Many corporates are working with various bank sponsored electronic banking solutions. An alternative solution could be to connect to your banks via a bank-independent payment solution. Since a variety of communication channels is available but different banks offer different connectivity, it makes sense to understand what’s available and what could work best for you.
Payment channels, the alternatives:
Access to several banks via the EBICS or product specific channels
The EBICS communication channel, already supported by many international transaction banks is free of charge. The number of banks that offer this channel is growing fast. Setting up a connection with banks that support EBICS is a plug and play implementation.
H2H (Host to Host) connections
This is an individual connection with a bank. H2H connections are bank specific. Each H2H connection is a bank specific project.
Access to the SWIFT network (to be purchased from SWIFT)
Once the access to the SWIFT network is in place, you need to implement and test connections per individual bank. SWIFT can be expensive because companies are also charged by the amount of traffic over the channel.
Whatever combination of channels you use, you still need payment software which allows you to read the incoming bankstatements and create and send payment files in a secure way.
Payment File Formats
Another important aspect of payments is the ‘payment file format’ question (MT101/ SEPA/ CGI etc.). Which formats are currently used by your company and will your bank accept them in the new setup or do you need to change the format? This discussion is important when replacing 10 or more electronic banking systems of a corporate which has 20 or more subsidiaries with different ERP versions (as a result of previous M&A).
The choice of payment channels depends on various factors. For instance, a company with 20 banks, of which 16 can be connected via EBICS, would probably connect the remaining 4 via separate H2H-connections as this is more cost efficient than setting up a SWIFT connection. Alternatively, a company with 20 banks of which only 5 can be connected via EBICS, will connect the rest via SWIFT.
Moving away from your traditional electronic banking systems to a modern independent payment solution can be quite a challenge. Many questions need to be answered and scoping can be challenging: which channels and formats will we use?
Sometimes, corporates switch banks because the desired channel is not offered. We also note that payment files generated by legacy ERP systems are changed (either via the ERP system or with help of a converter). In any case, it makes sense to seek professional advice to find the best solution for your treasury. Please contact us in case of any questions.