How to choose the right payment hub solution

Selecting a payment hub for your business is a process that varies for every finance and treasury team. With numerous payment hub solutions available in the market, choosing the right one can seem overwhelming, especially at first glance. This article aims to assist you in selecting the appropriate payment hub solution for your team by discussing some of the factors that companies usually consider when making their choice.

What is a payment hub?

A payment hub is a centralized software that can consolidate company-wide payments. It derives payment data from various payment initiating systems, such as ERP, treasury, accounting, or financial systems, and transforms them into a single source of truth where all outgoing payments and payment confirmations, records, and statements are processed.

Companies use payment hubs to simplify and centralize their payment procedures, allowing them to handle transactions across various banks and payment channels from a single platform. This centralization helps improve efficiency, minimize manual errors, and offer better visibility and control over financial operations. Ultimately, it enhances overall cash management and reduces costs due to a lot of manual work.

Factors to consider selecting a payment hub

• Narrow down exactly what you need

Before going into any discussions with vendors, it is wise to reflect on your requirements carefully. Not only will that save you time in the scoping of the project with a vendor, but it will also eliminate time invested in discussions with vendors that aren't able to meet your requirements in the first place. A clear business case with requirements for implementing a payment hub can also be leveraged internally to get buy-in from the necessary stakeholders.

• Think of the implementation timeline

The implementation of a payment hub depends on various factors. To give a few examples, it can be influenced by time pressure by a treasury or finance teams, the complexity of the current system landscape (since a payment hub needs to be integrated), the sophistication of the organizational setup (with different subsidiaries, etc.) or the availability of specialists in the vendor's organization to help you roll out a solution.

• How much centralization vs decentralization

Many companies are considering centralizing their payment setup, giving the control to group treasury and thereby increasing process efficiency and gaining better insight into all payments. However, companies need to evaluate how much they want to centralize the solution. Some customers roll out the solution to every subsidiary in dozens of countries but exclude trickier countries like Latin America, while others process thousands of payments every day fully centrally.

• Types of payments that need to be made

It's relevant to narrow down what types of payments you're currently making, as different payment hub solutions have varying abilities. Most advanced payment technologies can cover different currencies, cross-border, domestic, ACH, SEPA, wires, cheques, salaries, batch vs individual payments, etc. However, not all solutions on the market are suitable for a wide range of requirements.

• Different currencies

When companies operate globally, they must deal with foreign exchange (FX) management. This involves making payments in various currencies and dealing with the risk of holding cash in certain currencies or exchanging one currency for another. A payment hub can already help manage FX to some extent, and for those who want to optimize company-wide and intercompany payments in different currencies, in-house banks also provide an excellent foundation to manage all associated challenges effectively.

• Bank connections

One thing to consider is what banks your team is looking to connect the payment hub with. Most vendors can connect with the largest banks via H2H, SWIFT, API, FTP, and other connection methods. However, there is a difference between these types of connectivity, their costs, and the technical implementation required. It is always recommended that you check with each vendor what bank connections they have already established, whether they can connect to unestablished ones, and how long the latter would take.

• ERP system integration

One prerequisite for most treasurers is that the payment hub can integrate with ERP systems. We have even come across cases where we needed to integrate several different ERP systems because subsidiaries were using them. Especially since invoices are often routed via ERP systems, they can be a valuable source for automating payables when connected to a payments hub. We recommend checking with each vendor how they work on such payment integrations, what information can flow between the systems, and how file formats are converted in the payment hub since they differ among ERPs and banks, for example.

• Two-way communication

For most treasurers, two-way communication is another important factor in the selection process. It enables receipts of payment acknowledgments, tracking of payments, or other bank status information that is communicated to all parties through the payment hub and can be leveraged for reporting and better visibility into payment status.

• Process controls and fraud detection

Managing a large number of payments can be a complex and time-consuming task. To ensure that no errors or fraudulent activities occur while maintaining efficiency, payment process controls should be included as a standard part of payment workflows. Payment hubs can offer automatic sanctions screening for compliance, 4 to 6 eye verifications, and detection of fraudulent or erroneous payment patterns. These automated functionalities can greatly relieve treasurers, accountants, and finance professionals from heavy workloads.

• Security features

Since you will be processing a lot of sensitive data and large amounts of money, make sure that the solution you choose is highly secure. Most cloud-based payment hubs already offer basic security features like SSO, 2FA, and they possess the most critical security certificates like SWIFT compliance, ISO, and more. However, due to compliance obligations, there can be minor differences between what some companies value more than others. Make sure to involve your IT and security team from the beginning to ensure that the vendors you talk to are compliant with your company’s policies.

• Data visualization and reporting

A centralized payment hub allows for all payments to be tracked in one place, offering great potential for reporting purposes. When this central visibility is integrated with banks and ERP systems, it becomes possible to track the amount of cash available in each bank account, as well as payments that are expected to go out and cash that is predicted to flow in. This can help you determine if additional funding is needed, for example. It's important to note that some vendors offer better reporting features than others, so it's a good idea to verify if the desired features are available.

• Implementation resources

When implementing a payment hub project, it is important to work closely with the vendor and plan the project carefully. This will help you understand the timeline and what resources your team will need at different stages, minimizing surprises and potential delays. It is also wise to involve other departments, such as IT, finance, and accounting, early on in the planning process, as they may be affected by the project. Additionally, remember to inform your banks of any changes you plan to make, so they can be prepared to cooperate if new bank connections are required with the payment hub provider.

• Support level of vendors

Payment hub vendors provide varying levels of support during different stages of the customer lifecycle. Before choosing a vendor, ensure that they will offer all the assistance you require while implementing the solution and for user support after implementation. Additionally, make sure to establish what happens if you need to upgrade your solution, add extra modules, users, or banks. Some vendors may also allow customers to contribute feedback on the roadmap for future product development or extra features. Ultimately, your vendor's future collaboration with you is as essential as it is for them.

• System administration

When selecting a vendor for your business system, it is important to understand what tasks the system admins can perform independently and for which tasks they will need specialist help. You should inquire about the extent of the system's customization capabilities, such as workflows for automation related to approval structures or other process controls. While having vendor support is great, you may also want to make changes with your team without having to consult the vendor every time.

• Quality assurance of the system

One effective method to ensure that you are choosing the appropriate payment hub is to have one or two reference calls with existing customers of the vendor who have a similar setup to yours. They can share their experiences of using the solution, which can be helpful in making an informed decision.

Examples of payment hub solutions and implementations

Payment hub software include a range of options, such as ERP systems incorporating payment features, independent payment gateway solutions, and dedicated payment management software designed to unify multiple payment systems within one platform. Nomentia provides an integrated, cross-bank, and safe international payment platform tailored for businesses regardless of their scale. The payment hub streamlines and unifies payment processes across the entire organization, boosting oversight and productivity through automated tasks, error handling, fraud prevention, and comprehensive transaction tracking, all within a unified system.

Some examples of implementations of payment hubs can be found in the case study section. Here are also a few summarized examples of how companies have leveraged payment hubs:

Kone

KONE faced the challenge of harmonizing global cash and bank processes across its four Shared Service Centers in Slovakia, India, Malaysia, and China to enhance security and streamline operations. They implemented a bank connectivity solution integrated with SWIFT Alliance Lite 2, and gradually introduced it across SSCs for payment and bank statement processing. This resulted efficient processes and more straightforward central user rights management. The successful rollout led to stakeholder buy-in and good collaborative efforts between KONE and its partners from the start.

Greenchoice

Greenchoice used to have manual cash management processes across multiple banks, leading to inefficiencies in payment processing and liquidity planning. They implemented a payment hub solution to streamline payments, enhance cash flow visibility, and automate liquidity management, resulting in significant time savings and improved transparency. With a smooth implementation and intuitive interfaces, Greenchoice experienced increased efficiency, simplified user management, strengthened security and compliance. As they continue to grow, they are also adding more treasury management functionalities on top of their payments hub.

Brita

Brita’s treasury department sought to streamline bank connectivity due to challenges with their previous multibank payment tools. By adopting Nomentia, they centralized payment processing, facilitating communication with multiple banks through a single independent tool, thereby automating processes, reducing errors, and enhancing transparency and security in transactions.

  No one size fits all

Selecting the right payments hub is crucial for optimizing financial operations, but it is essential to recognize that every company has unique needs. There is no one-size-fits-all approach when it comes to choosing the perfect solution. Ensure to take the time to assess your organization's specific requirements, consider factors such as scalability, integration capabilities, and security, and choose a payments hub that aligns closely with your goals and objectives. By doing so, you can ensure a smooth selection and implementation process and start gaining greater efficiency in your payment processes.

Are you interested in learning more about the payments topic?

Here's a recent webinar we organized together with our partner Orchard Finance on all the critical payment trends to be aware of.