9 reasons why Luxembourg-regulated entities choose a multi-bank payments platform
When it comes to payment processes, companies are facing daunting and growing challenges. Currently, a significant number of corporates and financial institutions still rely heavily on manual processes, such as paper-based payment instructions or authorisations that require manual data entry and physical signatures, which may still involve sending documentation via fax in some cases.
The lack of automation, efficient and secure validation/authorisation processes, and availability of easy-to-handle multi-bank connectivity channels are some of the shared challenges for a majority of institutional and financial industry players in the payment scope. Also, there is a growing concern related to regulatory requirements, particularly around AML/CFT challenges with regards to “Know your transaction” (KYT) and transaction monitoring requirements. And while manual processes can be more easily supervised and validated by a firms’ compliance department and other lines of control and defence, when it comes to risk management on automated and straight-through processes, there is little room for mishaps. Using fully digital and automated setups can make businesses’ lives easier when faced with these challenges, but there is more to it.
In today’s market, payment products only partially cover the full feature range of services many companies are looking for, such as worldwide multi-bank account connectivity, a state-of-the-art user experience and interface design and AML/CFT add-ons for instance. But the automation of payment processes is no longer optional, it is a must.
But how to move forward and address these ‘pain-points’? End-to-end payment platforms might just be answer. Here we explain how and why.
When talking about end-to-end payment processing, experts usually mean a complete, functional solution all in its own, covering all the steps without the need for manual processing or intermediate (human) actions on a variety of channels, tools or systems, hindering a straight-through flow and execution.
End-to-end is considered a type of process improvement since it enhances effectiveness, efficiency and performance of processes or information technology in a business. By automating a process from start to finish, it also allows a firm to gain a better understanding and monitoring of a process from the planning to the execution.
In a time where many businesses still have paper-based payment validation through manual signatures and payment order transmission processes to banks are still done via fax, it is important to weight the pros and cons of keeping this in place and not investing in digital tools and channels that can positively impact the business and its stakeholders. Change is not something that comes easy, but it is the time to push the payment processes scope into full digital mode.
For players who still rely on manual payment processes, the implementation of a single platform is more time and cost efficient than selecting and implementing different tools and services from different providers.
For businesses that have multiple, host-to-host banking channels or are adapting consumer-focusing PSD2 access-to-account channels to their need, one of the main advantages of implementing a hosted end-to-end payment platform is having everything they need in a single platform. It has the potential to cover and adapt to their needs, and their internal procedures and organisation.
Some companies will be able to switch to a fully automated payment process right away, for example without making their management and signatories use a dedicated external payment authorisation tool and related processes, but instead rely on the company’s own environment for payment approval and sign-off (such as ERPs or other tools encompassing signatory features). The submission of payment orders and the retrieval of reports on transaction execution is then operated through API end-points that certain payment platform operators are able to provide.
Did you know? An Application Programming Interface (API) allows two systems to communicate with each other, providing the language and the contract for how they interact. Each API has its own documentation and specifications that determine how information is transferred.
By simplifying and automating payment processes from start to finish, firms guarantee more clarity and transparency for both their stakeholders and clients.
Payment platforms often provide a customisable role-based access control through their readily-available web interfaces for customers that prefer to rely on existing systems that are customisable to their setup. By adequately modelling and reflecting the signatory and access rights that exist within an organisation, these platforms create a solid structure for more effective and secure verification and validation processes, without the need to implement additional on-premise software or to adapt companies’ existing systems that might not be easy to integrate with external tools. By assigning specific users to specific roles according to their responsibilities and signatory rights, relying on this kind of proven tool ensures that the stages of the payment process are done as smoothly as possible and stick to the security and compliance rules of the company.
Additionally, the right payment platform might also simplify complex workflows and enhance them in a way where approval requests, for example, are automatically routed to the appropriate user, including reminders and notifications when a payment request is urgent, delayed or when payment due dates are approaching.
By automating payment processes, businesses can significantly reduce the risk that comes with manual processes. They can lower the frequency of occurrence of errors when paying invoices, of paying inaccurate or duplicate invoices and of misplacing a payment order if it is done manually and sent to the bank via non-monitored channels. End-to-end payment platforms can automatically match transactions with payment orders and ensure a secure and effective validation process through the various levels of user roles.
In a long-term perspective, it is a good option to choose a hosted payment platform, for example in a Software-as-a-Service (SaaS) setup. This design enables financial industry and institutional players to enhance their payment processes without requiring any specific software deployment on their own IT infrastructure and to be flexible for their selection of authentication and signature mechanisms.
Multi-bank account connectivity is a challenge that affects most businesses, institutional and financial industry players, but also for many corporations, particularly those that prefer not to invest in their own in-house bank connectivity stack.
To tackle this issue, hosted payment platforms can include a single bank-agnostic connection to reach and manage virtually any bank account in the world. To make this happen, the platform will need to include a direct connection to a payment network and messaging connectivity service with banks, such as SWIFT, the world’s leading provider of secure financial messaging services, for example.
Amid all the challenges of implementing a payment platform in a business, one of the most common in the financial services industry is regulatory compliance, for instance with outsourcing requirements. With requirements becoming more and more thorough, payment system providers need to adapt their setups and their value proposition to fully meet their clients’ obligations and demands. To lighten the load over this concern, it is important to choose the right platform provider, one that can fully meet outsourcing compliance requirements that apply to financial industry-regulated players. It can significantly lower their implementation lead times and efforts required, both when choosing the right provider, implementing the platform and defining operational processes, as well as over time, for instance to streamline the reporting and documentation process.
With growing regulatory requirements regarding both IT security in the financial industry and against anti-money laundering, responsibilities brought upon both all financial industry-regulated and many non-regulated players have increased substantially over the last years.
A payment platform can provide an extra layer of monitoring, audit trails, validations and security features and ensure an easier-to-handle compliance process by including adjustable features such as risk management analysis and specific anti-money laundering tools.
Typically, it also provides detailed audit logs and payment tracking features, facilitating the access to data in a single place while keeping track of all transactions and reducing the risk of fraud. When it comes to the end of the payment validation process, the platform should include versatile user authentication and transaction signature components.
With all the information being available on a single platform, reporting and analytics can help companies analyse and identify areas or tasks that need action or improvement. With data always up-to-date, and with in-detail insights on transactions and patterns, businesses can make better decisions and enhance their payment processes.
Less by not least, by streamlining payment processes, businesses eliminate several manual processes, freeing employees to dedicate their time and efforts on other and more beneficial business functions.
While adopting an automated payment platform should be a priority for businesses, it is also important to consider the steps to take before acting on that decision. Before beginning a payments automation project, a business should start by identifying the key metrics they want the platform to improve. The aim is to identify the key issues of the current processes and slowly enhance them to include automation, instead of trying to solve all the business payment challenges at once. It is also important to note that change does not come easily, and that it takes time. To integrate a payment system, there is the need for internal change management, as the company will need to review and adapt its processes.
With these considerations in mind, and with the right platform provider, businesses have the opportunity to develop a robust setup to streamline and to enhance workflows that offers benefits throughout all financial processes, systems and interactions in a company or group.