The centralized payments hubs being developed by a growing number of banks are designed to improve corporate payments services and the experience for treasurers and finance executives. Just like other industries, a healthcare organization can also be better positioned to manage payments if its bank adopts a centralized payments hub.
Such an infrastructure can streamline payments for critical patient care expenses such as laboratory expenses, medical supplies and equipment, and even employee payroll. Easy-to-use payment platforms, payment alerting and fraud monitoring tools can reduce the time needed to manage the business and focus on patients.
A centralized payments hub can take different forms, but generally it’s a technology infrastructure that enables a bank to route all of its electronic payments to a centralized engine for processing. With this infrastructure in place, banks hope to personalize clients’ payment experience, reduce their fraud risk and increase payments efficiency.
Why banks are developing these hubs
Traditionally, banks have maintained different payments processing systems for each payment method they offer to their business clients (e.g., checks, credit cards, wire transfers, Automated Clearing House transactions and low-value international payments).
Unfortunately, when banks are managing payments across multiple legacy settlement platforms, regulatory changes can prove to be very costly and disruptive. What’s more, these segmented environments inhibit product innovation, client experience improvement and market segment growth.
Indeed, as the payment industry changes and adapts to growing market needs and budding technologies, banks understand they must modernize their infrastructures in order to compete. That’s why many are developing centralized payments hubs.
For the client, a payments hub means dealing with a more efficient bank that can be nimble, stay on top of regulatory trends and adapt to technological advancements. This efficiency will ultimately lower operational costs, improve customer service and streamline regulatory screening processes.
These hubs can be designed a number of ways, but one of the more streamlined configurations is to have the hub sit between the payment clearing networks and the bank’s front-end access channel — which could be a digital platform, a file delivery service, an application programming interface (API) or messaging service, or even a mobile channel.
Hub benefits for healthcare clients
A centralized payments hub can benefit corporate clients by enabling a bank to:
Personalize clients’ payments experience and help them improve liquidity management. Banks are positioned to provide a more customized experience if they have comprehensive data regarding a client’s various payment activities, which a payments hub can provide. As an example, when a client logs into its treasury portal, a bank could provide an on-screen reminder that the client must pay a certain invoice that day in order to take advantage of a prompt-pay discount.
A centralized payments hub also could enable a bank to offer transaction tracking similar to what overnight courier companies provide for packages in transit. This could be particularly valuable in relation to high-value payments. Say a company sends a $1 million payment and wants to determine the status a few hours later. The company’s bank could provide an up-to-the-minute view of that payment online, including whether the client’s account has been debited and whether any credit has been utilized.
Reduce client risk related to corporate account takeover fraud. Having comprehensive information about a client’s payment activities, through a payments hub, can also help a bank spot potentially fraudulent transactions. If a bank sees 10 wire transfers, each for $800,000, initiated from a client’s account, and its payments hub fraud monitoring tool reports there has been no precedent for that sort of activity in the account, the bank can investigate the questionable transactions and potentially help the client avoid a fraud loss.
In addition, the greater visibility to transactions provided by a payments hub can give a bank real-time payment notification capabilities. A client could ask the bank to send a dashboard alert any time a payment is initiated from its account over a certain dollar amount, for example.
Increase payments efficiency. It’s safe to say that the majority of middle-market and large organizations use multiple payment types. A hub can employ business rules to select the most efficient payment network to use for clearing any particular payment. The hub’s choice — whether Fedwire, SWIFT, CHIPS or a low-value clearing network — is based on objectives built into the business rules, such as minimizing cost and reducing time to settlement.
A bank with a payments hub might also be able to help a client reduce repair fee charges. The bank could build an operational analytics dashboard that shows the client how fast their payments are being sent and the reasons for delays. Moreover, the dashboard could tell the client why certain payments are requiring repairs so the client can proactively correct its instructions and reduce repair-related bank fees.
Healthcare treasury managers should talk to their banks about their payments infrastructure strategy and investments — and assess their banks’ agility as new payments technology and regulations emerge.
Lauren Farrell is senior vice president, core products, at Capital One.