Payment hubs and bank connectivity
A payment hub increases efficiency and straight-through processing by centralizing and optimizing payments. It’s all about automation and increasing insight, visibility and the opportunity to decrease costs. This is of course nothing new. However, in recent years a much wider range of bank connectivity options have become available to our corporate clients.
The journey started in 2001, when SWIFT opened up for corporates, offering the possibility to exchange messages and files in a standardized way to support treasury and cash management activities. There was no longer a need for a dedicated connection with each banking partner. This reduced both costs and the ‘lock-in’ effects that many corporates had with their banks. The SCORE model, introduced in 2007, made it more attractive for corporates to join SWIFT. However, the investments and complexity involved meant it was only a feasible solution for a limited number of generally very large MNCs.
This changed in 2012, when SWIFT launched Alliance Lite2, the so-called SWIFT Cloud solution. This evolved into Swift Alliance Lite2 for business applications in 2014. This allows third parties to integrate the Alliance Lite2 connection in their offering thereby integrating TMS and payment hub solutions with SWIFT. We now see an accelerated adoption of SWIFT by corporates across the board.
As well as an accelerated adoption of SWIFT, made possible by SWIFT Alliance Lite2, we now see a shift in focus from bank connectivity itself to the additional functionality that can be put on top. Bank connectivity providers – whether they are payment hubs, SWIFT Service Bureaus or treasury management systems – are expected to support functionality such as data analytics, workflow management, sanction screening and fraud prevention.
The right solution
Corporates now have choice when it comes to optimizing their bank connectivity and payment processes. However, the many options available also mean that it can be difficult to select and implement the solution that is right for you. What functionality do you require today and might you require tomorrow? What are the growth plans, track record and creditworthiness of your preferred vendor? In our experience, involving all key stakeholders at the start of the project, and ensuring sufficient functional and technical expertise is available, are key in optimizing bank connectivity and payment processes.