Corporate to Bank (C2B) Collaboration
Treasures at Corporates and corporate bankers constantly face the challenge of making collaboration between them efficient and enduring. A corporate treasurer would want a standard integration framework for collaborating with all the banks with whom the corporate has relationship including integration and reconciliation with Business Processes. The bankers have the challenge in understanding the corporate’s business and technology to integrate and get data. The corporate would want to bank to adapt to their needs to gain their business and the banks have the challenge in understanding the corporate processes and systems and the variations in each corporate.
There have always been two schools of thoughts on how the collaboration platforms have to be defined
a) Banks have to provide the platform for collaboration by hosting – by picking up the data, transforming, providing analytics and data for reconciliation in the format understood by the corporates. Here of course, to the extent of collaboration defined, the corporate will need to provide the data to the bank which may use it to make assessments of the market trends.
b) Corporates can deploy a collaboration platform – or a more advance payment factory and shared service centers that can interface with banks on a standard international format and technology. Here, since the data belongs to the corporates they will own and manage the data in entirety, take decisions for optimum cash and liquidity management and other treasury functions.
In the first case the bank gets a footprint in corporate treasury and in the second the corporate optimizes it’s own treasury operations and has the flexibility to choose different banks with insights to negotiate terms. The arbitration may be based on the size of the corporate and the extent of treasury functions based on the nature of the Business.
There of course exists a third paradigm where the corporate and banks collaborate on a third party network perhaps on cloud which will provide the infrastructure for data exchange. Without taking away the benefits of the options above the cloud can also become a data bank and provide options for greater business opportunities for both corporate and banks and without the need for either to bother about the vagaries of others’ deployment.
Here, I have discussed broadly the different challenges and approaches observed from the corporate side based on discussions with both treasures and the bankers who are trying to onboard them.
a) Reduce Duplication: This is to reduce the duplication of work between the business processes and the processes that forwards and receives data from Banks. To use paper terms, a corporate would not want to fill up the forms twice.
3. Integration with Business Processes – This is an important point to consider. There can be multiple processes that can create information that needs to be shared with the bank and the reports or statements that you get may impact multiple Businesses. It is important to identify the single point from which the trigger for collaboration for the Business Processes is raised. A carefully drafted consumption or subscription model should be defined to prevent proliferation and misuse of such a channel of communication. An important point to consider here is how to handle if the corporate has multi country or multi company operations. A Payment Factory or a Shared Service center will also require a robust collaboration platform.
5. Real Time Reconciliation – Once the purpose of collaboration is defined and the instruction is sent the impact of a positive or a negative response will need to percolate to the Business Process that triggered it. Once the necessary controls and workflow of accepting the message has been completed a real time update to the initiating process or reconciliation of the item can significantly stream line the process and can help get accurate and real time positions and analytics. Setting up reconciliation parameters is among the issues that will require a high involvement. The data for reconciliation required by the corporate may not be used for processing by the bank and hence an overhead to retain the data in it’s system. The corporate needs to consider that the reconciliation data received from the bank (statement or an advice or a report) may be an aggregation of the request or may be a part of multiple responses received from the bank. A clear documentation of reconciliation needs can go a long way in simplifying the onboarding process.
b) Real Time Integration: The technology had advanced and any wait should be deliberate but not to generate a file. The business is real time and views on working capital and other needs are needed quicker than before.
c) Security and Control: The challenges of real time integration and collaboration with external parties bring with it the issues of security of communication channels and authentication. A real time system puts limitations on the ability to recall and instruction sent to external parties and should lend itself to the options of checks and balances before the other parties actions it and the transaction becomes irreversible.
d) Quick Onboarding: Setting up the collaboration can be expensive and time consuming. It is necessary that the platform that we define for collaboration – who ever defines it – should quickly onboard to show successes. This is important considering the competitive scenario and considering the fact that technologies involved are now proven in the market.
e) Standardization: In order to quickly onboard and also to ensure that there would be no re-invention of the wheel for every business and for every banking relationship there is a need to standardize communication protocols, security standards and message formats. This again should be industry standard and acceptable.
f) Support and Redressal: Collaboration requires quick answers if the service requested does not reach the intended parties. The issue could be technical or related to the business. There is a need to check the status at all times and the need for people to be available within the Service Level Agreements to support.
A simplistic representation of the a solution for the above challenges is represented in the diagram below: This representation essentially contains three broad components of the solution:
- Connector: That will include all the components and configurations that are required to collaborate including defining the protocols and parameters for connection security.
- Formatter: The formatter will have the mappings that are required to transform the business instructions into messages that can be transported to the bank. This is an elaborate function which will not just include transforming the message to but include enrichment and validation for message structures in both directions.
- Monitor: A monitor will be to view the status from both business perspective and a technical perspective. The monitor should have the control to throttle, repair and resend as also to send queries to the bank.
Figure1: Schematic for C2B Collaboration
This collaborating platform defined to address the needs and challenges should adhere to strict guidelines that can be used to set up broad based collaboration needs and challenges keeping in mind the historical processes, current requirements and to future proof.
I have listed below some of the guidelines that are required to be defined for this purpose and should be kept in mind while defining a collaboration platform:
1. Provide to quick access to services and funds at the bank – The platform should provide or be extensible to access any current or potential service of the bank or should significantly reduce costs. Payments, collections and reconciliations are natural contenders. The questions that we can ask are: Do you want to send your invoice, purchase order to the Banks too. Will it help if you send your LC applications by linking to the processes at the bank etc. We need to identify the end point Business functions in your ERP processes that can be used as the pointer to start aggregating the data.
2. Message Standardization – This is an important decision to be taken upfront that the platform will be on an international standard that can also be used to collaborate with any other bank with which you already have a relationship or may develop in the future. ISO20022 XML messaging is worth considering as there is a very high degree of awareness and has a breadth of functions. In addition there are published schemas that can be easily imported.
3. Integration with Business Processes – This is an important point to consider. There can be multiple processes that can create information that needs to be shared with the bank and the reports or statements that you get may impact multiple Businesses. It is important to identify the single point from which the trigger for collaboration for the Business Processes is raised. A carefully drafted consumption or subscription model should be defined to prevent proliferation and misuse of such a channel of communication. An important point to consider here is how to handle if the corporate has multi country or multi company operations. A Payment Factory or a Shared Service center will also require a robust collaboration platform.
4. Advice and Communication – The transaction that you are requesting from the bank or the information that you will receive from your bank has other stakeholders internal and external. A careful mapping of stakeholders and proactively alerting them is an important feature of the collaboration platform. You can either ask your bank to do this or define an alert in your system that will send an e-mail or an SMS to the necessary contact. Alert can also be used as a mechanism of follow up to check the reason for non delivery of service requested or inform the concern to take up follow up action.
5. Real Time Reconciliation – Once the purpose of collaboration is defined and the instruction is sent the impact of a positive or a negative response will need to percolate to the Business Process that triggered it. Once the necessary controls and workflow of accepting the message has been completed a real time update to the initiating process or reconciliation of the item can significantly stream line the process and can help get accurate and real time positions and analytics. Setting up reconciliation parameters is among the issues that will require a high involvement. The data for reconciliation required by the corporate may not be used for processing by the bank and hence an overhead to retain the data in it’s system. The corporate needs to consider that the reconciliation data received from the bank (statement or an advice or a report) may be an aggregation of the request or may be a part of multiple responses received from the bank. A clear documentation of reconciliation needs can go a long way in simplifying the onboarding process.
6. Real Time Monitoring and Status update and Control – An extension of the previous point is a careful agreement with the bank on how to get the feedback. A single instruction can have different stages of processing both at the corporate and at the bank. The bank may have received the instruction but will need more information or it may have forwarded the request but waiting for a response. A careful planning of the status response and update in a local monitor to give a view to the business and technical users can reduce a large amount of support concerns and help improve the credibility of Business. Monitoring in itself has to be a carefully planned activity as different types of service requests can lead to different types of information being monitored. Message Monitoring is different from a Business Transaction monitoring. The headers will provide details of the underlying Business and monitors should be defined for individual business users as the messages themselves are important and possibly legal documents. Meters should be created in the monitors to provide statistics that will track the cost of messaging, the success or failure of the collaboration platform, means of optimizing the platform among others. Control will involve defining roles in the corporate whose approvals are required before releasing the instructions to the bank or to confirm if the instructions can be taken into corporate processes over and above the security validations defined. Rendering the monitor on a mobile device and providing options to approve and correct on a hand held device can bring about mobility and cost synergies. The platform should be easily integrated with device independent mobile standards.
7. Security Standards and Protocols – Since collaborations will involve multiple entities who will have different levels of technical and Business maturities with different policies for security and connections it is best to define the best industry standards for the same. The typical issues to consider will be the mode of transfer and protocol (why not leverage the latest standard of WSRM can be a questionasked), encryption and decryption algorithms and libraries, digital certificates and the Certifying Authority. The connector part of collaboration has to be flexible and each of these should be attached to well defined policies. Defining connection along with reconciliation tend to be the most time consuming exercise of a collaboration platform.
SAP provides software that can be deployed at both Bank and the Corporate to develop a strong collaboration platform. Collaboration can be defined on Process Orchestration (PO) at both the bank and the corporate. Financial Services Network (FSN) a cloud based solution provided by SAP can be used as an effective collaboration tool to exchange information between corporates the bank. On the ERP side SAP has a wide range of solutions for corporate treasury for managing cash, liquidity, working capital and other needs. AIF a Focus Business Solution from SAP provide ability to track errors from business perspective in an interface and has the ability to alert stakeholders on different channels.
A set of Corporate to Bank adapters working on a Host to Host Mode have also been developed by SAP in close collaboration with banks that have pre-tested and pre-configured scenarios that addresses many of the guide lines listed above.
Collaboration between businesses is not new. On line real time collaboration between corporates and banks has also been in vogue and real time technology is no longer the equivalent of rocket science. It already is in some cases and is increasingly becoming a necessity and hygiene to have a wide range of collaboration for a large gamut of business and services. This is a note on some of my experience in this space.
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