Improving Visibility of Payments Value-Chain part 2 / 2

In my earlier post I discussed the business imperative for improving visibility in payments processes and the factors (demand, organizational and technology) creating impedance in realizing the vision of Straight-Through-Processing. In this post, I will outline some approaches of improving Straight-Through-Processing in payments processes to improve visibility in them.

Visibility in payments processing is fundamentally about knowing the status of payments as they flow from front-office initiation channels, across mid-office fraud, risk and compliance systems , through the payments application i.e. AR,AP and finally through external interfaces with clearing providers and financial network providers e.g. SWIFT, ACH etc. From a technology standpoint, payments straight-through-processing requires streamlining the integration across all these inbound channels, outbound interfaces and ancillary systems.

One approach is to consolidate all of the existing payments applications with a payments hub. Payments hubs are packaged applications that consolidate interfaces, both inbound and external, and offer full-fledged payments processing capabilities including AR, AP, treasury, exception management i.e. payments repair and reporting. In principle, centralization of payments processing with payments hubs provides real-time cash flow visibility by eliminating manual / semi-automated reconciling across multiple payment application stove-pipes, enables single-source-of-truth audit reporting and streamlined governance. It is important to note though that such application consolidation with a payments hub does require serious investments in time and effort, potentially being a multi-year effort and may be cost prohibitive depending on the comprehensiveness of the payments hub in terms of payment processing capability.

An alternative to application consolidation is interface consolidation with a payments gateway. Payments gateways streamline the number of integration points for payments applications by serving as a common pipe through which all in-bound and out-bound payment traffic flows. Unlike payments hubs, payments gateways do not replace core payments processing that’s undertaken by the payments applications. They offer connectivity to internal applications and external interfaces through pre-built adapters. This approach improves visibility in terms of being able to offer an aggregated view of the payments traffic in terms of volume and type of payments. Sophisticated gateways offer the ability to introspect the payments traffic, which could comprise of different message formats, there by offering a real-time snapshot of payments inflow, payments outflow and exceptions.

A hybrid approach is to use BPM in conjunction with the above technologies. Here, a lightweight abstract process is created to represent the end-to-end journey from the time a payment enters the organizational boundary to time it leaves the organizational boundary. This enables a chronological view of the payments workloads thereby giving insight for improving business operations by eliminating the bottlenecks for a specific line of business or initiation channel or payments application. Such abstract processes could be modeled as events driven processes that are triggered / invoked by different systems as payments flow through them. This BPM layer could also serve as the single-source for tracking payments. Below is a graphical depiction of how a BPM layer can be used to gain end-to-end visibility of payments.

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A business centric perspective on Private Cloud, Data-center Modernization and EAI.

Author:
Sanjeev Sharma
Twitter: @sanjeevio

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