to this. Used effectively, it can help a company to understand and minimize potential risks, such as the impact of currency risks on the business, while protecting supply chains. It can also be used to generate detailed payments information at critical junctures early in the process. This allows the treasury team to focus on managing — rather than discovering — transaction risk.

However, technology is costly and takes time to implement; therefore companies should educate themselves on the choices available and understand the imperative of strong coordination between their payments bank and technology provider. When adopting new technology, there are two guiding principles: First, it must deliver transparency; second, it must improve the efficiency of payment processes. Companies achieve this best when they review their goals with their workstation provider and payments bank together.

Goal 1: Connectivity

There are a number of technology options available that enable connectivity, so it helps to identify specific requirements in advance to choose the option best suited for the company. For example, are there specific security needs and comfort levels regarding authentication, job segregation and entitlements? Knowing these requirements will help to articulate the company’s needs when working with technology firms.

The trend in recent years has been towards private cloud-based models — although similar concepts have been around for some time under different names, such as hosted services or application service providers (ASPs). Private cloud-based models have significant advantages over public models because they offer faster deployment and accelerated development.

By understanding and considering their requirements in sufficient detail, companies can better choose between a public or private solution. For example, many corporations invest in an infrastructure that can support file-based payments as part of their strategy to improve efficiency. Others may want final approval of payments before they are released to maximize security. Historically these attributes might have been mutually exclusive, but not anymore. There are businesses today that have integrated approvals as part of file-based payment processes and they have accomplished this by fully discussing requirements such as these with their payments bank.

Goal 2: Payment integration

Communication standards such as ISO 20022, as determined by the Common Global Implementation (CGI) initiative, offer opportunities to lower costs and increase flexibility. However, there are implications for adoption. For example, some banks may not be as willing to provide support for an interoperable standard as for their own proprietary standard and, therefore, alternative support may be needed.

Another important consideration regarding payment integration is the consolidation of single and cross-currency payment types in a single file, which can significantly improve efficiency and lower costs. Since many regional and local banks may not be able to meet such requirements, it’s important to choose a payments bank that can.

Similarly, companies need to be certain that they will be able to leverage their existing contracts and spend to reach into countries where they operate or where they plan to expand — especially in emerging markets, which are necessarily harder to access. Corporations also need to consider whether their payments bank is focused on helping them to select the right payment types based on their country, currency or payment urgency requirements — from high value wire payments to low value ACH payments — so that they can achieve the highest payment efficiency.

Goal 3: Automation

Given the volatile macro-economic environment, managing risk is a priority for all companies — and is at the heart of the strategic role that treasury now plays. The use of technology allows companies to automate day-to-day tasks and generate detailed up-to-date information about their payments and exposure to risks.

There are numerous opportunities to improve automation by integrating bank information into a company’s treasury system. For more than a decade, straight-through processing (STP) has been a realizable goal for corporations. What now separates payments banks (and the technology solutions they offer) is not in delivering STP but in delivering information about a company’s failed payments. Exception handling — and the provision of data showing precisely the reasons for failure — is now the priority.

Automation can be used to generate detailed payments data and quantify exposure to risks. For example, it can not only acknowledge when payments are processed but also when a payment file has been received so that no payments are missed.

Goal 4: Reconciliation

Banks can all provide basic reporting information. However, smarter integration between your bank and treasury workstation can create a more dynamic reconciliation process — improving efficiency and minimizing manual intervention.

In order to move to a reconciliation approach, however, companies need sufficiently granular information about the status of payments, the exchange rates used and the return reasons of payments. They may also need to work with a bank that offers the functionality of a multi-channel approach — using online, file or mobile — to alert them to potential problems.

Effective reconciliation can significantly improve efficiency and reduce the need for time-consuming manual intervention in the payments process. As importantly, leaving the tactical management of day-to-day FX and payment issues to technology enables the business and the treasury to focus on the strategic issues that are increasingly important in today’s volatile environment.

Goal 5: Access to Ongoing Support

When implementing new technology, corporations need to understand the level of integration expertise and testing capabilities it will require. As the banking world increasingly moves towards interoperable standards such as ISO 20022 and bank agnostic solutions such as SWIFT, differentiation between banks on the basis of solutions has become more difficult. It is therefore essential to differentiate between banks based on their implementation expertise and the quality of their people and processes.

Support and expertise also comes in the form of knowledge about the global payments environment. Transacting in emerging markets can be tricky and may require the need to accommodate various regulations. How well the payments bank’s operations team and other experts are able to advise should factor into the overall consideration.


Leading banks have already invested in smart ideas to simplify global payments. Only by carefully reviewing their payment goals and requirements with their bank and technology providers can companies achieve best practices and effectively mitigate payment processing and currency-related risk.

Finally, if the company is having to build complex reporting around the bank’s limitations it might be time to up-tier the banking relationship, not the technology.


Tom Durkin
Global Head of Integrated Channel Solutions
Bank of America Merrill Lynch

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