Frequently in information technology, a term is developed without consideration given to the importance of one of the words that make up the term. This is certainly the case with terminology developed around the effective management of multiple banks and the impact it can have on so many of the IT and finance projects underway or planned for these next few years. While treasury is responsible for the banking relationship, the foundation…the bedrock of the landscape and what furnishes the organization with all the needed banking services is multiple banking connectivity. Here, with organizations required to work with anywhere from three to dozens of global banking relations, it is critical to have solutions and a connectivity landscape delivering the capability of “multi-bank connectivity.”
The start of most finance systems or ERP projects is the integration and connectedness of the ERP and banking partners. However, it can also be the most time-consuming and frustrating activity for ERP migrations. In fact, results from a recent Kyriba-Pulse joint survey found that, “91% of IT leaders agree that connecting banks is one of the most complex aspects of an ERP project.”1 Directly, or indirectly, the entire financial supply chain, the Enterprise Liquidity Platform, is critically impacted by the health and effectiveness of banking connections. A comprehensive, solutions provider is needed to provide the ability to consolidate files from many different systems or provide reporting back to the complex ERP landscapes so many IT organizations are faced with.
Multi-bank connectivity and integration, often lack clear understanding by finance and IT to the importance and impact it plays in the success of ERP projects and migrations. This stems from the fact that the ownership for the banking relationship landscape and bank services management almost always resides with treasury. CIOs and CTOs sometimes have banking on their radar, but it is often underestimated for complexity and duration in planning the systems roadmap for ERP greenfield implementations, migrations and even for ongoing production support or maintenance.
The Challenges for IT and Finance
What is really important to consider before discussing technical details is four core elements inherent in dealing with banks and that impact IT-driven projects. Another interesting aspect of bank connectivity projects lies in the fact that many projects with banks result in the bank becoming the bottleneck as their service level agreements (SLAs) do not match up to the urgency and time constraints placed on IT and finance. For instance, many banks’ SLAs call for a 24 or 36-hour duration for test results or troubleshooting. When testing timelines for functional, integration and user-acceptance testing often set for 1 or 2 week “sprints” under Agile methodologies, this can spell disaster to the project timeline.
Banks and Procedures
Your banking partners have a very strict, process-oriented controls framework with their own, unique steps and timelines for on-boarding their clients. Your organization is no different than others and must adhere to an often rigorous and rigid timeline and framework for migrating from a banking ‘test’ landscape to production. While bank reporting projects can be relatively quick, payments file transmissions/connectivity along with the formatting and various settings for payment status reports and other attributes can be onerous and very time-consuming. Couple this rigidity with the bank’s “gates” for passing various test phases and projects can begin to expand beyond several weeks to a few months. Global banking relationships are another concern as work and requests done in North America won’t be seen or worked on until late afternoon and the following morning for Asia-Pacific with even longer delays for Europe.
Multiple Connections, Multiple Formats = IT Workload Implications
Finance and treasury often manage at least several, if not dozens of bank relationships for various regions and/or purposes. Perhaps one bank provides a level of debt for a line of credit, another is a revenue or collections bank, and another provides payments expertise in specific countries or regions. In all cases, banks have their own standards for communications and connectivity. Payment formats, even for the same clearing system, will almost vary by some measure across your banks. When IT-led projects are launched, the assessment of migrating existing banks and the difficulty of adding successive banks to SAP is typically one of the most underestimated areas of the project. When multiplied across a dozen partner banks, with their own flavor or proprietary requirements and connectivity standards, durations extend accordingly.
Payment Types, Formats and Scenarios
The existing forms provided by SAP are mere shells… empty generic forms that must be configured and adapted to meet each individual bank format specification. Banks publish and maintain a wide array of specifications with requirements to be met by your IT team. This alone, can often involve weeks of configuration and testing even without the bank’s SLAs factored in. Traditionally, customers looking to deploy a global payments factory rely upon internal IT resources to build and test payment formats and flows to their banks. The challenges expand when multiple banks along with the high number of variables associated with each payment format translates into hundreds of format configuration and customizations that are modified and tested in each environment. These then are often returned 24 to 36 hours with requested updates or error handling codes, requiring iterative development to fix.
The magnitude of formats and scenarios that need to be built and tested can be enormous and easily overwhelming. This is particularly true because most application integration that IT departments perform is connecting one application to another application. The variances between the banks in terms of protocols, file formats and security are some of the factors that then drives the one-off integration of varied payment scenarios for each bank.
The challenges don’t yet include a very important aspect of banking and payments connectivity: scenarios for cross-border payments, international and/or regional clearing systems…the in-country requirements. The wide-ranging, almost endless possibilities commonly include supporting treasury transfers for funding or intercompany wires, sweeps and just ad hoc payments on behalf of AP. Finally, the payments landscape must incorporate up-front, proactive fraud detection and error handling as there are going to be instances in any payments journey where fraud is attempted, or payment policy and procedural guidelines are violated. The testing for these various scenarios is critically important and result in long durations for development and testing when done by in-house IT.
Meeting the Challenges: Accelerating the Project Timeline, Mitigating Risk
IT and finance professionals have options to help mitigate the risk to their projects and weave leading practices for function and form into their technology solutions. At the same time, CIOs can shave months off their project timelines and ultimately impact the entire project duration through acceleration of the ERP migration when the right technology partner is selected.
When considering your Connectivity Solutions provider, consider the following and ask if these levels of capability are offered:
- Pre-built, pre-tested bank connections and payment format files accelerate global banking connectivity projects by more than 80 percent
- Reduced project team involvement and needed effort for project activities
- Delivery of accurate domestic and cross-border payment files, meeting the clearing system and specific country requirements
- Delivering more monitoring/notification capabilities and UI for your customers
- Payment File Transmissions, OFAC screening, beneficiary bank Account Verification and payment status reporting
- Bank reporting enablement and acumen to drive cash and liquidity management
- Fraud detection and account validation before files are transmitted to your pre-processing / front-end systems
- A pre-built format library supporting over 800 bank format variations and over 50,000 bank testing scenarios globally across 1,000+ global banks
- Integrated global bank connectivity delivers out-of-the-box connectivity, including APIs and Fraud Detection and Compliance
- Simplified, easy interfaces; minimal IT resources are needed when it comes to interfacing between the ERP system and Kyriba. Using both SFTP and API, we take all payment files into our prebuilt interfaces with no code specs needed from IT
- SWIFT connectivity and certification
- Management of ongoing maintenance and support