With government and private sector-led initiatives pushing for faster, digital payments across the globe, corporates and financial institutions are still missing a key element of enhanced transactions: data.
For corporates, it’s the remittance detail of a transaction that supports settlement, reconciliation and enhanced data analytics for CFOs and treasurers to gain better insight and visibility into corporate finances. For banks, that information is key to facilitate the processing of a transaction and ensure the proper compliance checks are complete, including Know Your Customer (KYC).
While payment rails like ACH, Faster Payments and beyond offer enhanced transmission of data, Nick Armstrong, CEO of identitii, says they still fall short of what corporates and their FIs need.
“There is a different between sharing more information, and being able to securely share actual documents,” Armstrong told PYMNTS. “ACH and Faster Payments can’t share the rich information that is needed to reconcile payment exceptions, verify identity or route payments.”
He’s not the first to bring up the issue of corporates and banks struggling to transmit information along with funds. In an earlier interview with PYMNTS, Ben Peters, chief operating officer at insurance payments solutions company VPay, said a lack of remittance data may be partially to blame for ACH’s lack of ubiquity.
“The issue with ACH is the separation of remittance claim data with the actual ACH payment,” he said earlier this year, pointing to the challenges that this introduces for the healthcare and insurance payments space.
In corporate banking and payments, the challenges that arise can be vast. The Federal Reserve raised this issue way back in 2012 when it released a report linking the importance of companies’ access to remittance data with their adoption of electronic B2B payments. But even as regulators like the Fed in the U.S., and others abroad, as well as private-sector players, continue to press the payments innovation needle forward, businesses and their banks continue to face a data dilemma that is far from inconsequential.
In fact, identitii’s own research estimates that as much as 8 percent of SWIFT network messages are held up every day because there is not enough information linked to a payment for an institution to be able to process it (that equates to 2.4 million stalled payments a day, for those counting, based on the nearly 30 million messages SWIFT recorded per day earlier this year). Armstrong added that it costs an average of $50 for an institution to manually investigate a transaction to make up for a lack of data and assess what additional documentation and information an institution needs to complete a transaction.
“That’s a big expense for banks,” he noted.
A stalled transaction is naturally going to present a headache for corporates and their treasurers, and limit their visibility into payments and finances. For banks, in addition to the cost of manually investigating a transaction, Armstrong emphasized the role that a lack of transaction data plays in hampering compliance efforts, particularly when it comes to KYC.
Financial institutions need to “know more about each and every transaction, not just about who they are transacting with,” he explained. The ability to send KYC-related documents is essential to the KYC compliance process, like identity verification and purpose of payment.
As markets enhance payment systems, transaction times are slashed. While regulators and innovators are not entirely ignoring the importance of transmitting data with money, rising regulatory requirements for KYC and other rules mean corporates and banks will need access to even richer data. And with shorter transaction times, banks and corporates must meed those data demands to prevent bottlenecks and backed-up transactions.
Furthermore, as Armstrong noted, the movement of this information must not only be complete and speedy, it must be secure. Recently, identitii launched Overlay+, an enhanced version of its tool to enable banks and corporates to transmit data that uses robotics process automation technology to offer “live monitoring and an unalterable record of any automated activities,” Armstrong said. The tool integrates with existing Legal Entity Identifier (LEI) databases to support due diligence, KYC and AML compliance, and enables banks to send — and corporates to respond to — requests for information initiated by the identitii platform.
The solution is also able to integrate into Microsoft Outlook and other email platforms, allowing banks and corporates to send and receive request for information via email “without actually sending data over un-secure email channels,” explained Armstrong, adding that the solution supports translation of data between bank and network formats, and movement of both structured and unstructured data.
Overall, it’s a tool that reflects the growing importance of payment data when money is moved. A recent survey from Ovum and Temenos found access to data is a priority for corporates when it comes to the services they seek from their banks. While Real-Time Payments services ranked second, researchers noted that “RTP and data availability goes hand in hand.”
Banks able to offer RTP will have access to transaction data in real-time, too, the report said. But according to Armstrong, these rails remain unable to handle the quality and volume of data corporate treasurers and FIs require for seamless operations.
“The main challenge is that rich information and documents can’t currently be sent with a payment,” he said, “because existing payment networks limit the amount of information that can be shared.”