Treasury Today Country Profiles in association with Citi

The next generation of payments factories go beyond consolidation

As corporate payment factories mature, some companies are looking to further optimise their payments processes, and new-style payment factories are helping them do just that. Next-generation payment factories allow corporate treasury not just to gain central control over outgoing payments, but also to…

…use that information to control disbursements in real time and optimise payments to align them with forecasts.

As a result, companies get the benefit of centralised management of payments and consequent visibility, as with a traditional payment factory. They can also move beyond that to institute more efficient payment structure – using netting to reduce overall payments, and regrouping to reduce cross-border payments, and so on – and choose when to make payments for improved liquidity management.

Companies have long recognised the benefits of centralising payments management. By routing all batch and manual enterprise-wide payments through a payment factory and managing all bank communication from there, companies can reduce the number of bank interfaces that they must manage, enabling them to use the same interface for different payment types and for all of their subsidiary operations. This also allows for consolidation of outgoing payments, reducing the staff hours and cost of managing payment flows and creating greater visibility into where payments are going, and when.

However, by leveraging an in-house bank with the payments factory and taking advantage of new technology and standardisation advances, companies can move beyond that to net and regroup payments in order to make payments management leaner and more efficient.

In particular, there are a number of advances that together offer great benefit in terms of streamlining and increasing control over both payments and account management. This process is enabled by making use of both the in-house bank and best-practice infrastructure developments to improve STP and cash visibility.

One key difference between this and a traditional payments factory is that cross-border payments are streamlined and made more efficient by regrouping and re-routing them as domestic payments, wherever possible, through the in-house bank (IHB).

The in-house bank is primarily responsible for intercompany liability management. Internal entities can hold virtual accounts with the IHB in order to manage internal transactional flows. Thus payables and receivables can be netted between different internal business units and settled periodically through a single external transaction that clears through internal virtual accounts. This can drastically reduce external banking transaction fees. However, it does have the effect of shifting liabilities through the in-house bank, and thus the legal and regulatory ramifications of that must be managed.

Integrating a payments factory and an in-house bank provides the opportunity to make use of the IHB to also improve external A/P management, since the IHB can make payments ‘on behalf of’ different entities within the company. The IHB, with a bank account in the home market of the vendor, can thus also make payments to external vendors domestically and reduce or remove much of the costs generally incurred in managing cross-border payments.

Again, the tax and legal implications of this external payments regrouping must be managed, and it may not be practical or feasible in all markets. ‘On behalf of’ payments are not as important within the EU, where the Payment Services Directive and SEPA are removing the distinction between domestic and cross-border payments.

Making use of other best practice solutions also helps to drive greater payments efficiency. For example, using SWIFT for Corporates connectivity to interact with banks allows for optimised bank account management and greater visibility into flows. Plus, best-of-breed payments factory solutions come with integration to ERPs and other treasury systems almost out-of-the-box, removing much of the headache of standardising payments data and information.

For example, SAP offers ipcNavigator, a payment solution from Hanse Orga, to centrally manage payments, connect with SWIFT, provide SEPA-ready payments, and so on. And vendor OpusCapita offers fully-integrated payments factory, liquidity management and in-house bank solutions that are also SEPA-ready, provide SWIFT access, and interface with the vendor’s cash forecasting solution.

By standardising payment and banking information and bringing it into ERP systems and treasury systems – and getting information in near-real-time from SWIFT – the treasury can then use this information from the payments factory to have greater control over the disbursements process and make payments in line with forecasts.

Bringing together advanced technologies, an in-house bank and centralised payments management through an ERP can create an advanced payments factory that goes beyond simply consolidating payments to optimising them.



Offsetting payables and receivables between two particular entities to pay the just net amount owed. Can be done for two internal entities, and (where possible) for internal and external accounts.


Using local accounts connected to the in-house bank to make payments ‘on behalf of’ other group entities in order to ensure that whenever possible payments are made domestically, to reduce the expense associated with cross-border payments and act as a natural hedge to reduce FX exposure.


SWIFT-Connected In-house Bank
  • Centralised liquidity management.

  • Reduced idle cash.

  • Reduced external banking costs.

  • Improved control over outgoing and incoming payment flows.

  • Centralised and/or de-centralised processing of account statements.

  • Cost-efficient internal financing (with offsetting).

  • Interest can be calculated both for internal and external accounts.

  • No need for software maintenance and bank connections at group companies—all managed centrally and through SWIFT.

Source: adapted from OpusCapita

Payments Factory Connected to IHB
  • Centralise and automate the payment process (A/P).

  • Maintain a single centrally managed payment processing system.

  • Use the same payment format.

  • Create one centralised European process for payments (under SEPA) and centralised or regional payment processes elsewhere.

  • Increase the efficiency of payment processes with full STP.

  • Automate account statement management and enable real-time reporting.

  • Provide a reconciliation tool and automated process to manage reference information.

  • Minimise the amount of manual work.

Source: adapted from OpusCapita