Implementing a Global Enterprise-scale Payment Hub: The Challenges and Business Impacts
This article is written by Nomentia With complex global operations, decentralized ways of working across treasury, finance, and accounting, a lack of process automation, and security concerns on the rise, you may be considering a payment hub for your enterprise. When juggling multiple priorities and all the operational tasks already stretching your organization, the implementation project may seem dreadful. It’s not a secret: Setting up a payment hub can be heavy-duty. Depending on the complexity of the case (number of entities enrolled, in which countries you roll it out, how many banks and bank accounts you have, whether you connect multiple ERPs, etc.), it may take anywhere from several days to several years. Nevertheless, if it’s done right, the payment hub can have significant business impacts—not just in improving ways of working but also in realizing cost savings. To explain how to set up a global payment hub on an enterprise scale, we will go through the main challenges, the project team and its setup, ways of working, lessons learned from our customers, and the benefits and business impact after the successful implementation. Before the start: the challenges you’ll face during a payment hub implementation All payment hub projects are different. While we have been working on small projects where we only connect one ERP and a few banks, and it only takes days to a few weeks, we have also been delivering large-scale projects for enterprises that could take even as long as one to two years of commitment. Whenever we undertake a massive project, both parties understand that it’s a long commitment and, therefore, a forward-looking project plan is essential. The challenges of implementing a payment hub are unique for each organization, but in our example, we will focus on the complex, enterprise-scale implementations where clients were dedicated to creating a payment factory within their organization. Keep reading even if you are implementing a less complicated solution, as the article gives some great insights for planning any payment hub implementation. 1. Global operations make the implementation complex Many Nomentia clients have undertaken massive payment hub projects with operations in over 100 countries. Even just operating in tens of countries has its challenges. If you must implement the payment solution in countries with strict legislation, like China or India, having a good implementation partner with experience is an advantage. Why do global operations make implementation complicated? One reason is integrating ERPs, financial systems, and banks. The other reason is more abstract: people generally don’t like change. It’s not unusual for local entities to have their own operational procedures; the process can also often be highly manual, if not entirely manual. In some cases, an integration between the internal system and the bank, like an ERP, may exist to execute payments automatically. Still, on a group level, you may have very little visibility on this. In addition to having localized operational procedures and local systems, each country and entity may have its own banking partner. Later on, we will discuss how working with many banks can complicate implementation. Moving away from the current ways of working comes as a big shock for many, even though you are trying to implement improvements that can benefit everyone. If you want to implement an immediately successful project, you must involve all necessary stakeholders in managing the change and getting the essential project-planning information. 2. Scattered system landscape Based on our first challenge, you may have already guessed the next one: A scattered system landscape can make the implementation project complex. If you have acquired new units from different regions, it’s possible that instead of running the business on one central ERP system, you have several ones used locally. Payment files may also be generated in other systems. If system consolidation is not currently possible, you should at least connect all source systems to the selected payment hub, allowing the payment files to be automatically forwarded to the correct bank. Having a scattered system landscape naturally poses a few challenges: 3. Preparing guidelines & change management: Communication is as important as the technical setup In an enterprise-scale project where tens of entities are involved, having good change management practices, ways of communication, and clear guidelines will set you up for success. Involve your teams The new payment hub will impact how hundreds of people work daily; at worst, moving from manual processes or local ways of working to a centralized, automated approach could be something people may even fear or be concerned about. Communicating how your operations will change positively when you introduce the new processes will help people perform their jobs well and make them feel involved in the project from day one. Your colleagues can also be great allies when you need to understand how to work with different banks globally. Choose the project team and include people with different backgrounds Choosing your team is the most essential part of the project! You don’t need a big team, but you should include people who understand your financial processes, how they work now, and how they should work when you automate them. Also, involve an excellent project manager to communicate with the payment hub provider, keep the project on track, and hold people accountable for the progress. Having one or two IT resources can also be helpful throughout the project. As you deal with integrations, although the payment hub vendor usually takes care of most of the integration work, your IT team members will still need to help the vendor, participate in the end-to-end testing process, handle master data management, and provide all the necessary technical details. Set up clear ways of working It’s also a good idea to clearly outline the ways of working for your project team. Identify the core team, the communication channels for sending each other instant messages and following the progress, your meeting cadence, and where you will share information with the larger group. 4. Connecting with the banks ‘Not all banks are the ‘same’—this is some of the best advice for when you start a payment hub project. Before you…
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Frontiers of Banking: Navigating APIs & PSD2 Protocols
This article is written by Cobase In the modern corporate world, the efficiency of banking operations depends heavily on the communication protocols used to connect with financial institutions. In this extensive comparison, we delve into the nuances of various protocols like SWIFT FIN, SWIFT FileAct, Host-to-Host, EBICS (versions 2.4, 2.5, and 3.0), APIs, and PSD2, examining their strengths and weaknesses. In this blog post, we will focus on APIs & PSD2. APIs APIs, short for Application Programming Interface, play a vital role in today’s interconnected digital ecosystem. They enable different software systems to communicate with each other seamlessly and efficiently. Within the banking context, APIs provide a mechanism for banks to expose their services to corporations, facilitating direct integration with corporate systems. One of the main strengths of APIs lies in their ability to provide real-time or near-real-time access to banking services. Corporates can make API calls to check account balances, initiate payments, or fetch transaction history, receiving immediate responses. This allows corporations to have an accurate, up-to-the-minute view of their financial position and to execute transactions without delay. APIs also provide a high level of flexibility and customization. They can support a wide range of services and functionality, depending on the banks’ chosen level of exposure. Moreover, APIs can be designed to handle complex banking operations, like bulk payments or multi-step approval workflows, offering corporations the flexibility to tailor banking interactions to their specific needs. Another significant benefit of APIs is their potential for improving operational efficiency. By integrating directly with corporate systems, they can help automate banking processes, reducing manual intervention and associated errors. However, the use of APIs also brings certain challenges. A key concern is the technical complexity associated with their implementation. Each interface has its own specific requirements in terms of the request format, response handling, error handling, etc. Corporates need to ensure their systems are compatible with these requirements, which often demand significant IT effort and expertise. Security is another critical consideration. APIs essentially provide a gateway into the bank’s system, and improper implementation can lead to significant security vulnerabilities. Corporates need to ensure robust security measures, such as encryption, authentication, and access controls, are in place when using them. Moreover, the availability and functionality of APIs are entirely dependent on the bank. Not all banks may offer APIs, and even among those that do, the range of services exposed via APIs can vary widely. In conclusion, APIs offer a powerful and flexible mechanism for corporations to interact directly with their banks, providing real-time access to banking services and the potential for improved operational efficiency. However, corporations need to navigate the challenges of technical complexity, security, and variability in bank API offerings to harness the full potential of APIs for banking communication. Strengths: Weaknesses: PSD2 The Second Payment Services Directive (PSD2) is a transformative regulation implemented by the European Union to foster innovation and competition within the financial sector. PSD2 mandates that banks provide third-party providers (TPPs) with access to their customers’ accounts through APIs, provided the customer has given explicit consent. This is often referred to as ‘open banking’. This directive effectively shifts the control of financial data from banks to consumers, empowering them to use third-party services for managing their finances. For corporations, PSD2 presents an exciting opportunity to directly access banking services and improve financial operations. One of the main strengths of PSD2 is that it paves the way for real-time access to banking services. Corporates can utilize APIs to fetch account information, initiate payments, and access other banking services in real-time. This not only enhances visibility into their financial standing but also speeds up transactions and decision-making processes. Another significant advantage of PSD2 is its potential for innovation. By opening up banking data, PSD2 has spurred the development of new financial services and solutions. This can lead to more efficient banking processes, cost savings, and better financial management. PSD2 also lays down stringent security measures for financial transactions. It introduces strong customer authentication (SCA) requirements, which mandate two-factor authentication for most electronic payments, thereby reducing the risk of fraudulent transactions. Despite its potential benefits, there are also associated challenges. One of the major concerns is data privacy and security. While the regulation has strict guidelines for customer authentication and data protection, sharing financial data with third parties inevitably increases the risk of data breaches. Furthermore, the technical implementation of PSD2 APIs can be complex. Corporates need to ensure that their systems are compatible with the APIs of different banks, each of which might have unique requirements. Also, PSD2 is applicable only to banks operating within the European Economic Area (EEA). Corporates with banking relationships outside of the EEA might not be able to leverage the benefits of PSD2 with those banks. PSD2 is a ground-breaking regulation that has the potential to significantly improve the way corporates interact with their banks. The benefits of real-time access to banking services and the potential for innovative financial solutions must be weighed against the challenges of data security, technical complexity, and geographical limitations. Strengths: Weaknesses: Unique challenges While all these protocols offer diverse strengths, they also come with their unique challenges. Corporates must carefully assess their specific requirements, technical capabilities, security needs, and the geographical scope of their banking relationships before choosing the most suitable protocol. Consulting with financial and IT experts can help inform this crucial decision. Navigating the labyrinth of banking protocols can be daunting, but there’s a solution that simplifies it all – Cobase. With the ability to connect via all the protocols mentioned above, Cobase is a one-stop platform for corporates looking to streamline their banking communications. One of the key strengths of Cobase is its deep, in-house knowledge across all banking protocols. Whether it’s SWIFT FIN, FileAct, Host-to-Host, EBICS (2.4, 2.5, and 3.0), APIs, or PSD2, the technical experts at Cobase are well-versed in all. They take the burden off corporates to learn and implement these technical standards, allowing them to focus on their core business. What’s more,…