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Straight-Through Payments Processing: Use Data Translation And Exchange To Avoid Delays

By Nancy Atkinson, Senior Analyst, Aite Group

Karen Hsu of Informatica organized a TweetJam (#INFAtj) recently on business-to-business (B2B) payments, SEPA, and integration. In conversation with Chris Skinner of Balatro Ltd., I stayed (mostly) within the 140-character message limitations of Twitter while the hour flew by.

Along with discussing the Single Euro Payments Area (SEPA), we recognized that first-tier down to third-tier banks consider their payments business important and are working to enhance it. Payments are transaction products that produce fee-based revenue—during the economic downturn, banks’ treasury services/cash management businesses maintained profitability through fee-based revenue. At banks, payments consolidation, transparency, and data analysis lead to internal cost-saving and revenue-generation opportunities.

The business of payments relies on data that is communicated via networks made up of computers/servers, software applications, databases and data warehouses, and workflow applications. To facilitate these computerized communications, standards exist that create structured data exchange, where the creator and recipient know the purpose of data in each field, the construct of each field (e.g., types of data—numeric or alphanumeric—number of characters supported, and required order for the components of the data field), and the policies, procedures, and rules for using each payments network. These constructs may be proprietary to the particular bank or vendor, or may be industry-established standards, but to the extent that they interoperate, straight-through payments processing is possible. When payments are fully automated, processing costs are optimized, errors are minimized, the transfer of funds is quick and reliable, and customers are satisfied.

Given the importance of payments business to banks and the constantly changing payments environment, banks need to accept payments instructions from a myriad of systems and in many different formats and convert them into internally recognized data. Within banks, data transformation must be done to convert that received data to accepted back-end payments-processing formats and external clearing and settlement formats.

While standards facilitate that exchange of data, there is no common, single standard worldwide for the financial services industry. Indeed, it is unlikely that one will ever exist, especially as versions of standards are released and supported. Therefore, data translation and exchange solutions that deal with all forms of data (structured, semi-structured, and unstructured) are essential to banks’ efforts to advance their payments business.

Given the business requirements that data transformation resolves, it is more than an information technology benefit. Ultimately, implementing these tools leads to better information for client service and new product/market development, as well as fast deployment of those products in targeted markets. Banks’ product managers, customer service managers, compliance managers, and operations managers should all demand payments transformation tools to improve their job effectiveness.

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