With the rise in automation and interpersonal connectivity, there are now numerous different options available to perform cash settlements. For instance, to pay a dividend or vendor, a banking platform can be used to complete the transaction whereas one can make a funding transfer by sending out an instruction or email to the fund admin directly.
As you can see, options are aplenty here, but why are we beginning to see a push towards single settlement platforms for these various forms of payments?
There are broadly two kinds of alternatives to the single settlement platform:
- Excessive Use of banking platforms: The implementation of different banking platforms for making transfers out of a bank’s account.Advantages
- Provides a sense of security since this is managed by the banks themselves.
- Issue resolution is performed by the banks, which can be easily checked if there are any blocks in transfers.
- Must use multiple platforms of the different banks to make transfers out of different accounts.
- Difficult to do an end-of-day reconciliation of all the payments that were made from different bank accounts.
- Customizable features are not available.
- Lack of central reporting and analytics.
- Paper-Based Cash Management: This is a popular method used for making payment instructions to fund admins or any other third party. This is usually done on paper-based Letters of Authorizations (LOAs) or through emails.Advantages
- Users have more control since the instructions can be changed or cancelled by making a call to the fund admin.
- A quite tedious manual process that is highly error-prone.
- Lack of reporting, analytics and ease to track the status of different payments.
- Lack of standard formats.
So, why is shifting towards a single settlement platform a feasible solution? A multi-admin, multi-bank supporting application is the answer to address most, if not all, of the issues that coincide with the aforementioned alternative options. This is due in part to:
- Greater Control & Reduced Risk when working with workflows and security checks within the application, which ultimately standardizes the entire process.
- Reduced Processing Costs coincide with having a single system. Also, with SWIFT integration and netting of transactions to be sent out via SWIFT, overall cost is reduced in a highly efficient way.
- Customized Features that are tailored for specific requirements and business cases based on individual client requests.
- Enhancements spanning reporting, analytics and auditing capabilities.
- Communication with banks, brokers and fund admins through a single application.
- Integration with upstream systems like trade ticketing systems and downstream systems like the Geneva accounting platform.