The move towards straight-through processing in international payments The move towards straight-through processing in international payments

The move towards straight-through processing in international payments
13 Dec 2017

Not too long ago, foreign exchange and cross-border transactions were undertaken using phones or fax machines. Because a lot of manual intervention was often required along the way, the process could at times be inflexible, challenging, fraught with operational risk and subject to settlement issues.

Unless the organisation was a large one, there was no easy way to access bank trading desks that were able to execute transactions for you. So if it were possible to do cross-border payments at all, it was generally a cumbersome, expensive process that was unable to grow with the business. But thankfully, everything changed in the digital age.

Even though the regulatory environment has become stricter over recent times, the confluence of globalisation and a new technological era has dramatically transformed the way foreign exchange transactions and global payments are executed. Put simply, cross-border payments, which have increased massively in volume due to globalisation, can now take place securely and efficiently as a result of technical innovation.

Today, there are single or multi-dealer electronic platforms that enable users to see foreign exchange rates – often being streamed - in realtime and undertake transactions as and when they desire. This situation enables organisations to be more competitive and transactions to be more transparent. It also makes it easier to conduct benchmarking activity. Moreover, such platforms are also able to track transactions, provide market updates or indicative rates and include reconciliation tools.

Efficient straight-through processing

The arrival of these systems on the market has led to increased levels of foreign exchange rate competition. This rise in competition has, in turn, resulted in costs coming down and settlement and straight-through processing (STP) activities becoming more efficient, which removes the need for manual intervention and reduces operational risk.

Some providers have even taken things a step further by making application programming interfaces (APIs) available to enable users to connect with their exchange rate and transaction-based systems directly. APIs enable one piece of software to interact with another securely over the internet and lead to:

• Lower direct labour costs and associated expenses;
• Higher productivity as it is possible to process batch files and high volumes of payments securely;
• Environments that are available on a 24x7 basis, enabling jobs to be scheduled and continuously monitored around the clock and continuous monitoring;
• Better reliability as automation of this type eliminates batch-processing errors and validates input data;
• Improved performance due to more efficient STP and timely payments to beneficiaries - STP rates often hit 98%;
• Reduced fraud and better control over processes.

Technical innovation

When sending data, automated file conversion tools are also available to address any challenges associated with regulatory issues and rising transaction volumes. These tools enable organisations to send batch payment files, irrespective of file format, to their provider, which then converts them into a standardised format. A key advantage here is that employers do not need to make any changes to their back-end systems.

Such tools can also accept different file formats such as XLS, CSV, XML or TXT and send an immediate response to users to let them know if their file has been rejected for technical reasons. There are undoubtedly still obstacles to undertaking STP across the entire information chain as not all countries support different kinds of technology or infrastructure. But innovations such as APIs and automated file conversions are making cross-border payments to and within developing world countries easier than ever before, no matter what size of organisation you happen to be.

 

Carsten Hils is global head of INTL FCStone Ltd’s global payments division, which he co-founded in 2003 and which under his leadership has grown significantly. He leads an international team that specialises in facilitating the transfer of funds in local currencies to the developing world and is an industry expert in institutional cross-border payments, international currencies and foreign exchange trading. Carsten also possesses deep knowledge of local money markets in developing world countries.

Not too long ago, foreign exchange and cross-border transactions were undertaken using phones or fax machines. Because a lot of manual intervention was often required along the way, the process could at times be inflexible, challenging, fraught with operational risk and subject to settlement issues.

Unless the organisation was a large one, there was no easy way to access bank trading desks that were able to execute transactions for you. So if it were possible to do cross-border payments at all, it was generally a cumbersome, expensive process that was unable to grow with the business. But thankfully, everything changed in the digital age.

Even though the regulatory environment has become stricter over recent times, the confluence of globalisation and a new technological era has dramatically transformed the way foreign exchange transactions and global payments are executed. Put simply, cross-border payments, which have increased massively in volume due to globalisation, can now take place securely and efficiently as a result of technical innovation.

Today, there are single or multi-dealer electronic platforms that enable users to see foreign exchange rates – often being streamed - in realtime and undertake transactions as and when they desire. This situation enables organisations to be more competitive and transactions to be more transparent. It also makes it easier to conduct benchmarking activity. Moreover, such platforms are also able to track transactions, provide market updates or indicative rates and include reconciliation tools.

Efficient straight-through processing

The arrival of these systems on the market has led to increased levels of foreign exchange rate competition. This rise in competition has, in turn, resulted in costs coming down and settlement and straight-through processing (STP) activities becoming more efficient, which removes the need for manual intervention and reduces operational risk.

Some providers have even taken things a step further by making application programming interfaces (APIs) available to enable users to connect with their exchange rate and transaction-based systems directly. APIs enable one piece of software to interact with another securely over the internet and lead to:

• Lower direct labour costs and associated expenses;
• Higher productivity as it is possible to process batch files and high volumes of payments securely;
• Environments that are available on a 24x7 basis, enabling jobs to be scheduled and continuously monitored around the clock and continuous monitoring;
• Better reliability as automation of this type eliminates batch-processing errors and validates input data;
• Improved performance due to more efficient STP and timely payments to beneficiaries - STP rates often hit 98%;
• Reduced fraud and better control over processes.

Technical innovation

When sending data, automated file conversion tools are also available to address any challenges associated with regulatory issues and rising transaction volumes. These tools enable organisations to send batch payment files, irrespective of file format, to their provider, which then converts them into a standardised format. A key advantage here is that employers do not need to make any changes to their back-end systems.

Such tools can also accept different file formats such as XLS, CSV, XML or TXT and send an immediate response to users to let them know if their file has been rejected for technical reasons. There are undoubtedly still obstacles to undertaking STP across the entire information chain as not all countries support different kinds of technology or infrastructure. But innovations such as APIs and automated file conversions are making cross-border payments to and within developing world countries easier than ever before, no matter what size of organisation you happen to be.

 

Carsten Hils is global head of INTL FCStone Ltd’s global payments division, which he co-founded in 2003 and which under his leadership has grown significantly. He leads an international team that specialises in facilitating the transfer of funds in local currencies to the developing world and is an industry expert in institutional cross-border payments, international currencies and foreign exchange trading. Carsten also possesses deep knowledge of local money markets in developing world countries.

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  • Posted On August 19, 2018 by Stp inventor

    “Not too long ago” STP was invented 25 years ago, I know I invented it. And it wasn’t “phones and faxes” it was all Telex machines and post. Please if you feal the need to comment on an invention please make sure you get your facts right prior to publishing thanks. You then go on to suggest that platforms have created STP, and this is factually incorrect. STP was created in 1991 in London by one person, it then morphed into a process that is used globally by almost every individual in the western world. This publication has more errors into than I can begin to point too not impressed

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