Question

Explain the Payment Factory concept. Provide the statistics of payments flows (value and volume) in EU countries.

Answer 1

Solution:

Firstly, What is Payment Factory?

Payment Factory is the centralisation of the payments process within an organisation.

Every transaction have its own payment process via Credit and debit cards, Wallets, mobile wallets and P2P payments, Online Banking ePayments, Direct debit, Invoice and pay later solutions, Cash payments, Cryptocurrencies.

In EU countries the above mentioned methods are in place for completion of any business transaction by the people pay in different regions, verticals, environments, and circumstances.

Shared-Service Centers (SSCs), In-House Banks and Payment/Collection Factories are distinct organizational vehicles, but the borders between them can be blurred. Companies may have different definitions/ interpretations of what exactly they are. The reason is that all three are cost centers that focus on supplying standardized, recurring services to the business units more efficiently and more effectively.

Lower Costs

– External economies of scale leading to lower bank fees and fewer bank accounts

– Internal economies of scale leading to lower IT, headcount, or overhead costs.

Centralized Processes

– Better liquidity management and simpler, more visible cash positions

– Improved processing quality and speed

– Harmonized payment/collection processes and procedures

– Streamlined account reconciliation

– Fewer IT interfaces and file formats.

Reduced Risks

– Stronger internal controls

– Increased IT security.

The idea is to “industrialize” labor-intense, repetitive processes and replace them with more capital-intense, centralized ones. However, while the goals between all three are similar, an SSC has the broadest scope, while a Payment Factory has the narrowest.

Payment Factories are by nature SSCs that are focused on the accounts-payable function. Often, they are part of an In-House Bank. The goal is to simplify and automate accounts payable. Accounts payable is an ideal candidate for centralization because invoice receipt and processing are often paper-based and laborintense processes. Likewise, Collection Factories are centralized collections-processing centers that are focused on the accountsreceivable function.