By Morne Klynsmith – Head of Treasury Technology, TreasuryONE
In a three-part series, we will explore bank connectivity – and some of the challenges that corporates face on a daily basis.
In this first article, we look at the methods which South African corporates typically use to access their daily cash balances, bank statement transaction details for reconciliation purposes and processing of domestic and cross-border payments. It can be one or a combination of the following, however, logging on to a multitude of banking portals to gain a view of an organisation’s cash position, or how to centralise payments in order to optimise working capital, are just some of the headaches that a corporate can do without.
How corporates connect to banks on a daily basis:
- Manual access via the bank’s online platform
- Direct Host-to-Host Connection through a SFTP (Secure File Transfer Protocol) connection. This requires a direct connection to each bank within the corporate’s banking landscape. These connections are mostly used to connect a corporate’s ERP (enterprise resource planning) and TMS (treasury management system) to the banks for the automated retrieval of bank account statements and the processing of payments and debit order collections.
- SWIFT connectivity allows for a single point of entry to the SWIFT network, which automatically connects corporates to more than 10 000 banks across the globe. The SWIFT network provides a corporate with additional functionality currently available over a Host-to Host connection which includes real-time instruction matching for treasury and forex transactions, banking market infrastructure for processing payment instructions between banks, and securities market infrastructure for processing clearing and settlement instructions for payments, securities, forex, and derivatives transactions.
While each of these options has its place, there are also some disadvantages:
Online Banking Platform Access:
- Headache of managing user access for each user at each bank. It is a time-consuming and often document-intensive process to manage user access and login tokens.
- Each bank has its own look and feel and functionality available on its platform, resulting in various formats for file integration that differ per bank.
- Organisations making use of multiple banks are therefore unable to retrieve consolidated reports at company level and usually have to resort to excel to get a complete view of their cash position.
- Resource intensive due to duplication of effort on various platforms and systems
Direct Host-to-Host Connection:
- Connection is required per banking partner
- Some banks do not support this functionality
- Lengthy and labour-intensive process in setting up the connectivity with each bank, especially within the Afra-Asia region where many South African corporates operate and manage bank accounts
- Each bank can have its own specific technical requirements and format, and as a result, many points-of-contact need to be managed
- File formats and technical requirements can differ from bank to bank, as well as country to country
- Lack of control, dependent on the bank’s file execution and timing
- Resources are required to monitor and manage the servers, the various connections and file exchange processes
- High cost of subscription to the service, and thus only viable for very large corporates
- High cost per message or transaction
- Lengthy joining and implementation procedure
Aside from these traditional methods offered by the banks, corporate’s are in need of a more advanced solution that will enable them to maintain visibility over cash, and manage liquidity in real-time. Connecting to a myriad of bank portals with numerous security tokens to handle treasury operations is risky, cumbersome and time-consuming. However, having a single point of entry to view and manage worldwide bank accounts can significantly streamline daily treasury operations, create efficiency and reduce risk, and thereby translate into significant cost savings. A centralised view of a company’s bank accounts can provide corporate treasurers with better control of their bank account structure and make way for real-time visibility to be able to manage their investments and make their important day-to-day financial decisions.
We will explore this in more detail in our next article.