B2B Payments

Can Multiple Banking Relationships Ruin Cash Flow?

Not having standardized payment workflows makes it difficult for many companies with wieldy systems to track their cash flow, according to a new report. Consolidating banking relationships and centralizing the process can save money through greater efficiencies while also reducing the potential for fraud.

By Jeffrey Green (@epaymentsguy)

Only one in five organizations follow a standardized and controlled payment-management workflow across the organization, even though a centralized payment platform could help reduce fraud risk and increase controls, according to new research.

The findings suggest organizations aren’t doing enough to protect themselves and their systems, according to Sungard, which commissioned the study. Among respondents, 29 percent said they would implement a payments project to reduce fraud and increase controls, though many corporations are challenged by lack of an infrastructure that can support routing and payment approvals globally.

As such, many still rely on spreadsheets and local online banking apps in a highly manual environment, notes the report “B2B Payments and Bank Connectivity: Innovations To Overcome Complexity-Drive Fraud Exposure and Cost Increases.” This in turns leads to poor cash visibility, high operational costs and increased risk of fraud and errors. Moreover, this also leads to challenges when companies rely on fragmented systems for connectivity, including SWIFT, automated clearinghouse and check-printing systems, the report notes.

Conducted in October and November 2013, the research involved surveys of 398 participants globally, with almost 60 percent of represented companies having more than $1 billion in annual revenue. Most major industry groups were represented, the largest being financial services at 19 percent and manufacturing at 11 percent. Among respondents, 67 percent worked in the treasury department.

The research found that 25 percent of companies use more than 10 cash-management banks, and 23 percent of those maintained more than 1,000 bank accounts.

Some 29 percent of respondents used SWIFT to tie their banking relationships, while 41 percent had expected to do so in the next 12 to 24 months. Only 3 percent indicated they were using a cloud-based system or externally hosted third-party connectivity, yet the percentage was expected to increased to 10 percent within the next two years, the study found. “A hub-and-spoke approach using a network or channel such as SWIFT can provide easier, more efficient and less costly bank connectivity,” according to the report.

A thorough organization-wide analysis of payments processes can lead to better understanding of areas for improvement and that can benefit the most from further examination, the report notes. “Standardizing payment processes strengthens governance and delivers cost efficiencies, while centralization delivers even greater cost benefits,” the report states.

According to the report, 55 percent of respondents with more than $1 billion in revenue relied on e-banking to connect their banks, while just 41 percent expected to continue using e-banking in the next 12 to 24 months.

Only 12 percent of respondents cited cards as their preferred payment method, indicating another area for cost advantages, especially for companies making a lot of small payments, the report notes. Moreover, some 15 percent of respondents make more than 20 million check payments per year, and 50 percent of respondents printed checks in-house, though most indicated plans to switch to outsourcing or eliminate check printing altogether.

A key benefit of centralizing payments is streamlining bank relationships, which can grow increasingly complex as organizations grow and decrease transparency into all bank accounts, the report notes, with respondents citing concentrating banking relationships and consolidating accounts as a best practice for lowering fraud concerns.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

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