Every treasurer knows the frustration that arises from receiving a payment and not knowing to which customer or supplier it relates. Challenges in reconciliation can cause cash flow and supply chain delays and potentially damage business relationships when settled invoices are chased unnecessarily.
As B2B payments are rarely sent by direct bank transfer from one business to another, funds usually arrive in a beneficiary's account in the name of the bank or payments business used by the underlying customer, rather than in the customer's own name. As well as the reconciliation challenges, this causes a multitude of issues with compliance.
Matching invoices to payments received, and the subsequent delays caused by manual reconciliation, is just one of the many issues businesses face when sending and receiving payments. However, technology is solving these problems. Payments are becoming faster, cheaper, easier to arrange and more transparent. A significant step on this journey is a move to payments on behalf of (POBO), and collections on behalf of (COBO), whereby the financial institution is able to send a payment in the name of the payer. This means the recipient sees immediately where the payment originated and can easily reconcile that payment.
Unfortunately, existing POBO and COBO solutions do not go far enough to eradicate the pain points – they do not provide institutions with true unique IBANs [international bank account numbers], which often leads to payments still arriving in the name of the payment business or bank. This lack of payments ownership defeats the purpose of POBO and COBO and leads to the same reconciliation issues experienced with traditional transfers.
Next generation POBO and COBO
Banking Circle is committed to identifying pain points such as these and working to build solutions that address the issue. This often requires solutions to be built from the ground up because an adaptation of existing solutions would not achieve the desired result.
The new Banking Circle POBO and COBO solutions enable banks and payments businesses to give their customers access to transparent, local payments and collections across borders, without the need for a physical presence or a relationship with a correspondent bank in that region. The Banking Circle team has built a solution that enables financial institutions to offer immediate visibility of the sender's details when processing B2B payments, and to collect funds locally into accounts in the underlying customer's name. As such, payments now behave much more like consumer bank transfers: fast, streamlined, transparent and fully compliant.
Banking Circle POBO and COBO mean payments businesses and banks can deliver this service without relying on the slow, costly and outdated correspondent banking network or investing in building their own solution.
It was important to Banking Circle's team that the new solution enabled providers to comply with complex payments regulation without Banking Circle taking ownership of the relationship. As a result, the financial institution remains in control of both the relationship and customer experience, while Banking Circle provides the infrastructure for payments and collections to be made economically and efficiently.
Utilising Banking Circle's unique financial infrastructure, POBO and COBO offers banks and payments businesses an optimised end-to-end payment solution and visible payment chain that is compliant with Wire Transfer Regulations.
Smoother, faster reconciliation is achieved through dedicated multi-currency virtual IBANs in multiple jurisdictions, delivering improvements across reconciliation, consolidation, risk management, operational efficiency, transaction processing and liquidity management.
Available via application programming interfaces (APIs), user interface (UI) and SWIFT, the solutions can be accessed by new and existing Banking Circle clients, with just a connected or unconnected bank identifier code (BIC) required by the payments business.
To find out more about POBO and COBO, please click here.