Digital commerce has resulted in companies ‘going global’ much earlier in their life cycles. Businesses of all sizes are seeking ways to automate and digitise processing across their worldwide subsidiaries to gain a competitive edge. According to a recent survey by Globalization Partners, 25% of executives are concerned about working capital efficiency when expanding abroad. To combat this, many are establishing global shared service centres and building out the capabilities of these centres to drive efficiencies and control. What benefits are they seeking, and what levers are they pushing to accomplish these objectives?
- Process and organisational efficiency – centralising accounts payable (AP) and accounts receivable (AR) processing, and outsourcing non-core payments such as cheque printing and mailing.
- System stability and scalability – simplifying connections between the company and its bank while maximising the return on investment (ROI) on enterprise resource planning (ERP) and treasury workstation (TWS) investments.
- Security and control – enforcing spending controls and standardising approval processes while reining in control of account signers.
- Funding costs and risk management – achieving end-to-end transparency in payment status and funding costs. Optimising working capital and currency management by paying on the due date (and not before), in the preferred currency.
The good news is that there are solutions available in the market to help companies achieve these goals. Moreover, banks and fintechs are increasingly focused on delivering these solutions not only to the Global 2000, but to mid-corporate and lower middle-market clients globally.
What features should companies seek while scanning the market for their optimum solution? While that could vary based on a number of factors, a few high-level features are universally needed:
- Data format flexibility – connecting to payment initiation solutions should not become an ‘IT project’. It should enable the company to get up and running quickly without distracting it from its core business. To accomplish this, consider a solution that offers XML, which is the global payments standard widely adopted by ERPs, treasury management systems (TMSs) and banks across regions.
- Payment channel flexibility – the solution should enable users to initiate payments when and how desired, including both machine-to-machine (application programming interface [API] or host-to-host) capability to achieve straight-through processing, or via a portal for file uploads, or via pre-defined templates for one-off initiation. Finally, the solution should enable future-dated payments to optimise cash flow.
- Industry-leading security and control – two forms: first, the solution should incorporate robust cybersecurity protocols for access, authentication and transmission to protect data. Second, the solution should reinforce a company’s maker/checker, and customised approval levels. Ideally, it would also deliver back-end payment limit controls (by payment type) as a second layer of control. Finally, it should provide transaction-level positive and negative acknowledgements for each step in the payment process, preferably via ISO 20022 XML.
- Preferred payment types – the solution should include not only traditional payment types (wires, automated clearing house [ACH]), but also cheque printing and mail outsourcing. Determine whether the provider is committed to investing to add non-traditional, or emerging, payment types such as virtual cards and real time payments.
Payment initiation is only half the required solution; the provider must deliver ‘on demand’ reporting both for payment status and global cash positions. Baseline requirements to consider:
- One-click data access – through a robust information centre, accessible via laptop, tablet or mobile device. Data exports for audit reporting or ERP updates via API, push/pull transmissions, or ad hoc/scheduled exports.
- Global cash position reporting –the solution should aggregate and report on cash positions (MT94X) from all banks, with the capability to present the data in the preferred currency, with one-click drilldowns to specific accounts and transactions.
While the above focuses on capabilities, service delivery is equally important. The provider should have local market expertise in local languages and a robust company support structure to deliver a high level of globally consistent support in each subsidiary market.
Finally, innovation in this space continues at a fast pace; consider whether the chosen provider has a sustained investment commitment to evolve their capabilities, for example features, functionality, and service delivery.
The bottom line: the ability for a middle-market client headquartered in the U.S. with subsidiaries in Germany, Brazil, and Mexico, to initiate one payment file covering all payments in their preferred format and payment type while receiving a single view on cash balances is a game-changer. It would enable companies to lower processing costs, reduce points of failure, enforce global controls and visibility, and gain a competitive edge.
Santander recently launched Santander Cash Nexus for our US clients. Santander Cash Nexus delivers the capabilities and benefits noted above. Santander Cash Nexus was developed as a direct result of listening to our clients who have made significant investments in their ERP and TWSs , and seek solutions that unleash the full potential of these investments. In a truly global landscape, technology such as Santander Cash Nexus should be considered of critical importance for firms with international subsidiaries.