The document discusses trends in payment centralization across various regions, highlighting differences in how payments are managed, including cost efficiency and control. It emphasizes the benefits of centralizing payments, such as reduced costs, improved visibility, and increased security through standardized workflows and digital signatures. Additionally, it outlines connectivity methods for payments and introduces Kyriba solutions for managing payment workflows.

1. Trending Topics in Payments
October 22, 2013
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2. Payment Centralization

3. To centralize or not to centralize…
•
Different regions see varying degrees of
centralization and ‘payment factories’
•
Typically…
 Central Europe – treasury is responsible for
transmission of all payments (although vendor
payments may be blind routed)
 North America – the opposite; we usually see A/P
(via the ERP) have a separate workflow and
connection to banks
 UK – a bit of both
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4. To centralize or not to centralize…
•
Why the differences between regions?
 Bank connectivity choices (e.g. EBICS) make it easier
to consolidate
 Tendency for more centralized financial workflows
(and implementation of shared service centers)
 Pre-SEPA, much complexity in varying types of
payment formats
 SEPA
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5. Value of centralizing payments
•
Cost and efficiency!!!
•
Control and compliance
•
Reduced bank services and costs
•
Visibility into payments being sent
•
Control of payment timing
•
Less systems to maintain
•
Opportunity to standardize payment terms
•
Opportunity to review payment programs
(e.g. early payment discounting)
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6. How do I centralize payments?
1) Collaboration: determine who is involved
2) Evaluate required banks
3) Centralize connectivity to banks (TMS or ERP)
4) Optimize bank services
• Reduces formats needed
5) Standardize internal workflows – approvals, limits, etc.
6) Consolidate information in a single system
(ideally, portal)
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7. Security and Authentication

8. Security and Authentication
Internal Controls
•
First level of security is internal
•
Global control over payment
initiation, approval, release is critical to
avoid fraud, mistakes
•
Decentralization provides challenges –
can be overcome by centralizing and
standardizing processes
•
Technology usually helps – but needs to
encompass entire workflow to be effective
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9. Security and Authentication
Security
1) Confidentiality
• Payment file is encrypted and only the bank
can read the data (e.g. use of PGP)
2) Integrity
• Payment has been sealed (bank can tell if
‘seal’ was tampered with)
3) Non-repudiation
• (for certain protocols) Bank cannot deny
receiving payment message that organization
can prove was sent
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10. Security and Authentication
Authentication
Digital Signatures
• Bank knows payment originated from my
company and was authorized to be sent
• SWIFT 3SKey is one of more popular digital
signatures
• Signature applied in treasury/payment
system by approver(s)
• Not yet commonplace, but increasing in
popularity
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11. Other Payment Options

12. Mobile Payments
•
Near-term impact limited to mobile being ‘part of
the workflow’
Initiation
 Review
 Approve

•
Demand to enable ‘in the field’ personnel to initiate
remote payments will increase
•
Supporting other parts of business to accept mobile
payments is a strategic opportunity
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13. Non-Bank Payments
•
Mobile technologies have also spurred increase in
non-bank payments
 Paypal, Western Union, Square
•
Primary drivers include:
 FX translation
 High cost to receive wires
 Growth in emerging markets
•
Challenge: overcome counterparty risk concerns
•
Opportunity: reduced costs; higher efficiency
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14. Connectivity

15. Connectivity defined
Service providers manage both formats and connectivity for
domestic and international payments.
Domestic Banks
Service Provider
Corporate Client
Vendor manages formats
and connections for you
International Banks
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16. Connectivity defined
Connectivity is…
Connectivity Element
1) Network protocol
2) Connectivity method
Examples
Public IP, VPN, leased lines, older
systems (X.25)
FTP, SWIFT, EBICS, MQ, AS2, internetbased
3) File format
EDI820, NACHA, XML ISO 20022
4) Security
Encryption via PGP, PKCS#7 (3SKey),
S/MIME
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17. Connectivity defined
Connectivity is…
Connectivity Element
1) Network protocol
2) Connectivity method
Examples
Public IP, VPN, leased lines, older
systems (X.25)
FTP, SWIFT, EBICS, MQ, AS2, internetbased
3) File format
EDI820, NACHA, XML ISO 20022
4) Security
Encryption via PGP, PKCS#7 (3SKey),
S/MIME
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18. Connectivity defined
Connectivity Methods
1) FTP
•
Host-to-host connections
•
Directly to/from the bank using a custom script
developed and maintained by vendor
•
Access and security dictated by the bank
•
Used frequently around the world
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19. Connectivity defined
Connectivity Methods
2) SWIFT
•
Both a network and author of formats & standards
•
The ‘network’ requires membership; allows
communication of messages between members
SWIFT (or BIC) addresses
•
Different membership types -> different services
(e.g. Member-Concentrator vs. SWIFTNet)
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20. Connectivity defined
Connectivity Methods
3) EBICS (and regional protocols)
•
Certain countries have protocols to connect
directly to banks in that country (e.g.
France, Germany, Austria)
•
Simplifies connectivity for the vendor, although
require a service provider to get connected
•
Depending on number of banks corporate has in
that country, SWIFT may be more efficient
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21. Connectivity defined
Connectivity is…
Connectivity Element
1) Network protocol
Examples
Network IP, VPN, MQ, AS2
2) Connectivity method
FTP, SWIFT, EBICS, internet-based
3) File format
EDI820, NACHA, MT101, XML ISO
20022, EDIFACT, other local standards
(AFB, AEB, CBI, CNAB, etc.)
4) Security
Encryption via PGP, PKCS#7 (3SKey),
S/MIME
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22. Connectivity defined
File Formats
Primary File Formats
NACHA
Description
EDI 820
High and low value payments (North America,
wires)
SWIFT MT10x
Global “simpler” high value payments
• MT101/103/202
XML 20022
Global high value and low value payments
XML PAIN = payments message formats
Mass low value payments (North America, ACH
and EFT)
e.g. <pain.001.001.03>
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23. Connectivity options
When determining right connectivity and formats
Key questions you want to ask:
• Cost
• Experience
“Inventory” of connectivity
 Expertise with onboarding banks

• Ease (cost) of integration
• Ability to support multiple methods/protocols
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24. Connectivity options
What about my situation affects the choice?
Variables:
 # of banks
 Who/where they are
 Types of payments (i.e. wires vs. high
volume)
 # of payments
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25. Connectivity options
What’s best for me?
Connectivity Method
FTP
Ideal Scenario
Regional Protocol
Connecting with banks in those regions (e.g.
France, Germany for EBICS)
SWIFT MemberConcentrator
Outside North America
Large number of banks; small volume of activity
SWIFTNet
Lots of everything
High volume of activity at domestic banks
● Often a combination of methods may be best ●
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26. Summary
Payment Centralization
Improved Visibility
More Control
Cost efficiencies
Security & Authentication
Controlled workflows
Secure transmission
Digital signatures
Other Payment Options
Non-bank payments
Mobile payments
Connectivity Methods
FTP
SWIFT
Regional Protocols
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27. Kyriba Solutions
Kyriba offers:
•
Payment centralization – Kyriba manages the entire payment workflow
•
Experience – Kyriba processes 1,000,000 transactions per day
•
Expertise – Kyriba onboarded more SWIFTNet customers than any third
party provider
•
Monitoring – Kyriba’s dashboards allow proactive monitoring of all bank
connectivity, including SWIFT traffic
Find out more about how you can achieve SEPA compliance
http://www.kyriba.com/kyribaSEPAsolution.pdf
See how Kyriba payments solution can help you extend the accuracy and horizon of
your cash forecasts by visiting
http://www.kyriba.com/solutions/payment-management
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28. Contact Kyriba
Get in touch with us using the email address below, or visit us at one of the
following addresses:
treasury@kyriba.com
kyriba.com
twitter.com/kyribacorp
linkedin.com/company/kyriba-corporation
kyriba.com/blog
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