Payment processing was originally conceived to deliver greater accuracy and speed in the financial markets. Processing financial transactions without manual intervention has a lot of up-sides, creating faster, cheaper and easier payment processing.
Technological advances in machine learning will take this type of automation further but don’t be fooled into thinking humans can completely step out of the picture at this stage – particularly while the technology is in its infancy. As with all financial process automation, correct set up of these systems and on-going human oversight is critical to avoid introducing errors and associated risk into the system.
Where to start?
When considering a move to STP, the first step is to understand the outcomes that you want to achieve and weigh up your appetite, and your business tolerance, for risk. Then review the capability of your current system and evaluate its ability to handle the settlement process from the initial executed transaction to completion. The next step is to ensure that your infrastructure is correctly set up and furnished with the appropriate rules and controls.
Keeping qualified people at the centre of a move towards automation or machine learning helps to ensure that that workflow and controls are correctly set up and third party modifications — such as changes to bank and beneficiary templates — are caught and catered for. A simple banking feed failure can compromise daily cash reconciliations, which in turn can trigger more significant and costly downstream effects.
Creating the framework for success
The creation of payment processing policy rules, clear monitoring and accounting regimes ensure that the drive for efficiency doesn’t result in an over-reliance on automation and the complacency that can accompany it. Done well, STP can introduce simplicity into your payments processing function, no matter what size of business you run. And, since the benefits of automation tend to grow with the number of transactions handled, the pay back is almost always greater for larger enterprises.
Overcoming common barriers
However, the sheer volume of work involved in a SWIFT implementation can be a common barrier to success for some companies. Ironically, STP can actually increase rather than reduce key person risk if only one team member has a clear understanding of the technology and systems involved. As an outsourced treasury middle and back office services provider, ETOS works with clients to make sure that a move to STP delivers the potential efficiencies that it promises, both during the initial implementation phase and on an on-going basis.
The next in our series of blogs on Straight Through Processing will look at some real-world examples of the benefits and pitfalls of payment processing automation. To find out more about ETOS and our treasury services, contact us.