Globalization has provided corporations a host of opportunities and challenges as they broaden their businesses beyond national boundaries. This expansion has sparked a growth in electronic domestic and cross-border payment and collection activities. Automated Clearing House (ACH) credit transfers and direct debits, and other electronic payment products such as wire transfers and cards, are gaining popularity and usage on a global basis—particularly for high volume business-to-consumer and accounts payable/receivable (AP/AR) activities.
ACH is a key component of the projected growth of international electronic payments. The Federal Reserve Board and Boston Consulting Group say electronic payments represented 66% of all global transactions in 2000. By 2010, this figure is expected to rise to 84%, with debit cards, automated transfers (ACH) and credit cards responsible for much of the growth.
New Opportunities
In today's electronically connected global economy, corporations are finding new opportunities with customers and suppliers on- and off-line that stretch over multiple borders and geographies. These new relationships are further enhanced with watershed market events such as the Single Euro Payments Area (SEPA) that promise to provide corporations with efficient, low-cost payment and collection processing on a regional basis.
Electronic payments dominate the European Union (EU), which recorded 57.2 billion non-cash transactions in 2003. This region will soon benefit from SEPA, which should drive down clearing costs and harmonize transactions between Eurozone beneficiaries and originators. By 2010, pricing, formats, cut-off times and return instructions will be uniform for EU-contained transactions.
SEPA's goal is to treat Eurozone ACH payments as domestic payments, by transforming multiple, national payments systems, as well as the legacy non-urgent cross-border transfers, into an ACH payment structure similar to that of a single country.
An additional benefit is the SEPA direct debit. Currently, companies can centrally originate payments throughout the Eurozone from a single account, but the legal infrastructure surrounding direct debits is country-specific, requiring businesses to maintain in-country accounts. SEPA direct debits enable the centralization of the collection process for companies as well, via a single account structure for all Eurozone collections. This will most likely provide an additional catalyst for continued interest in establishing Shared Service Centers (SSCs) as companies decide to consolidate both payments and collections processing under one roof.
However, the regional harmonization provided by SEPA and other market opportunities must be augmented with cross-regional connectivity to provide corporations an efficient and cost-effective global electronic payment/collection solution.
Resulting Challenges
Deutsche Bank recognizes that as corporations expand their businesses around the world, certain challenges are accompanying new opportunities. The corporate treasury and AP/AR functions are required to manage a significant growth in the number of multi-currency domestic and cross-border payment and collection activities, including multi-currency reporting and reconciliation.
Reconciliation of AP/AR transactions across multiple countries and currencies is challenging enough, given the complexity surrounding country-specific payment/collection instruments, transaction codes and remittance/referencing structures. However, corporations must also deal with preparing and maintaining numerous local formats for payment and collection execution, while juggling additional country specific requirements such as diverse clearing cycles, central bank reporting and legal/regulatory issues.
In response, Deutsche Bank has developed a unique solution—db-worldPAS, our global payments and receivables processing platform, allowing corporations to conquer these new global challenges while capitalizing on these opportunities.
A Global Solution
db-worldPAS has been specifically developed to meet the global transaction origination, reconciliation and conversion/translation requirements that corporations encounter as their needs become more expansive. db-worldPAS provides a single global solution to corporations operating in a multi-product, multi-currency and multi-country environment.
As corporations globalize, they are continuously looking for new ways to create further processing efficiencies by streamlining operations, decreasing costs and automating business processes. db-worldPAS enables them to consolidate all accounts payable and receivable operations into a single global or regional SSC and make payments on behalf of multiple legal entities.
For example, db-worldPAS provides the ability for a corporation to send a single file in a single format to Deutsche Bank for local and cross-border payment and collection processing in over 38 countries. db-worldPAS is designed to convert 25 different inbound formats (including industry standards such as EDIFACT, ASC X12, SAP IDOC and XML) into over 100 outbound local formats (e.g., BACS, DTAUS, NACHA and FedWire) for local in-country processing while providing corporations with timely delivery of the robust, harmonized information reporting needed to facilitate auto-reconciliation of AP/AR activities (e.g., use of standard transaction codes and file level acknowledgments). Furthermore, it offers transliteration capabilities that translate ASCII into local language characters, which are required in some Asian and Eastern European ACH clearing systems.
db-worldPAS' conversion capability will allow corporations to realize the benefits of the new single market throughout the Eurozone. When appropriate, this scalable payables and receivables offering will convert all payment/collection instructions to the correct SEPA format—seamlessly bridging this transition while continuing to provide companies with a complete, reliable and robust payments processing platform.
Deutsche Bank, one of SEPA’s architects, is one of the leading clearers in the world with top positions in the three major currencies (Euro, US dollar and British Pound). As such, the Bank is able to offer corporations regional as well as cross-regional connectivity—creating one global solution, db-worldPAS.
