Technology is transforming the corporate payments space, creating numerous opportunities for treasury teams to drive efficiency in this area. In this article, Sven Lindemann, CEO, Hanse Orga highlights the current trends in payments and how Hanse Orga is helping its clients become best in class.
What do you see as the major themes in the treasury payments space today?
Centralisation, fraud prevention and compliance are all major topics that clients are focusing on at the moment. Everyone wants to discuss these issues, and organisations are increasingly open to moving to the cloud in order to address these areas more effectively.
Where centralisation is concerned, we find that clients are looking to centralise not only their outbound payments, but also their inbound payments. When companies receive payments from customers around the world, they may have an opportunity to centralise these by creating a standardised, centralised process that we call an order-to-cash factory. This enables companies to build a strong credit collection, cash application and dispute management process, as well as giving them the ability to deal with different kinds of formats. Likewise, this model can be used to support compliance and gain a deeper understanding of who the company’s customers and suppliers are.
This model also covers topics like fraud prevention, which many organisations are approaching in a very structured way. On the outbound payments side, it’s important to identify where there is a risk of payment fraud. But companies also have to consider the risk of issues arising in relation to inbound payments, particularly if the company allows customers to apply deductions to invoices. Increasingly we see companies wanting to approach this in a centralised way so that they can make sure they are working with the right partners, paying the right amounts and receiving the expected sums.
What trends are you seeing in terms of how treasurers’ technology requirements are evolving?
One important trend is the rise of what we call hybrid cloud solutions, which are a cross between on-premises solutions and cloud solutions.
In some cases, we find that large corporates want to keep some parts of the business in an ERP-integrated solution because they want to maximise the outcome of the ERP implementation. But in parallel, organisations may have decentralised subsidiaries which are not in their ERP system. For these decentralised subsidiaries, the company may still wish to have visibility over the cash, resulting in a strong requirement for cloud technology.
We are therefore focusing on solutions which enable companies to use a mixture of ERP and cloud technology, with a strong focus on cash visibility around payments, as well as on fraud prevention and compliance.
Is this a relatively new idea?
It is. In the past, Hanse Orga has focused strongly on ERP-integrated solutions because there we saw the best outcome for our customers. The idea was to centralise everything into the ERP – and there are some payments solutions integrated in the SAP world where users don’t have to leave SAP.
But more recently we’ve seen a lot of global payment projects following M&A activity, when large corporates have new subsidiaries which are not yet integrated in the ERP system. Typically they want to have control over the payments processes in these subsidiaries as soon as possible.
We’ve responded to this need by purchasing Tembit Software, a cloud payments specialist. This has allowed us to integrate a cloud offering into our ERP solution, thereby creating a hybrid cloud solution.
How does the solution work?
The idea is that a company can decide to set up a global payments hub, which can be integrated into its ERP system. Meanwhile, all the non-ERP users can connect via the cloud.
Crucially, both solutions should act together seamlessly without any complicated interfaces. So one user can decide to enter a manual payment via the cloud, while another enters a payment via the ERP system. Both can see what other users in the other technology environment are doing – and both systems have the same data set, so the company can decide whether the cloud is the leading system or the ERP is the leading system.
In practice, this could mean that treasury might decide to work on the cloud – but within the cloud environment they can see everything that’s happening in the payment space on the company’s ERP system and can approve payment runs to send them to the bank out of the cloud. Meanwhile, accountants who work with SAP all day can stay within the environment they know and do ad hoc payments to suppliers, or make transfers to other subsidiaries. Alternatively, treasury might sit in the ERP, with payment runs collected via the cloud and then approved by treasury via the ERP system.
What other developments are you focusing on?
As previously mentioned, fraud prevention and compliance and centralisation are major topics in the market. In many cases, organisations are dealing with a large number of banks in an even larger number of countries. When you have to send payment files to ten banks in 100 countries, it’s a huge effort to manage all of the relevant payment formats and country specific dialects. Then you have to connect to the banks, so you have the choice of going via SWIFT, via host-to-host connectivity or via standard protocols like EBICS.
We can take care of that by offering managed payments services so that customers can focus on their business processes. Once a payment is approved, we can take the payment file and, if needed, optimise the format. We can also optimise payments based on bank fees – for example, if you have an agreement that Bank A gets 60% of your payments and Bank B gets 40%, our system can measure that automatically and route payments to one of the two banks in accordance with the contract. Our managed services also include fraud prevention, fraud detection, fraud monitoring and compliance services.
How do you see treasurers’ technology needs evolving in the year ahead?
We still see a large need in the market for ERP-integrated solutions. We are also seeing a lot of requests from organisations to put satellite solutions in the cloud where they do not need integration, which is why we’re investing a lot in cloud development. But overall, we believe clients will be focused on maximising the outcome of their ERP system while combining this with the capability that a cloud solution can bring.