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  What’s the problem?
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  Where can I find more information (educate myself) on this topic?
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  What are the implications for faster payments?

Some corporates may not be able to take advantage of faster payments remittance information. At issue is whether their ERP systems and other legacy processes can handle individual and batch-specific transactions – among other challenges. For corporates to leverage the full potential of faster payments, they need to have two fundamentals: 1) the ability to implement Straight-through Processing and 2) the ability to reconcile payments same day and/or in real time. Relationships with multiple financial services providers further complicates this, as each provider may have different specifications that require various systems and technologies.

If payments are posting same day or in real time, AR departments need to be prepared to credit customer accounts in a timely fashion. Data contained in the payment also needs to flow into the right areas at the same speed, ensuring that information is not lost or delayed, especially for payments being made shortly before due dates. Updating of reconciliation-related business processes need to take this into account. AP departments also need to be taught that certain payment types, such as same day ACH or instant payments, allow for more flexibility in terms of liquidity management and the need to make payments, which in turn requires corporates to update legacy business processes. Whether a corporate can justify the required system upgrades also needs to be thought through and the degree to which a business case and ROI can be calculated will differ substantially from business to business.

Not all payments systems work the same, and bill payment exceptions may occur for multiple reasons. Corporates should work to ensure they develop and implement best practices for minimizing or eliminating exceptions while ensuring all the benefits of new faster payments solutions are being utilized. It is critical for corporates commit to a robust due diligence process when evaluating new innovations and/or products for implementation. Taking the time before implementation will undoubtedly save time and money. Corporates should make sure procedures for handling exceptions are in place with their financial institution or provider to ensure an uninterrupted flow of payments.

As the saying goes, faster payments could lead to faster fraud. Once funds are sent through any particular faster payments method, the payment is then settled either same day or in real time, reducing the time corporates have to “reverse” or cancel submitted payment messages. Corporates must weigh the fraud risk against their processes, including internal security and the user experience they want to provide, among other considerations. Corporates may want to consider implementing a risk- based approach for facilitating faster payments for their end users to mitigate the risks. Things to consider include how well the end user is known to your organization, size of the transaction and/or volume of the activity by the user, historical performance of the user, etc.

Irrevocability – meaning a transaction cannot be returned or revoked – is a characteristic of faster payments. While irrevocability may pose a risk for senders of payments, it benefits the receivers of payments. Corporates should work with their financial institution or provider to fully understand the capabilities related to any faster payments method. This will help corporates determine which method is best suited for disbursing and receiving funds based on their organization’s risk appetite and internal controls.

The benefit of faster payments for corporates is that it can create process improvements and improve the customer experience by enabling a quicker refund and payout process. However, implementing any particular faster payments method could require corporates to upgrade or improve their systems and processes. Corporates must evaluate the cost of upgrades vs. the anticipated improved cash flow due to operational efficiencies (reducing/eliminating unauthorized debits, closed accounts), fewer calls into the call center due to STP, a better user experience for customers and more. A corporate’s due diligence in evaluating any particular faster payments method for implementation should include a cost-benefit analysis.