Stanley Epstein

Bank Payments …. Happiness Is …

There are different players in the "Payments Cycle", from the end users to the banks and even the clearing systems that they use. Each one has widely differing requirements as regards their information needs.

The older folk among us may remember a song that was popular in the mid-1960s, by Bobby Sherman titled “Happiness Is”. To quote a key line from the lyrics “happiness is different things to different people”. And this is my starting point. It is the “different things to different people” part that is so important, especially when one considers the critical issues that surround the payments industry. 

Banks have long claimed the right to be the sole interlocutor in the payments world – a right that they claim on the strength that they alone legally hold the accounts of individuals from which and to which these payments are made. Traditionally because of this banks have been the sole and arbitrary determinant of what information constitutes a payment. Usually this is the bare minimum to satisfy the banks own operational requirements – originating and receiving banks, sender and receiver account numbers, the currency and amount and the briefest of reference information. 

Payment information works for banks, but does it really work for any other participants in the payments chain? The answer is an emphatic NO! Different players in the payments chain need and would like to receive other payments related information. The ability to achieve real STP (Straight Through Processing) can lead to greater efficiencies in terms of operating procedures, processing times, fewer errors etc., etc. In short greater efficiency leads to reduced costs – and reduced costs spell increased profits. And this applies to customer and banks alike. 

Broadly speaking there are four users of payments related information and they all would like to see different types of information that will assist in their own quest for efficiency. 

• Customers - To customers a payment is a small (but very important) part of the business chain. Customers are seeking detailed information that relates to its relationship with its own customers and with its suppliers. Single payments may involve hundreds or even thousands of different transactions such as invoices, credit and debit notes, returns, adjustments and so on. Accurate details of each of these are vital to the record keeping and the business operations.
• Banks - Banks are account keepers – and because they hold accounts or their clients’ payments and payment systems are the natural vehicles for moving funds from one account to another. Who pays, who receives, when and where, what currency and how settlement will be effected – and of course the customer details too.
• Clearinghouses - Clearinghouses are the distributors of payments on a mass scale. Recent years have seen the rapid development and deployment of many different payment mechanisms. Often these allow for direct input by the customer against his bank’s authority – and the customer still has to find another way to pass on all that vital information that he so desperately needs.
• Banking authorities - Events in recent years have forced the regulators to take a much closer look at what payments flow where in the banking world. Either the regulator himself wants the information directly or he has made it obligatory on the banks to record, monitor and retain certain details that relate to payments such as AML (anti-Money Laundering) requirements. 

The following brief description summarizes the parties from the payer to the beneficiary including all the intermediaries who have an interest (and of course need information) on a typical payment being made through an RTGS system. Against each party I have briefly indicated what information they need to know.  

• Sending Bank – (1) Which bank is it going to, (2) the amount, and name of the paying customer, (3) name and account details of the receiving customer. At the end of the process they may want to also receive a confirmation that the payment was made.
• RTGS system – (1) Which bank is sending, (2) which bank is receiving, (3) the amount, (4) the transaction type.
• Receiving Bank – (1) Which bank sent the payment, (2) the amount, (3) name and account details of the receiving customer, (4) transaction type, (5) settlement confirmation from the RTGS system.
• Payee – (1) The amount, (2) the name of the payee, (3) payer’s reference data, (4) beneficiary references such as invoice numbers, payment amendments such as credit notes etc.
• Payer – (1) Confirmation that the payment was made and (2) the date on which this occurred.

And this is just the basics! It should be clear that payments mean different things to different people.

Ah well … those 60s …..

“To a preacher it's a prayer, prayer, prayer,
To the Beatles it's a yeah, yeah, yeah,
To a banker lots and lots of dough,
To a racer a GTO.

Happiness is, happiness is, happiness is,
different things to different people,
That's what happiness is.”

(“Happiness Is” Bobby Sherman, 1965)

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