One of the hottest topics in finance and treasury continues tobe the payment—how to transfer funds more cheaply, quickly, andsafely. This conversation becomes even more interesting when thetopic is global payments, since cross-border payments remain costlyand inefficient in every region of the world.

As companies increase their global reach, cross-border paymentsbecome a necessity, stimulating demand for better paymentsolutions. In the coming years, the technologies and processessupporting the global payments space will be transformed bydigitization, artificial intelligence, and blockchains. Existingcapabilities, such as ISO 20022 XML and SWIFT GPI, can be expectedto continue yielding benefits for multinational financeprofessionals, as well.

Let's take a look at the current state of these innovations.

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SEPA and XML

XML messaging in ISO 20022 format is not new to treasury; thesemessages are widely used in treasury reporting and payments,including for credits and debits in the Single Euro Payments Area (SEPA). Still, ISO20022 has room to grow as a global payment messaging standard.

Within North America, EDI and NACHA payment formats remainpopular. This is fine for transacting within North America, butdifferent formats are required for cross-border payments as well asfor sending local payments in other countries. The result isthat a global treasury must support a multitude of paymentformats—but this could be avoided if treasury were to harmonize allpayments to XML PAIN (based on ISO 20022). Some enterprise resourceplanning (ERP) and treasury management systems support XML PAIN(and XML CAMT for cash management), simplifying theimplementation and ongoing support of treasury and paymentstechnology.

Regardless of whether payments or other treasury data istransmitted via FTP, SWIFT, EBICS, or API to an organization's banks, convergence to XML messagingformats is fundamental to improving payment efficiency. LeveragingXML ISO 20022 standards is akin to communicating in a common globallanguage.

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APIs

Application programming interfaces, or APIs, have existed forwell over a decade, but they are relatively new to treasury. InNorth America, corporate treasury and ERP systems typically rely onFTP host-to-host connections to receive bank reporting and forstraight-through processing of paymenttransactions. Companies with global banking relationships typicallyuse SWIFT to connect.

APIs offer an alternative to FTP connections, providing a morerobust interface that shares data in closer to real time. APIs willalso enable those banks which are currently reachable only viaSWIFT to offer their business customers choices on how to connectwith their bank platforms. This may provide corporate treasuryteams more scalability in how they connect to their banks, as wellas potentially reducing connectivity costs because development ofbank interfaces will be more standardized.

But the big win here is the potential for real-time bankconnectivity. Using APIs, banks will be able to offer two primarybenefits:

• Instant communication with treasury management and ERP systems,for both processing of payments and receiving paymentconfirmations.
• A wider array of payment choices, including services such asZelle and Paypal along with blockchain providers such as Ripple.

This latter development will make treasury management systemsand banking portals into multi-channel payment platforms, enablinga true payment factory experience for treasury, finance, and sharedservices teams.

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Real-Time Payments

Instant payments, delivered and settled in real-time, alreadyexist in many countries around the world. In the consumer space,real-time payments enable us to send money to the bank accounts offriends and family via apps on our phones. In Kenya, mobile moneytransfer service M-Pesa has turned cell phone networks into awidely used payments medium. The service's digital wallets canvirtually store value without the need for a bank account.

In the business community, particularly for business-to-businesspayments, adoption of similar technologies has been slower. Onlythis year have real-time payments started to work their wayinto corporate treasury, with formats such as SEPAInst (forSEPA-formatted instant payments over networks such as TIPS in theEurozone) and the The Clearing House's Real Time Payments network in the UnitedStates.

Unfortunately, these instantpayment initiatives are very limiting; they are designed forlow-value payments only, and they are domestic in nature.Cross-border real-time payments remain on the outside looking inwhen it comes to instant settlements. However, twoorganizations—SWIFT and Ripple—have set their sights on solving thecross-border RTP issue.

In 2017, SWIFT introduced its global payments initiative, or GPI, which wasdesigned to speed up the settlement of cross-border payments tosame-day, or even faster, settlement. The initiative alsointroduced a GPI tracker, which delivers better visibility intoexactly where each payment is between the initiating, intermediary,and beneficiary banks. GPI also improved transparency into the costof cross-border payments, a sore point for many treasurers who werepreviously unable to achieve cost predictability when sending apayment internationally.

Despite all these achievements, SWIFT GPI does not actuallydeliver real-time payments, which is why SWIFT has simultaneouslyworked with governmental and central bank authorities to supportconnectivity to domestic real-time payment networks. By connectingSWIFTNet to multiple domestic real-time payment networks around theworld, SWIFT proposes to build bridges between localized instantpayment schemes, effectively creating a global web of real-timepayments connectivity. The strategy shows promise and has thepotential to offer significant advantages to corporate CFOs andtreasurers.

Ripple, on the other hand, is one of the few distributed-ledger(or blockchain) settlement systems that is specifically targetingcorporate payments. The platform's creators see cryptocurrenciesand distributed-ledger technologies as a means of transferringfunds more efficiently. While many think of Ripple as a non-bankpayment channel, the organization also offers a bank-to-banktechnology that is purely an alternative to SWIFT for interbankpayments.

One of Ripple's proposed services uses a cryptocurrency as asource of liquidity which enables the company to offer lessexpensive (or free) payments alongside a promised real-timesettlement of funds in fiat currencies. Users of the service arenot required to actually hold a balance in the cryptocurrency(Ripple manages the entire transfer), which eliminates a concern ofmany corporate treasurers that using a blockchain-based paymentsolution exposes them to cryptocurrency price risk. Ripple hasother models as well—services that don't use cryptocurrencies atall—which further points to the idea that it is the blockchaintechnology, rather than cryptocurrencies, that offers a moreefficient alternative to the correspondent banking model.

There remains work to be done, as the blockchain anddistributed-ledger proofs of concept must evolve into paymentnetworks that can support mainstream transaction volumes. The useof cryptocurrencies must also be ironed out, given the price volatility of digital currencies and the lack ofliquidity in these “sources of liquidity.” However, the earlyversions of distributed-ledger systems do demonstrate thesetechnologies' potential to develop into an alternative paymentchannel that may help corporates solve the elusive cross-border,real-time payment conundrum.

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Artificial Intelligence

Robotic process automation (RPA), powered by artificial intelligence, will soon be a realityin finance and treasury. While robotic software applications forfinance will initially target labor-intensive treasury processessuch as reconciliations and generation of accounting entries, thereare applications for payments as well.

Treasury bots will allow a full digitization of the paymentsworkflow, including:

• digital signatures and real-time notifications of workflowsteps;
• electronic documents and authorizations;
• verification of identity, payment policies, and bank accounts;and
• instant-alert workflows if payments remain unconfirmed or arerejected.

Further, robotic software can improve protections against fraudand unauthorized payments via capabilities such as:

• digitization and mapping of the organization's paymentpolicy;
• payment channel optimization;
• fully automated payment screening, not just against globalsanctions lists but also against internal payment policies andrules; and
• evolution of fraud-detection rules by using machine learningalgorithms to identify exceptions and to generate new rules withouthuman input.

While many of these individual capabilities already exist withinsome treasury management systems and specialized paymentapplications, a solution that incorporates all these automatedworkflow elements is the next step in payments technology. Acomplete digitization of payments is necessary to eliminate manualwork and ensure consistency in applying internal risk governance tocorporate payments, which reduces risks of decentralized anduncontrolled payment workflows. As the frequency of payments-fraud incidents continues to rise,CFOs and treasurers must digitize all corporate payments to protecttheir data, money—and jobs.

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The Future of Payments

The future will feature quicker and cheaper payments that aremore resistant to fraud. Although multiple payment technologies arecurrently competing in areas such as cross-border payments, thenext few years promise real-time connectivity between banks andinternal treasury or ERP systems; real-time delivery and settlementof payments, both domestically and internationally; and a moreautomated, robotic workflow that reduces the internal costs ofmanaging payments while further improving audit and controls.

Bob Stark is the vicepresident of strategy for Kyriba. In this role, he is responsiblefor that company's global product strategy and market development.Stark is a 20-year veteran of the treasury technology industry,having served in multiple roles at Wall Street Systems, ThomsonReuters, and Selkirk Financial Technologies. He is a regularspeaker at treasury conferences, including AFP National,EuroFinance, and regional AFP events.