by Helen Sanders, Editor, TMI
One of the most significant evolutions in cash management over the past few years is the centralisation of payments through payment factories and shared service centres (SSCs). Since the Single Euro Payments Area (SEPA) and the payments services directive (PSD) took effect, thereby creating a harmonised payments landscape in the Eurozone, many corporations have been keen to extend the benefits of centralised payments by implementing ‘payments on behalf of’ (POBO) structures. It was no surprise, therefore, that the BNP Paribas Cash Management University workshop on POBO was particularly well-attended, During the workshop, moderated by Helen Sanders, Editor, TMI, two corporations, IBM and Avnet, joined BNP Paribas’ head of client advisory, Filipe Simao to discuss their payments centralisation projects and the relative value of POBO for their organisations.
Payment centralisation models
Filipe Simao first outlined the various approaches that corporations take to centralising payments. In some cases, payment functions access a single technology platform and payments are channelled through a single bank connection while the payments organisation remains unchanged. A second model is to centralise the accounts payable functions into one or more payments factories or SSCs. The ultimate step is not simply to centralise processing and platforms, but to channel payments through a single bank account (usually per currency) as part of an in-house banking structure. Filipe described some of the benefits of this approach,
“Any treasurer trying to manage large numbers of bank accounts will recognise the advantage of using a single account for each currency across all of the business entities in a region. Treasurers gain greater control over cash without the need for pooling structures or interbank transfers, compliance requirements are less onerous, and the administration required to manage signatories on bank accounts is reduced.”