Modernizing the Payment Process Integrated Payables & SWIFT for Corporates

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1 Modernizing the Payment Process Integrated Payables & SWIFT for Corporates Chad Wallace - VP Head of Payables & Intl Solutions September 22, 2015 Xuan Nguyen - VP Sr. Product Manager

2 Today s Agenda Corporate Online Banking Automating Payments with your Treasury Workstation Integrated Payables Solution SWIFT for Corporates Solution Q&A 2

3 Audience Poll How many Business Owners vs. Bankers? How many are using the bank s online portal to process payments? 3

4 Cumbersome Online Banking Processes Multiple Tokens Required Token Required 4

5 Cumbersome Online Banking Processes Navigate to the Payment page Setup a template using the information on the invoice Initiate the payment Dual Approver must login and then authorize the payment Check back to determine if the payment has been processed by the bank Inactivity Alert Let s login again Navigate back to the Payment page Confirmed! Payment is processed Navigate to Reporting page Download reporting in various different file formats Load reporting data into Treasury Workstation or ERP 5

6 Why is Beneficial To Automate your Payables Process? 1. Efficiency 2. Payment timing 3. Automation 4. Facilitate the migration from check to electronic payments 6

7 Six Steps to Automate Your Payables Process Identify core areas to be automated Understand which departments (and people) are affected Analyze the current process Assess available technology Prioritize and create a roadmap Aim high and create a firm foundation Source: In shifting from paper to electronic transactions, accounts payable departments gain speed, efficiency and cost savings. Capital Perspectives, Capital One Bank, N.A

8 What is Enterprise Resource Planning (ERP) system? Enterprise Resource Planning system, is software and hardware that links numerous back-office functions to gain reporting efficiency and cost savings across a company. Functions supported include: Financial Management also known as the Treasury System Supply Chain Management Manufacturing Project Management Human Capital Management 8

9 Integrated Payables 9

10 What is Integrated Payables (IP) service? Integrated Payables solution provides client the ability to streamline their payables processing by consolidating multiple payment types into a single file for processing Key Questions to Ask Yourself: 1. As a client, are you sending multiple files for different payment types; as a Bank, are you receiving multiple files for different payment types? ACH NACHA files, Wires, Books and Checks with Positive Pay 2. With the transition from paper to electronic processing, is there a desire to outsource check printing to the Bank in order to reduce cost, gain efficiency and manage one relationship? 3. Is there a need to consolidate, streamline and automate payment processing to reduce risk and gain efficiency? ACH Wires Positive Pay Integrated Payment File Two Main Requirements: Client must have the ability to produce a file with payment instruction from their Enterprise Resource Planning/Treasury system and transmit it to the Bank for processing 10

11 How does the Integrated Payables service work? 1. Client Creates File of Payment Instructions Payment file can include indicators to identify each payment type within the file OR Bank can determine the best routing method base on client preference and effective date aka least cost routing 2. Payment Instruction Intercept Window File upload through secure delivery Automated validation of instruction formatting For validation pass, transformation of instruction to processing format and generation of confirmation file/report notice of file status to client For validation fail, generation of confirmation file/report notice of file status to client 3. Payment File Routing Route and process payment instructions after receipt of a valid instruction file 4. Core Processing Core systems processes and distributes payments to beneficiaries Generate confirmation file to client with payment information 5. Reporting Summary & Detail Same Day or Next Day Balance Reporting ACH Return and Notification of Change 11

12 Integrated Payables Process Flow Client Process 1. User authorizes payments on ERP system 2. ERP system generates payment file with instruction in Bank supported format 3. ERP system sends file via secure channel to Bank for processing 4. Payment Instruction Submission Window 7. Reporting Same Day Online Balance Reporting 5. Payment File Routing 8. Reporting Morning After Settlement Application Advice Online Balance Reporting Standard ACH Reporting Reporting Feed Reporting Feed 6. Core Processing & Account Debiting Secure Delivery Channel Payment-specific validation Acknowledgement of file receipt/validation and response file/ confirmation to client Splits file by payment type for forwarding to back-end processing systems ACH batched and routed for next day settlement Book Transfer between accounts Check print and mailing w/ Positive Pay Wire Transfer processing Payment To Beneficiaries 12

13 What types of payments and file formats are generally supported? Payment types can include: ACH Book Transfers Check Print w/ Positive Pay (same day and next day options) Wire Transfers Industry standard input/output file formats: EDI 820; EDI 997; EDI824 XML (ISO 80022) Bank defined CSV or Flat File format Note: Integrated Payables service can support a single payment type or all payment types 13

14 SWIFT for Corporates 14

15 What is the SWIFT for Corporates? SWIFT for Corporates solution provides client the ability to streamline their payables processing by sending a real-time instruction message through SWIFT to their bank. Key Terms SWIFT: SWIFT is a member-owned cooperative that provides the communications platform, products and services to connect over 9,700 banks, broker-dealers and corporate customers in more than 209 countries. SWIFT enables its users to exchange automated, standardized financial information securely and reliably, thereby lowering costs, reducing operational risk and eliminating operational inefficiencies. SCORE: SCORE is a closed user group (CUG), which allows corporates to access the SWIFT Network to provide financial messaging between a Corporate and it s Financial Institution. FIN: SWIFT s financial messaging service FileAct : SWIFT s messaging solution that allows secure and reliable transfer of files that is typically used to exchange batches of structured financial messages and large reports. Two Main Requirements: Client must have a relationship with SWIFT and their Treasury Workstation can support creating files or messages to SWIFT 15

16 How does the SWIFT for Corporates work? Client Setup with SWIFT Client setup with SWIFT Client completes testing with SWIFT and Bank 1. Client Creates Payments In ERP Payments can include ACH, Wire, FX, or Disbursement to name a few Standard format between all Banks, no need to develop a different file format for each bank. 2. Transmits over SWIFT messaging to Bank Client transmits a Real-Time Message to SWIFT (MT101) during business hours. Bank receives Real-time Messages into the Bank Payments Hub. 3. Payment Instruction Processing Payments are validated for proper information and scrubbed for compliance and preventative fraud. 4. Core Payment Processing and Routing Payments are debited from instructing account and routed through the appropriate clearing networks. Bank can determine the best routing method base on client preference and effective date aka least cost routing. 5. Reporting Summary & Detail Intraday or Next Day Balance Reporting 16

17 SWIFT For Corporates Process Flow Client Process 1. User authorizes payments on ERP system 2. ERP system sends file via SWIFT File Act or FIN (MT101) secure channel to Bank for processing Reporting Feed 5. Reporting Settlement Intraday Credits/Debits End of Day Statement Reporting 3. Payment Instruction Processing Secure Delivery Channel 4. Core Processing & Account Debiting ACH batched and routed for next day settlement Payment-specific validation Creation of outbound payment to Beneficiary Bank Book Transfer between accounts Check print and mailing Wire Transfer processing Payment To Beneficiaries 17

18 What types of payments are generally supported through SWIFT for Corporates? Payment types can include: ACH Book Transfers Check Print w/ Positive Pay (same day and next day options) Wire Transfers Industry standard input/output file formats: MT101 Payment Initiation MT900/MT910 Intraday Credit/Debit Notification MT940/MT942/MT950 Balance Reporting Note: Integrated Payables service can support a single payment type or all payment types 18

19 Four Main Benefits of Automating your Payables Process using Integrated Payables or SWIFT for Corporate 1. Efficiency Consolidate file formats for ACH, Book Transfer, Checks w/ Positive Pay and Wire Transfer, to single industry standard file format Reduce the number of instruction formats and the number of files required to generate from client accounts payable system FTE efficiency gain and increase cash flow management through automation with less staffing required to perform various types of payment processing 2. Payment timing Match payment timeframes to the needs of suppliers and employees rather than payment method batches. Pay later and still meet payment deadlines, based on certainty of ACH process Increase certainty of account debiting leading to better cash position estimation 3. Automation Integrate file-based or real-time transaction initiation and reporting with the client s Accounts Payable / Treasury system File-based or real-time reporting can help the client automate reconciliation with invoice files and integration with accounting function 4. Facilitate the migration from check to ACH Introduce ACH to suppliers and customers and avoid creating new payment processes Leverage a check printing and mailing process consolidated with other payment methods 19

20 QUESTIONS? 20

21 Contacts: Chad Wallace VP Head of Payables & International Solutions Xuan Nguyen VP - Sr. Product Manager Xuan.Nguyen@capitalone.com 21