Why centralization alone isn’t enough—and how POBO and in-house banking change the game
Here’s the thing most companies get wrong: they treat centralized payments like an efficiency play. Fewer bank accounts. Bulked payments. Lower admin burden. And while that’s not wrong, it’s barely scratching the surface.
Because when you design centralized payments with strategy in mind—when you align structure, technology, and control—you unlock far more than savings. You create visibility, leverage, and agility across your entire global financial operation. And if you’re not aiming for that, you’re leaving value on the table. A lot of it.
The False Comfort of “Centralization”
Many organizations are proud to say they’ve built a payment factory. In practice, that often means they’ve centralized operational processing—moving payment execution into a shared service center, consolidating teams, and reducing cost per transaction. It’s a step in the right direction—but it’s not strategy.
What they’re really doing is centralizing labor, not control. Most payment factory models continue to process payments from each entity’s accounts, on their behalf, under their name. The model is operationally efficient, but it stops short of transforming financial ownership or visibility. It’s about processing payments faster and cheaper—not smarter.
This mindset tends to focus on cost reduction: using lower-cost labor, often offshore, to process more payments at a lower price point. And that’s fine—if the goal is operational efficiency. But that’s not where the real value is.
The strategic leap happens when organizations move from shared processing to Payments on Behalf Of (POBO)—a structure that routes payments through a limited set of centralized accounts, executed legally and operationally by a central financing entity or designated shared-service structure. POBO doesn’t just centralize execution—it consolidates control. It reduces accounts, enhances oversight, simplifies FX, and becomes a foundation for broader financial integration.
What Strategic Control Actually Looks Like
Once organizations make the shift from centralized processing to POBO, the conversation moves from operations to control. POBO isn’t just a payment method—it’s a structure for establishing real-time financial visibility, reducing complexity, and driving better decision-making across treasury and finance.
In my 25 years of experience driving treasury transformation projects for corporate leaders around the world—including Booking Holdings, Chevron, Estée Lauder, Microsoft, and Texas Instruments —I’ve seen what happens when POBO is done right. These companies have built some of the most advanced global treasury infrastructures in the world—leading-edge solutions designed to optimize payments, reduce risk, and increase agility. Treasury becomes predictive, not reactive. Working capital gets deployed more efficiently. And payments become an engine for visibility—not just execution.
Strategic control means knowing where your cash is, where it’s going, and what it costs—in real time. It means consolidating power without sacrificing flexibility. It means enabling real-time, data-driven decisions around liquidity, FX exposure management, and audit readiness. This is the backbone of a treasury function that’s designed to lead.
The Design Decisions That Make or Break POBO
Strategic design is where most projects go off-track. Companies underestimate the number of decisions that must align across treasury, AP, tax, and IT. They rush implementation without building a framework that answers key questions like these—questions that matter even more when POBO is ultimately integrated into a broader treasury structure.
- What’s the right account structure to support POBO across entities and currencies?
- How do we ensure compliance when routing payments through a central model?
- How do we design POBO to optimize visibility and minimize foreign currency risk?
- How do we align stakeholders to maximize adoption and long-term value?
- How do we align teams across functions and regions to enhance scalability?
Each of these isn’t just a technical preference—it’s a strategic lever. Done right, they enable flexibility and scale. Done wrong, they lock you into workarounds and inefficiencies that erode value and confidence.
From Payment Factory to Strategic Infrastructure
Centralized execution is a starting point. But without structural integration, it remains just that—a start. A payment factory reduces friction. An in-house bank (IHB) redefines control.
At its core, an IHB is a centralized legal and operational entity—often a financing affiliate—that acts as the internal bank for a company’s subsidiaries. Rather than each entity maintaining its own external banking relationships, the IHB manages payments, collections, intercompany loans, and foreign exchange centrally. It moves beyond shared processing by consolidating financial ownership and liquidity management into a single, strategic structure.
As Citibank notes in their article In-house Banks: As Relevant as Ever in Today’s World, “In-house banks may not be a riveting topic, yet they remain a linchpin of top-performing corporate treasuries.” And while adoption is still growing, the trend is clear:
- Only 10% of companies under $2 billion in revenue have implemented an IHB
- Adoption rises to 39% for those between $2–10 billion
- Then climbs to 64% for $10–25 billion companies
- And hits 70% among companies above $25 billion
This progression isn’t just about size—it’s about strategic maturity. The companies adopting in-house banks are the ones managing complexity at scale. And the fact that so many haven’t yet adopted one? That’s not a weakness of the model—it’s an opportunity.
POBO embedded in an in-house bank doesn’t just streamline execution—it becomes the structural framework that supports FX management, intercompany lending, liquidity forecasting, and more. It’s not just a better way to pay—it’s a smarter way to operate. For a deeper understanding of in-house banking and its benefits, check out Serrala’s guide, In-House Banking: The Strategic Advantage for Treasury Professionals.
Technology Enables the Shift—But Only If You Design for It
For corporates leveraging SAP as their ERP system, technology like SAP’s Advanced Payment Management In-House Bank (APM-IHB) facilitates this transition—from a standalone payment factory to a fully integrated treasury platform. APM-IHB brings together centralized payment routing, virtual accounts, automated balance tracking, seamless end-to-end processing, and real-time intercompany postings into a single environment that connects POBO with the broader in-house banking ecosystem.
When combined with SAP’s Multi-Bank Connectivity (MBC), this infrastructure extends all the way to external banks—enabling direct communication without file transfers. The result is a secure, real-time, fully traceable workflow from invoice to execution, with full audit trails and embedded compliance.
This kind of design creates the foundation for strategic enablement: real-time visibility, stronger fraud controls, improved compliance, and actionable insight across the enterprise.
That said, the tech can’t carry the strategy on its own. It’s the execution of the design—not just the platform—that determines whether you get a scalable, strategic outcome or just another centralized process.
AI Is Coming—But Only If Your Data Is Ready
Artificial intelligence isn’t optional anymore—it’s a differentiator. In treasury, it’s reshaping forecasting, risk modeling, anomaly detection, and exposure planning.
But AI is only as effective as the data it feeds on. And if your payments and processes are fragmented, your AI is flying blind.
Centralized payment models like POBO unify your cash movement data—linking subsidiaries, currencies, legal entities, and payment flows into a structured ecosystem. That’s what unlocks real-time, strategic, data-driven decision-making.
According to HSBC’s 2024 Corporate Risk Management Survey, 61% of finance leaders believe AI will become increasingly critical to effective risk management decision-making over the next three years. But only companies that have centralized and standardized their information flows and data will be in position to effectively capitalize on it.
You Only Get One Shot at Doing This Right
Most POBO programs roll out in phases—by region, business unit, or legal entity. But the foundational design usually happens once. That first model becomes the global blueprint. And if it’s built on flawed assumptions, the entire structure becomes difficult to scale, inflexible to adjust, and costly to fix.
With experience leading over 100 in-house banking projects focused on POBO, ROBO, FX, and cash pooling, I’ve seen just how much depends on getting that initial design right. I’ve helped leading organizations around the world avoid pitfalls, uncover hidden risks, and optimize every aspect of their solution—from account structure and intercompany logic to integration and governance.
That insight is difficult—if not impossible—for most companies to access internally. That experience helps clients mitigate project risk, align budget and timeline expectations, and extract maximum long-term value from their systems.
The risks aren’t in the tools—they’re in the design. And the gap between strategic impact and just “making it work” comes down to experience. When you get that design right, everything changes. It becomes the foundation for a scalable, strategic model that drives results across regions, entities, and currencies.
What It Looks Like When You Get It Right
One of the clearest examples of this in action is Microsoft. As one of the most technologically advanced companies in the world, Microsoft is relentless in pursuing innovation—not just in the products they deliver, but in how they run their business. Their treasury team is no exception. Driven, collaborative, and deeply strategic, they bring the same discipline to cash and liquidity management that Microsoft brings to global technology leadership.
We’ve worked with Microsoft for more than 20 years—first designing and implementing their original in-house banking solution on SAP, and then continuing as their system integration partner and strategic advisor helping to guide its expansion, enhancement, and extension. With Microsoft’s strong corporate culture of continuous improvement, their IHB structure has evolved substantially over the years to support broader geographic reach, tighter integration with their finance and operations infrastructure, and additional functionality, including a comprehensive POBO solution.
As Jim Scurlock, Director of Global Cash Management, noted in a webinar I co-presented with him and Sunny Ho, Group Treasury Manager on his team, Microsoft didn’t just adopt best practices—they helped shape them. Their treasury team pushed for intelligent automation, deep integration, and scalable global structures to support growth. And they expected their partners to deliver at the same level. Collaborating with a team this visionary and rigorous pushed our own thinking—and resulted in one of the most sophisticated in-house bank environments operating today.
Today, Microsoft’s in-house bank supports:
- 450+ legal entities domiciled in 117 countries operating under a unified IHB model
- 700+ bank accounts integrated into IHB for auto sweeping & funding with affiliates
- One of the first fully automated global cross-currency/country/bank ZBA structures
- POBO tightly integrated with IHB cash pooling, intercompany netting, and loans
- $500M+ reduction in idle cash unlocked and reinvested to boost working capital
- Multiple Alexander Hamilton Awards for treasury excellence (See one example)
As Jim Scurlock, Director of Global Cash Management, explained in a case study webinar I co-presented with him and Sunny Ho, Group Treasury Manager on his team, Microsoft’s in-house bank serves as the operational backbone of their global cash strategy—facilitating centralized payments, intercompany settlements, intercompany loans, cash flow forecasting, and real-time liquidity management. At this scale, POBO isn’t just a process—it’s part of an integrated infrastructure that enables strategic execution.
Final Takeaway
Don’t let your payment strategy stall at centralization. Use POBO to create visibility, enhance control, and prepare for the next evolution of treasury. Payments are no longer a back-office function—they’re a strategic lever.
POBO is the first step. The in-house bank is the platform. The difference is in the design.
If you’re still thinking about payments as an efficiency problem, you’re missing the bigger opportunity. The future of treasury isn’t just centralized—it’s connected, intelligent, and designed to lead.
About the Author
Peter Wolf is Managing Director of Treasury Services and Advisor to the Executive Board on Operational AI at Serrala. A 25-year treasury and technology strategist, he has driven the optimization of payments, liquidity, and financial operations for over 40 Fortune 500 companies through innovation, automation, and strategic design, collaborating with icons such as Booking.com, Chevron, Intel, and Microsoft. Peter has presented at more than 20 industry conferences, sharing actionable insights from his extensive experience in digital finance transformation.