BNY Mellon Aims to Unify Multi-Currency Processing

When banks face the task of managing payments for corporate customers, moving money around is a surprisingly big challenge. That's especially true when customers work with dozens of currencies in different countries and want to run everything through a single platform.

Bank of New York Mellon (BK) is the latest to give centralized payments processing a shot in the face of competition with the likes of Bank of America (BAC) and JPMorgan Chase (JPM), which have built hubs to route currencies and payments through one set of pipes, BNY Mellon's solution is its Enterprise Payment Hub.

"It's a platform that can be used to process payments from any location in any currency and any payment type," says Susan Skerritt, executive vice president and global head of business strategy and market solutions for BNY Mellon's Treasury Services Group.

BNY Mellon plans initial implementation early next year. The bank hopes to use the platform to provide faster processing as well as views of liquidity and working capital. The framework is also built as a services oriented architecture (SOA, or the development of business processes as software components, which allows for sharing or reuse). BNY Mellon hopes the use of SOA will shorten development time as the bank expands the payment hub into new currencies and regions. The hub is also integrated with channel platforms to process payments in a variety of formats, such as check, online and mobile.

The initial development work will focus on Euro and Sterling services in Frankfurt, London, Brussels and Luxembourg, with later stages targeting Asia and Latin America. The hub is being developed internally, in partnership with Clear2Pay's Open Payment Framework. The Open Payment Framework uses SOA to deliver data modeling, payment processes and other payment-related functions such as parsing, validation, cost-based routing, and auditing. Clear2Pay's competitors in payment services hub technology include Fundtech (FNDT), Polaris (PIHN) and Dovetail.

BNY Mellon's Treasury Services group provides payments, trade services, cash management, capital markets, foreign exchange and derivatives in more than 100 countries-processing more than $1.4 trillion in payments in a daily basis. Its payments processing services previously tended to be siloed in particular jurisdictions. Skerritt says BNY Mellon previously performed Euro payments clearing, but did not offer that on a wide basis because "we didn't have a robust platform. This new product enables us to build and expand our Euro capabilities," she says. "We will continue to have operational and client services support locally, but it makes tremendous sense from a flexibility and consistency perspective to have a single platform."

The local presence will come in handy when handling geographic differences in how bills are presented, received and processed. Skerritt says the differences in regulations and laws in different countries will be managed by enabling regional offices to remotely configure parts of the platform to match local documents and disclosures requirements. "By having a common approach, we can be more efficient in building out the service to handle those different jurisdictions," Skerritt says.

Banks have been working to build centralized hubs to handle international payments, a move that would make processing more efficient. But it's a difficult project, given the extensive IT work required. Celent says about half of payment service hub deployments thus far have been at banks with more than $100 million in assets , with a majority coming from outside the U.S. About 56% of deployments have been in Western Europe and Northern Europe alone, Celent says, basing its research on a poll of technology providers. About 17% of the hub share was in North America and Canada. Notable deployments include Bank of America, which worked with Fundtech to build a hub for corporate treasury management, and JPMorgan Chase, which used Dovetail's technology to build a hub for international ACH.

The research firm says interest in payment services hubs is increasing. Such hubs give clients the ability to interact with the bank without considering different payment products based on type of payment, value, or underlying clearing infrastructure. "While the viability and desirability of integrating all payments [such as cards and high value payments] on a single platform remains a hotly debated topic in the industry, many banks find that the integration across multiple geographies and currencies for corporate payments in particular can bring attractive benefits," says Zil Bareisis, a senior analyst for Celent.