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Payments fund control – Realtime limit management while doing Fund transfer for your corporate customers​

Home / Intellect Wholesale Banking Blog / Real-time Fund Control & Limit Management for Corporate Transfers
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Payments fund control – Realtime limit management while doing Fund transfer for your corporate customers

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A couple of weeks back, Intellect iGTB unveiled Consumerisation of Commercial Banking’ (COCB) at SIBOS. The idea stems from the focus on the end consumer being the primary driver of product design and services and also on how banks make a business case based on the below three key drivers:

  1. Revenue growth & protection
  2. Reduce operational cost
  3. Risk reduction & elimination

Most banks that we spoke to, in a way agree to the above three as their main focus area. This proposition is even more powerful especially with interest rates rising, and the need for banks to focus on segregating operational and non-operational deposits as well as optimizing the significantly increased capital and liquidity requirements. However, the question is how do I do it and where do I start from?

The answer to the question in my view is to start with the most important function within your bank and that is Payments

Payment modernisation or transformation can unlock significant revenue opportunities for banks. For corporate banking, it is even more significant as for corporates everything is interlinked. If you offer the right products mix and experience to your corporate customers it will not only help you drive customer stickiness but will eventually help you transform yourself as the principal bank from a transactional bank.

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Corporates demands friction-free, always-safe, real-time and cost effective fund-transfer as key consideration while selecting their primary bank. However, the evolving payments ecosystem and increasing complexity, it is becoming a challenge. For Banks, payment solutions that offers just-in-time functionality will ensure that their end-customer can manage their cash flow more efficiently. Towards this, offering limit netting products will help corporates manage their funds effectively.

For Banks, this is an opportunity to take a lead, and drive the change that their corporate customers are demanding.

Take for example how interlinked corporate payments and cash management has become.

With liquidity becoming more precious the corporate demand for banks to check their cash management and liquidity structures across their various subsidiaries before releasing a payment is becoming stronger.

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However, banks are unable to offer this service as they often struggle to evaluate in real time the net positon and gross position across hundreds of accounts that the corporate might have.

Moreover, banks run various risk while processing such payments such as:

Risk of

Breaching a monitored limit

Missing a payment cut-off

Not releasing a payment when the client has limits

Risk of maintaining unnecessarily high overdrafts at each account or payment product level

Leading to

Adverse bank exposure

Penalties and reputational loss

Poor customer experience

Higher Basel III credit provisioning


This is definitely not a situation which a bank wants to be in.

Now imagine having a system that can prevent banks from having to set up extra-high intra-day or long-lasting overdraft limits to prevent rejection of payments and at the same time save on Basel III risk provisioning and reduce the bank’s credit exposure.

Imagine if the same system could place transactions with insufficient funds in a referral queue and do an automatic re-try just before cut off or even throughout the day thereby considerably reducing the load on payment operations and bring down the operational cost.

Seems surreal, doesn’t it?

A real time liquidity sharing system, something which every bank and every corporate has dreamed of and which Intellect iGTB picked up as a primary driver to make into a reality.

iGTB designed Transaction Limits Management (TLM), a system that processes corporate payments by checking client balances and limits in real-time and gives a pay/ no-pay/refer decision based on corporate cash and liquidity structures and shared limits thereby reducing limit breach risks while improving client experience and STP.

What’s in for the corporate, you ask?

If a corporate entity does not have sufficient limits or balance to release an urgent payment, it can simply borrow limits from its parent or another child entity and save potentially millions in interest costs! Furthermore, the corporate will be saved of maintaining a high BOD Balance or for requesting high daylight exposure limits.

Utopia!

iGTB has implemented exposure monitoring solutions at leading banks across the globe to address the biggest pain points in transaction limits management. One such bank was maintaining limits of $450M for 33 corporates and was able to reduce this to $216m and still achieve 99% STP. Another bank was able to achieve less than 0.1% payments requiring manual referral while processing $500bn of payments per day with over 60,000 limit structures and some of them having over 500 accounts in a structure.

Talk with our experts to learn how Transaction Limits Management can help your bank drive the change and stay at the top of the market demands and optimize liquidity and working capital to the maximum for your corporate clients

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