GTNews: Efficient funds management in a fragmented payments ecosystem


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Over the last couple of years, the exponential growth of online commerce and the corresponding explosion of payment technology have resulted in a fragmented market in which the efficient management of funds becomes a daily challenge for businesses of any size and industry. Advanced, modular technology creates a comprehensive solution for the resulting treasury challenges.

The global non-cash transaction volume reached USD 358 billion in 2013, marking an increase of 7.6% over 2012 (cf. Capgemini and The Royal Bank of Scotland plc. (RBS): World Payments Report 2015). This coincides with an exponential growth of solutions and providers on the payments market. Not all segments of this market develop at the same speed and there are few solutions that cover more than one of them.

Businesses drive the demand for fast, convenient, and secure solutions, as they strive to present competitive offers to their customers while at the same time incurring consistently high infrastructure costs. This causes severe challenges, as the efficient management of funds is made harder by a mass of solutions, interfaces, settlement approaches, and payment options that have to be integrated into everyday workflows. The fragmentation of the current market means, however, that there are no efficient and affordable solutions that cover the entire payments value chain and particularly the reconciliation of technological payment transactions and real funds movements. This impairs the overview over the cash flow and with it the optimization of working capital as well as time- and cost-efficient funds management.

The above factors cause noticeable barriers to the growth of consumer-facing businesses, but also to B2B-providers of the payments industry. There are four prominent groups of businesses that have unique payment and treasury requirements, namely payment card acquirers and issuers, Financial Institutions, Payment Service Providers (PSPs), international merchants and marketplaces. As different as these groups seem at first sight, they still run up against similar challenges:

  • Real-time overview of funds and balances
  • Accurate, efficient working capital administration
  • Consolidated, streamlined cash management
  • Easy, resource-saving reconciliation and billing processes
  • Fast and easy connection to acquirers in many regions
  • High-end white-label technology to process transactions
  • Fast and easy integration of global alternative payment methods (APM)
  • Intuitive, flexible customer and bank account management systems
  • Connection to payment-related services such as fraud and risk management

These issues have to be addressed speedily and comprehensively to ensure sustainable growth for the entire payment ecosystem. The best approach to solving them is an integrated solution that can be adapted to the special requirements of each payments and banking industry segment. Such an approach requires technological expertise as well as a deep understanding of the legal and structural setup of the industry. It has to become possible to combine features from the currently separate sectors of payment gateway solutions, banking technology solutions, user account management, risk management, and acquiring for cards and other payments. For a truly comprehensive approach, it is important to challenge the status quo, where these four areas are perceived as separate, as this can eliminate other time- and resource-consuming issues such as incompatibility of solutions, alignment of multiple interfaces and tools, and a low degree of automation and scalability. It is particularly important to do this with an eye to streamlining internal treasury processes in order to make businesses highly transparent and flexible.

To achieve this, businesses should be able to manage all financial matters from a central hub. This requires the integration of technological solutions with the existing banking framework. In addition to that, funds have to be moved through the banking networks, which has several technological and regulatory conditions. They include a Financial Institution or banking license, PSD-/ PSD2-compliance, SWIFT-, and ISO 20022 connectivity. Such an integrated payment and banking solution helps companies streamline their cash flow. Apart from the centralization, this enables fast reconciliation as well as real-time funds overview and management and therefore efficient working capital management. It also saves time and resources through the availability of business bank accounts and foreign exchange capability. All this reduces the time, effort, and cost of cash management significantly. This benefits businesses from the payments sector as well as banks, insurance companies, multinationals, and others. The real-life benefits of such an integrated, modular solution become apparent when considering the implications for the user groups discussed above.

Payment Card Companies benefit from streamlined reconciliation and funds management. The real-time overview over their accounts enable them to adjust capital quickly. They can also forego an expensive BIN sponsorship or prime membership and create more varied, innovative, and competitive offers. It becomes possible to integrate APMs and traditional card schemes to offer a unique, attractive product portfolio. Plus, the option to complement a card program with a payment account, backed by a Financial Institution, secures full control and makes the benefits of funds control available.

A modular white-label solution enables the modernization of banking infrastructures. With it, banks and Financial Institutions can connect a legacy banking system to modern payment-IT. They, too, benefit from real-time reconciliation and transparent funds. Plus, a solution from a trusted third party minimizes in-house development, freeing additional resources. It is an added advantage that the solutions of a Financial Institution meet compliance and connection requirements and are inherently compatible with banking infrastructures. This makes them the perfect link between banks and payment providers as well as between banks and consumers.

By integrating with only a single solution, Payment Service Providers not only streamline their internal reconciliation and funds management, they also enable their customers to do so. This gives them a vital advantage on a highly competitive market. Automated reconciliation and billing processes are easy to manage and can facilitate extremely complicated billing and commission models. On the product side, PSPs can provide a global range of payment methods and add and remove them from their range with a single click. The connection to the banking rails makes it possible to open bank accounts and to map accounts from other banks into their ecosystem.

An integrated solution means that merchants and marketplaces require only a single point of contact to the payments ecosystem. In addition to more efficient working capital management and time and costs savings through advanced cash management, they can provide a highly customizable portfolio. It becomes easy to provide a global range of payment methods, the connection process to acquiring banks becomes easier, and complex billing and payment structures are now simple to manage and reconcile. Effectively, they save the expenditure of time and resources for advanced cash flow management.

The demand for and benefits of an integrated, comprehensive payment product suite that connects the worlds of banking and payments have become obvious. All members of the payment ecosystem benefit from real-time reconciliation, flexible working capital, and fast, efficient funds overview and management. The streamlined cash flow, finance and customer management options also advance the growth and prosperity of the entire sector.