MESSAGING & PAYMENTS
Proprietary & Confidential: Strategic Treasurer © 2017
January 2017
Co-Presented By:
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
About the Presenters
2
Today’s Co-Presenter:
Strategic Treasurer
Strategic Treasurer is a consulting firm advising on treasury, financial risk and risk technology issues.
Experience: 30 years – 12 years leading ST - serving corporate, government, education and not-for-profit institutions
Today’s Co-Presenter:
Jacob Aruldhas
ECS Fin produces innovative software solutions for managing messages and automating transaction processing workflows.
Founded in 1999 as a consulting firm, ECS Fin advised many Fortune 100 companies, coordinating business divisions and technology groups in the areas of enterprise messaging, transaction processing, workflow automation and process optimization
Proprietary & Confidential: Strategic Treasurer © 2017
Overview
3
Messaging & Payments
Context: Complexity from Global Business
Initiating Payments Globally
Complexity and Cost
Business Cases
• Business Case mindset• Corporate Treasury Business Case• Bank Business Case
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
Increased Complexity
4
N
...
3
2
N NNNNN
..................
3 3 3 3 3 3
222222
1 1 1 1 1 11
Hyper Complexity
Highly Complex
Complex
Simple
Back Office Systems
Paper Electronics
Connections Banks Currencies Countries Payment Types &
Settlement
Organizational growth, acquisitions and global expansion quickly moves and organizational environment from: simple, to complex to
hyper-complexity.
Proprietary & Confidential: Strategic Treasurer © 2017
Complexity of Treasury
While growing slightly, treasury is still
thinly staffed.
More centralized = increase in size of corporate
treasury departments
60% of treasury teams are comprised of under
6 people and 70% of treasury departments are
either static or decreasing in size.
Organizations are realizing the importance of a
well-structured treasury department and are
understanding the benefits associated with
adopting a centralized structure, versus a
regional or segmented structure. In addition,
the increase in the size of treasury
departments shows that a greater emphasis is
being placed on treasury as a whole, especially
as globalization increases and the complexity
and risk experienced by corporates with
regards to regulatory restrictions, security and
market volatility grows.
Source: 2016 Liquidity Risk Survey
How large is your global treasury organization, including analysts?
No Change Increased Decreased
How has staffing in your treasury department changed over the past two years?
38%
22%
12%16%
12%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
56%
28%
15%
0%
10%
20%
30%
40%
50%
60%
<3 4-6 7-10 11-25 >25
Messaging & Payments
Proprietary & Confidential: Strategic Treasurer © 2017
Expectations for Visibility and Control
Messaging & Payments
41%
14%
27%
20%
44%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Treasury Invoicing Payments Cash
Reporting
None
We intend to make significant information
technology investments in the next year in
the following areas: 2014-2016
2014 2015 2016
18%
34%
16%
16%
20%
46%
0% 10% 20% 30% 40% 50% 60%
Financial Risk Management
Bank Account Management
FX Exposure Identification
FX Trading and Settlement
Reconciliation
None
We intend to make significant information
technology investments in the next year in
the following areas: (check all that apply)
2015-2016
2015 2016
2014-2016 Cash Forecasting & Visibility Survey
*Multiple Choice/Multiple Answer Question: Answers will not add up to 100%
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
Some Payment Types & Methods
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Banks• Low Amount Domestic• High Amount Domestic• International Payments• Real-time Payments
Corporates• Integrated Payables• Integrated Receivables
Banks• Accounting Entries• Check Payments• ACH• RTGS• SWIFT• Real-Time ACH
Corporates• Portals• File Services• Messaging
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Messaging & Payments
Defining the Payment Cycle: Corporates
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• Receive Invoices
• Create Instructions (Manual Entry, Batch Load, Real-time Load)
• Match against invoices, attach documents as needed
• Create proprietary/NACHA/ISO15022/ISO20022 Messages
• Create File Header/Batch Header as needed
• Validate Messages/Files
• Internal Controls – Approvals, Release Times
• Release / Transmit
• Receive and Process Acknowledgement
• Receive and Process Confirms
• Receive and Process Settlement Messages
• Receive and Process Returns (Rejections from Banks)
• Event Management and Notifications
• Exception Handling Interfaces
A Payment Instruction may go through the following stages. Engagement and sequence of validation rules, business rules and
processing rules depends on specific type, context and purpose of each payment instruction.
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
Defining the Payment Cycle: Banks
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• Inception (Manual Entry, Batch Load, Real-time Load)
• Persistence
• Identify, Assign Context
• Compliance Check
• Duplicate Check
• Process Definition
• Create NACHA/ISO15022/ISO20022 Messages
• Groups by Receiving Bank
• Create File Header/Batch Header as needed
• Validate Messages/Files
• Internal Controls – Approvals, Release Times
• Release / Transmit
• Receive and Process Acknowledgement
• Receive and Process Confirms
• Receive and Process Settlement Messages
• Generate Statements for Corporates
• Receive and Process Returns (Rejections from Receiver)
• Proprietary messages to internal systems
• Event Management and Notifications
• Exception Handling Interfaces
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Messaging & Payments
Accountability, Management & Governance
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Banks
• Statement Reconciliation• System Reconciliation• Cash Management• Data Governance• Reports
Corporates
• Expense Reconciliation• Income Reconciliation• Invoice Matching• Income Receipt Matching
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Messaging & Payments
Existing Environments
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• Disparate connections
• Outdated technologies
• Multiple security mechanisms
• Low Redundancies
• Low SLAs
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Messaging & Payments
Challenges for Treasury Operations
• Multitude of connections, systems & processes to utilize, maintain & control
• Lack of centralized visibility into cash and payment file flows
• Lack of standardized payments processes and STP
• Inefficient and error-prone manual processes
• Issue identification and slower resolution / Lack of non-repudiation
• Time and complexity of compliance – auditing payment processes and system users
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
Initiating Payments Globally
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£
¥$
€
€
₽
$
R$
₹
Pain (ISO 2022) SWIFT MT (ISO 15022) EDI Proprietary
Camt (ISO 20022) SWIFT MT (ISO 15022) BAI Proprietary
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
Format Conversion
142016 Strategic Treasurer Treasury Aggregator Analyst Report
Why should we dedicate resources to convert formats?
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Messaging & Payments
Information Reporting Cycle
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2016 Strategic Treasurer Treasury Aggregator Analyst Report
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
Typical Messaging Environment
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Positions CA
Fed Wires AZ
Foreign Exchange, TX
IT, IX
FIX Connector
Compliance
Data Center, MO
Accounting
Gateway 3
Reconciliation
Syndications, IL
SAA/SAG
SAA/SAG
Gateway 6
Data Center, NY
Gateway 1
Gateway 2
Securities Lending, NJ
Gateway 5
Institutional Transfers, TX
OFAC
Corporate Actions, PA
IT, NY
Trading Floor, NY
DTC
Reuters
Telerate
Bloomberg
Gateway 4
SWIFT
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Messaging & Payments
Streamlining for Control and Accountability
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Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
1 Service, Multiple Connections, Protocols & Formats
• One service for all external connections
• Data can feed to multiple systems
• Treasury: Reporting Automation
• Bank Reconciliation: ERP
• Accept multiple file formats
• Provide file transformation
• Process payments as well
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Messaging & Payments
Fragmented Payment Processing Environment
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Data Mapping
Data Mapping
Data Mapping
SWIFT
ACH
RTGS
Data Vendors
Sou
rce
Syst
ems
SWIFT Payments
ACH Payments
RTGS Payments
World Check
Validations
OFAC
RTGS Adaptor
ACH Adaptor
SAASNL/SAG
950/940Recon
Cash Management
Reports
Statement Management
Data Mapping
Data Mapping
Data Mapping
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Optimized Payment Processing Environment
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Interface & Dashboards
Schedules Audit Trails Routing Reports Alerts Repairs Compliance
Trading Systems CRM Accounting Other internal source systems
Dat
a G
over
nan
ce &
Rep
orts
Web
En
able
d A
cces
s fo
r O
pera
tion
sNorth America
South America
Europe
Far East
Australia
Branches Exte
rnal
En
titi
es
S
ecu
red
Con
nec
tion
Payment Gateway
Application Integration
ACH Payments
SWIFT Payments
Real-Time Payments
Compliance
Reconciliation
Cash Management
RTGS Payments
SWIFT
FIX
ETC
Exchanges
Custodians
Brokers
Clearing
Web Portals
Many systems making payments globally demands a higher level of management and cost to support each system.
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
Returns/Exception Management
Process should ideally be handled in a message database
Ability to fix the format of incoming/outgoing messages
Update reference data and reprocess
Cancel and/or recreate message
Space should give users ability to choose a solution
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
Bank Business Case
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AdaptorsFiles
MQ SeriesWeb-services
EmailTCP/IP
ProcessReceivePersistIdentify
Set ContextSet ChannelSet PrioritiesSet Category
Set TypeSet Purpose
AcceptanceComplianceDuplicate?Mandatory
Items?
ReconciliationAcks
ConfirmsStatements
DataGovernance
Standby
Source System 1
Source System 2
Source System 3
Source System 4
Source System 5
ACH ModuleApply Rules A1Apply Rules A2Apply Rules A3
Real-time ACHApply Rules D1Apply Rules D2Apply Rules D3
SWIFT ModuleApply Rules C1Apply Rules C2Apply Rules C3
RTGS ModuleApply Rules B1Apply Rules B2Apply Rules B3
AdaptorsACH
RT ACHRTGSSWIFT
ProcessValidateTransmit
Ack Recon
ACH
RTGS
SWIFT
RT ACH
ProprietaryInstructions
ProprietaryInstructions
ProprietaryInstructions
ProprietaryInstructions
ProprietaryInstructions
StandardInstructions
StandardInstructions
StandardInstructions
StandardInstructions
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Messaging & Payments
Corporate Business Case
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Messaging & Payments
Buy-Side Firm Business Case
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Interface & Dashboards
Schedules Audit Trails Routing Reports Alerts Repairs Compliance
Trading Systems CRM Accounting Other internal source systems D
ata
Gov
ern
ance
& R
epor
ts
Web
En
able
d A
cces
s fo
r O
pera
tion
sNorth America
South America
Europe
Far East
Australia
Branches Exte
rnal
En
titi
es
S
ecur
ed C
onn
ecti
on
MessageGateway
Application Integration
SSI Management
Money Transfer
Income Recon
Statement Recon
Cash and Liquidity
Reporting
Trade Settlement
SWIFT
FIX
ETC
Exchanges
Custodians
Brokers
Clearing
Web Portals
Proprietary & Confidential: Strategic Treasurer © 2017
Messaging & Payments
Conclusion
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Complexity and cost of business messages and payments continues to increase and must be managed.
We need to understand the process for all elements that are involved (messages, systems, stakeholders, organization).
Ensure flexibility and design: Scalability and Flexibility
Proprietary & Confidential: Strategic Treasurer © 2017
Contact Information
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Strategic Treasurer was founded in 2004 by Craig Jeffery, a financial expert and trusted advisor to executive treasury teams since the early 1980’s. Partners and associates of Strategic Treasurer span the US, the UK, and continental Europe.
Atlanta Office Headquarters
525 Westpark Drive, Suite 130
Peachtree City, GA 30269
Website: strategictreasurer.com
Craig JefferyManaging Partner
Email: [email protected]
Direct: +1 678.466-2237
Jacob AruldhasCEO
Email: [email protected]
Direct:+1 914 661 2563
New York OfficeHeadquarters
50 Main Street, Suite 1000
White Plains, NY 10606
Website: strategictreasurer.com