The European Association of Corporate Treasurers (EACT) supports a competitive and integrated European payments market and has for many years been an active participant in the development of Single Euro Payments Area () payments. In particular, we have welcomed the goal of creating a set of pan-European payments standards that are effective, efficient and promote innovation for all market participants, enhance competition among payment service providers (), as well as the introduction of changes that serve to harmonise the financial supply chain.
However, despite many positive changes, there are still several issues which can be enhanced with regard to improving the efficiency of the whole financial supply chain. With the arrival in recent years of a trend towards instant payments, we are inviting relevant banks and governing bodies to recognise the corporate perspective on instant payments, and to address challenges limiting the speed of corporate accounting: payment execution, communication and reconciliation. EACT can play an active role in the definition of the business requirements and in the identification of the possible solutions.
Addressing time waste in the corporate payments cycle
The recent rise of instant payments is perhaps most noticeable at the consumer level. Across Europe, individuals are starting to have their payments reconciled and confirmed instantly after initiation. For larger businesses, which may be simultaneously dealing with both collecting money based on receipts and issuing payment based on invoices and bills, as well as communicating with banks, suppliers and customers, the situation is far more complex. However, this does not make the dream of instant, or at least more rapid payment, any less appealing for corporates. Time wasted on non-added value activities is one of the most pressing challenges in the financial supply chain, since the rate at which you close payment reconciliation increases the rate at which you can restart business cycles.
Furthermore, the reduced settlement times of instant payments could enhance the cash management capabilities of the Treasurers, enable quicker repayment of self–liquidating financing or reduce the recourse to credit lines in order to meet the obligations of corporate payments. Achieving instant payments in systems this complex is a daunting challenge, but improvements are definitely possible.
The relationship between payments and information
Instant payments differ between consumers and corporates due to the amount of information that must be processed. Individuals are able to receive confirmation nearly immediately about the transfer of funds at point of purchase, or in a peer-to-peer context, in an efficient and effective process. A similar situation is true for banks. For a bank, information and money (that is the payments themselves) are one and the same, confirmation of money, either going out or coming in, is a unified data point that is straightforward to process. The distinguishing factor for corporates is the treatment of information which accompanies payments both received and paid. Corporate accounting systems, at present, require confirmation of payment (via banks) and communication of the associated information for the reconciliation added by the payer with any sale or invoice/bill. A lack of unified standards in these communications processes requires a large amount of human oversight to execute payment reconciliation, slowing the process down significantly.
Creating harmonised communication standards
Ultimately, for Europe’s businesses to reap the benefits of the technology and innovation driven rise in instant payments, communication and reconciliation standards must also be brought into a unified, workable standard. We welcome an approach in which banks apply the same standards of communication in the ‘bank-to-corporate’ space for all transfers, which could be more easily interpreted and processed by technology limiting human intervention to exception handling. Introducing instant payments into the corporate financial value chain requires the same degree of attention that was applied to the successful harmonisation of a variety of national credit transfer and direct debit transactions to common standards.
Using the standard (post migration)
It is our recommendation that any implementation of instant payments standards should be designed along the standards of the Credit Transfer () scheme. The scheme's standards facilitate payment initiation, processing and reconciliation, based on straight-through-processing (STP), which directly addresses corporate expectations for increased speed and ease at which payments can be processed both for the payer and the payee. The standardisation of interfaces, cross-border interoperability, security and ease created by adherence to , provides the model which should be sought in all payment standardisation.
Instant payments at corporate level: not a question of 'if', but 'when'?
Instant payments are progressing across Europe, and the impact on consumers is already starting to create waves. Cash and cards will soon be widely met by a technologically driven, secure and real-time alternative for both payers and merchants at point of purchase. Instant payments could also fit perfectly with some corporate business models that are currently using delivery against payment solutions, or for commercial transactions of digital content online. Given the massive value of shorter payment settlement cycles, there is no reason why all businesses would not want to enjoy the same speed, convenience and efficiency of instant payments for corporate payments that consumers will soon get used to.
However, the realities of business operation at a corporate level, particularly doing business in multiple countries, mean that instant payment, instant communication and instant reconciliation are still difficult to realise. It is our hope that following the success of the Scheme, and further encouraged by the rise of instant payments at the consumer level, a truly unified communication standard across the entire payment spectrum can be soon brought about, so that all businesses can benefit from the inevitable adoption of instant payments.
Massimo Battistella is Manager of Administration Services at Telecom Italia S.p.A and has spent his entire working career in corporate treasury and finance management. He is also a Board Member and Deputy Chairman of the Italian Association of Corporate Treasurers (AITI) and a Board Member of the European Association of Corporate Treasurers (EACT)
Related articles in this issue:
Euro Retail Payments Board Meets for a Third Time
Highlights of EPC Report to the Euro Retail Payments Board on Instant Payments
Instant Payments at Point of Sale – Overcoming Customer and Merchant Barriers
Realising the European ‘Payments Dream’
Related articles in previous issues:
Instant Payments – a Winning Bet? ( Newsletter, Issue 26, April 2015)
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