Payment hub: Simplify payment complexities

Company growth, new company acquisitions, and expansion into new regions bring complexity and challenges.

Wouldn’t it be great to see, manage, and optimize all your payments in one central place? This is the vision of every treasurer responsible for global payments.

The good news is that ION’s Treasury Management System (TMS) solutions offer integrated tools for this purpose: a payment hub or payment factory.

What are the key challenges when it comes to global payments?

Treasurers need visibility of overall cash flows and keep track of many accounts at different banks.

Here are the key challenges treasurers are facing:

• Decentralized payments: Payments have different sources. Treasury deals need to be paid by the treasury department. The Human Resources (HR) department takes care of payroll. The TMS exchanges data with Enterprise Resource Planning (ERP) systems and bank portals. Complexity increases as global companies use multiple ERP systems or different versions of an ERP system as well.
• Different payment formats and bank connections: Each market has a different payment infrastructure and potentially different payment formats. Treasurers must find solutions to process local and/or cross-border payments in a secure and cost-effective way.
  The same is true for bank connections: Multiple interfaces with different banks make payments management more complicated.
• Increasing security risk: Payment fraud is a main concern. Therefore, companies are investing in fraud prevention and fraud detection. As a common first step, treasury teams must ensure that their approval process is a multiple-eyes confirmation and that audit trails are guaranteed.

Technology is instrumental in overcoming these challenges.

What is a payment hub?

According to the Association of Corporate Treasurers, a payment hub or payment factory is “a centralized facility for payments within a group. The payment factory [or payment hub] undertakes execution, administration, and reporting for payments.”
(Payment factory – ACT Wiki (treasurers.org))

In short, it’s a tool to help treasury departments with all their payment actions.

Here are the key benefits of a payment hub:

• Automated payment processing: Efficient processes rely on automation. It is advised to use machine learning to prevent fraud, ensure sanction screening, and meet bank cut-off times. A payment hub’s automated process helps the treasurer optimize the day-to-day business.
• Centralized visibility: Payments are extracted from multiple ERP systems. They are displayed with treasury deal payments, manually entered payments, and all payments to be processed in one central place. Treasurers stay informed as they always see the latest status updates [acknowledgment of successful payment execution or rejection] from their banks.
• Optimized payments: Companies with a high volume are equipped to process POBO payments on behalf of their subsidiaries. Payments can be aggregated through netting, resulting in cost savings.
• Streamlined bank communication: Connections to banks have two parts, the connection itself and the payment message in the right format. SWIFT, SWIFT bureaus, EBICS, and APIs are some possibilities to connect. Legacy formats such as MT, local formats, or the future standard message type ISO 20022 are needed to deliver the message to the bank. A payment hub enables access to all of these requirements.
• Ensured security: PSD2 regulations require electronic data to be secured. Well-defined approval processes, including the two-factor authentication and multiple-eyes principle, ensure security within the treasury department.

A good TMS provides the functionalities of a payment hub and integrates payment streams with other treasury functionalities, such as cash management and cash forecasting, to provide full visibility and control over a company’s financial operations.

How can ION support you?

At ION, we understand the need for centralized payment processing and collection to establish standardized and secure processes. Our goal is to help our customers increase control and visibility while reducing costs.

ION offers a portfolio of Treasury and Risk Management System solutions.

Our TMS solutions help companies of different types and sizes automate and optimize their payment processes.

Here are two examples:

KION Group, a leading supplier of industrial trucks and supply chain solutions, uses ITS. ITS is a locally developed and supported TMS covering basic to complex treasury organizations in Central Europe. It provides a fully integrated, end-to-end in-house banking process and payment optimization.

Matthias Sickenberger, Senior Manager Treasury of KION Group, summarizes the benefits of the solution:

“ION’s ITS Payment Factory enabled us to standardize and simplify our payment transaction processes in our Center of Excellence. The multi-banking platform connects us with our house banks and offers us a uniform input mask, self-management of signing authorizations and an overview of most of the European payments within the KION Group.”

VARO Energy, a leading European energy transition company operating across the entire energy supply chain, uses IT2. IT2 is a comprehensive TMS that puts process control back into the hands of the treasury team. It offers intercompany account structures, multi-lateral netting, and automated cash pooling.

Jean-Paul Fuchs, Finance Business Solutions Lead at VARO, says:

“VARO developed a highly integrated payment process solution, that enables automated processing from the ERP systems to the banks. IT2 plays an important role in the process. Aside from the classical treasury system features around cash and liquidity management, we can monitor the data processing almost real-time with automated alerts/controls.”

Through this blog post, you have gained insight into:

• The global payment challenges,
• What a payment hub or payment factory is, and
• How a payment hub or payment factory simplifies payment complexities.

Learn how ION’s TMS can improve your treasury operations. Contact us for a free demo today!