No Surprises – The Power of Payment Flow Simulation

Setting up a new banking client is a bad place for surprises. So it’s a great idea to manage everyone’s expectations – at your new client, as well as the bank – and avoid surprises.

In our last blog, we talked about the technical part of on-boarding clients. Due diligence (KYC) and the service contracts are done, all good. Now, Payments Ops can start the actual work of processing payments (and other messages) from your client and providing the service: Doing the Doing.  Every bank’s Payment Ops hates surprises (think: exception processing). Thankfully, your client has already validated their payment messages, and you both know they work.

But let’s flip that around … what about the messages your client gets from you, the bank? They need to work too, right? And the last thing your client wants is a surprise (think: exception processing).

The danger is that a Corporate treasury departments goes live with a new bank or service, and when the first statements or reports come in, they say … eh, what’s this? Either they haven’t seen them before (bad) or, they’ve seen a ‘sample’ and it’s different (worse).

For decades now, Corporate Treasury departments (at larger and, increasingly, at smaller companies too) have been investing in technology to automate day-to-day tasks – especially with respect to payments and cash management. Fundamentally, raw cash management data comes from payments and account messages from banks. ERP (especially Accounting) and Treasury systems are there to help manage the business and financial flows, which means reading and correctly understanding messages from the banks.

Just like pilots use simulators to qualify their skills in a very realistic way, banks can set up a simulator to allow their clients to test ERP and Treasury systems with actual bank messages – in a very realistic way. A good example is when a client sends a pain.001 (or any payment message) to the bank. Depending on the service, the client gets an acknowledgment back, and at some point, an account statement (either daily, or an interim statement). ERP and Treasury need these to do their magic, and alert someone about an important payment, or update a regular cash report or forecast.

With real-time payments becoming more prevalent, corporate Treasuries are becoming more real-time as well. In some businesses, the ability to receive and analyse up-to-date payments data is a huge benefit, with real value.

In a larger context, the operators of major clearing systems are using payment flow simulators to help participant banks (aka Clearing Banks) to test their messaging and their systems with the clearer. This approach reduces risk, speeds up testing, saves money, and avoids … surprises.

The same benefits apply to banks working with their clients. A message simulator helps your clients to plan and prepare and avoid … surprises.

Put in a larger context, a simulator can greatly help both banks and their clients to understand, in a safe and realistic environment, how messages and message flows will behave – even including CSMs (clearing and settlement mechanisms). The goal is to save time and effort before go-live, but also to allow accurate testing when changes or updates are made.

At XMLdation, our messaging experts are helping banks and clearing systems to avoid surprises, and delight their respective clients and partners.