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Corporate-to-Bank Connectivity in SAP: An Overview

When talking about bank connectivity there are always 2 things arising from the discussions with customers – bank file formats and protocols.

Bank formats are file formats in which a bank is able to receive payment instructions and return bank statements or payment statuses. Some of the most widely used are BAI, SWIFT MT, or XML ISO 200222 CAMT formats.  The majority of companies are still using various formats in parallel although with the global ISO 20022 message standard, there is finally a viable option to have one single format. In SAP system, some of the formats are already pre-delivered or  you can define them using customizing tools such as  (Extended) Data Medium Exchange Engine. You may find more information about payment formats in Payment formats in SAP blog series.

However, the formats are only one part of the solution when it comes to automating the payments. Equally important is to find the most effective way for a company ERP to connect to the bank.  And this is the topic I would like to focus on in this blog – what bank connectivity options exist and how you can implement them in your SAP system. The.

Manual File upload /e-banking

The use of bank portals and manual download/upload from/to ERP system is still the most commonly used option. It comes with a lot of problems though. Missing automation is an issue when you need to upload/download files manually several times a day and for multiple banks. Security concerns are also a big issue as data are processed by users and can be easily manipulated.

SAP solution:

Bank Statements

  • Manual entry  – user manually types information into the system using the FIORI app Manage Bank Statement app or SAP GUI Create Bank Statement (tcode FF67)
  • Import  – user retrieves a bank statement file from the bank, store it on a local system  and upload the file into SAP using FIORI app Manage Incoming Payment Files or SAP GUI Upload Bank Statements functionality (tcode FF_5)
  • Import  from excel template – user needs to cut and past bank statement data into excel and import the excel file into the system using the Manage Bank Statement app

Payments

 

Bank proprietary host-to-host connection

Manual file uploads and downloads might be OK for small business and occasional banking. However, larger companies with a high volume of transactions and/or requiring a high level of integration with their ERP need a different, more automated solutions.  Therefore the majority of banks offer a possibility of so-called host-to-host connection. The host-to-host connection is a direct system-to-system integration between the ERP system and the bank server, with no user intervention. The technical implementation varies from bank to bank but usually, it is based on an exchange of files over the internet using one of the network protocols e.g. standard Secure File Transfer Protocol (SFTP)  or AS2 for secure end-to-end file transfer. The disadvantage of this approach is the lack of standardization. You need to set up the connection per each bank. This might be time-consuming and complex to implement.  It also requires IT resources not only to set up but also to manage and maintain the connection. The host-to-host connection can be a good choice if you generate a high-volume of transactions through a small number of banks.

SAP solution:

A typical implementation of host to host connection involves using  SAP Netweaver PO/PI (Process Integration) as a middleware. The process chain starts in the SAP S/4HANA or ERP backend where you run the payment program. The payment program generates a payment file in the required format and places it in the respective folder in the SAP application server. SAP Netweaver PO/PI polls the file, encrypts it, and pushes it into the bank network. The bank server will pick up and process the payment file.  In return, the bank can send a payment status notification and bank statements.

Multi-bank connectivity channels

Multi-bank connectivity solutions enable to replace multiple host-to-host banking connections with a single channel. In other words, companies can send their payments and receive bank statements via one single channel and using one single format to a group of banks. The best-known multi-bank connectivity platforms are EBICS and SWIFT.

  • EBICS (Electronic Banking Internet Communication Standard) is a communication channel widely adopted mainly in Germany and France, but adoption is growing also in some other European countries.
  • SWIFT ( Society for Worldwide Interbank Financial Telecommunication) provides access SWIFT NET which is a global network used by the majority of banks across the globe.

The use of a multi banking platform has many advantages as companies no longer have to support and maintain several bank-specific protocols.

SAP Solution:

Same as in the case of proprietary host-to host connectivity, the integration between SAP system and  SWIFT or EBICS network is done via SAP Netweaver PO/PI. For direct integration with SWIFTNet, SAP offers a solution called  SAP Integration Package for SWIFT is bundled together with SAP Bank Communication Management. You may find the installation and configuration guide attached to SAP Note 1064419 – SAP Integration Package for SWIFT: Installation information. In the case of EBICS, the adapter is not a standard product but rather delivered as a part of service. Please refer to SAP Note 2343032 – Support of EBICS Adapter in SAP PI/PO

Bank connectivity via APIs

Application programming interfaces (APIs) are another way how to communicate with banks. With the shift of the banking sector towards Open Banking under which banks open up their systems via APIs, this option is considered to be the future of bank connectivity.

SAP Solution:

At the moment, only basic  API for sending payment files from S/4 HANA Cloud to bank is available under scope Item Application Interface to retrieve Payment Files (‏2YM‏)

 

Bank connectivity as a Cloud Service

Another option is to get bank connectivity as a service. Nowadays, cloud-based solutions are being adopted by more and more companies because of benefits such as pay as you go model, ease of implementation, and elimination of maintenance costs.

SAP Solution:

SAP Multi-Bank Connectivity (SAP MBC) is an application that is running on SAP Cloud Platform. The solution takes care of connectivity between SAP systems and banks. It supports multiple communication protocols, including Swift and EBICs connectivity. Once you subscribe to the solution, the on-boarding process is fast and you can have productive bank connections set up and running within several weeks.

In SAP system, you run the payment program which generates a payment file. The file is sent to SAP MBC application. The easiest way to connect to SAP MBC is via MBC connector which is a part of S/4HANA or delivered as an add-on for SAP ERP 6.0.  In SAP MBC, the payment file is encrypted and signed with an electronic signature. Then the message is routed to the right bank based on the settings. If the bank sends a bank confirmation, SAP MBC can push back the payment status to SAP ERP backend, or alternatively, you can set up a batch job that pulls the status message to SAP ERP backend.

Conclusion

There is still a lack of standardization when it comes to bank connectivity. Ideally, companies would like to have one gateway and one format to connect to all their bank around the world. Unfortunately, there are still many disparate formats and communication channels. Here, SAP Multi bank Connectivity solution could be an interesting alternative for companies who would like to remove the complexity of having separate channels with different  banks.

Brought to you by the SAP S/4HANA RIG

 

 

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