Payment without errors

Which issues do companies face when preparing bank payments?

Olga Makhayova:

Most medium-sized and large Russian companies have transaction accounts in several banks. Bank interactions are done, among other, through Internet Banking services banks offer their corporate customers. As long as your company is small and keeps its accounts in one or two banks, these can be handled manually. However, in case of a large holding company with dozens of subsidiaries, centralized treasury and several banks catering to its needs, it can be a lot more complicated. They can make hundreds or even thousands of payments each day. 

Payment preparation and issuance, related management and control functions are taking increasingly more time. Normally, this involves several employees: one person issues payment orders, another one examines them, and someone else will approve them. Preparing all payment drafts and submitting them into several different banking apps takes too much time and is fraught with numerous mistakes. Drafting payments is usually a standard and routine process, so companies often need to have it simplified and automated. This can be addressed with our Host-to-Host product, which enables interchanging documents generated from the company’s accounting systems with several different banks through a one-stop interface.

Valery Frolov:

Exchanging data with the bank directly from an ERP-system allows to enhance security and reduce risks in the control environment. Human factor risks are inherent to standard operations, and Host-to-Host is a perfect solution to address this risk. Substantial saving of upload, examination and follow-up control time is another advantage of the project. A properly setup system can reduce to zero the number of errors in payment submission.

Did Cinimex already have experience in the automation of interaction between banks and holding companies?

O.M.:–Yes, this is not our first deployment, we had already automated interaction between banks and their corporate customers using Host-to-Host on the bank’s side. From these projects, we knew that despite any possible differences in formats and protocols, the issues, which need to be addressed within the migration to Host-to-Host, are pretty much the same.

Firstly, documents must be submitted to the bank in an acceptable format.

Payment and currency exchange control reference details are regulated by legislation, but each bank can use its own format to submit these details. Therefor, our solution allows exchanging documents both using the corporate format of a specific bank and standard formats, such as ISO20022.

Secondly, we need to ensure interaction with the bank’s API over a dedicated channel, each bank has their own. On one hand, banks need to enable secure data communication for their customers in terms of internal IT security and regulatory requirements. On the other, they can’t overcomplicate the customer's IT systems with additional modules, add-ons and infrastructure requirements.

Thirdly, we need to enable integration with accounting systems that are used to issue payments and other documents submitted to the bank.

There is a variety of accounting systems (SAP, 1C and etc.), and the same organization can use more than one.

After having analyzed these tasks, we realized that there is demand for Host-to-Host automation on the bank customer’s side as well.

How long did this project take? How did you manage it?

V.F.: – Cinimex embarked on this project in 2018. Firstly, in 2019, we automated exchange of Ruble payment documents within the pilot perimeter, i.e. between the Group enterprises and Gazprombank, and it was scaled to the entire Group. Then in 2020, we started phase 2 – automation of foreign currency control paperwork exchange. We were able to accomplish the main goal – increase reliability and stability of payment process, and enable secure payments and foreign exchange transactions.

O.M.: The project involved three organizations: Cinimex, SIBUR and Gazprombank. Each party had a dedicated team led by a project manager. We had a general plan, drafted by SIBUR, which prescribed project phases, timelines, and assigned responsibility. Within this plan, each team was free to plan their work at their own discretion in order to meet the established deadlines. Each organization ensured that changes in the accounting systems, solution adaptation, integration and preparation of testing stands were completed within the established timelines. Project coordination was conducted through regular common meetings.

What was the role of SIBUR’s IT department in this project? How did you integrate the Host-to-Host with the company’s ERP-systems?

V.F.: – For business, the value of the project is that it was implemented in a short time frame, at minimum cost and to the required quality, which was possible owing to standard project phases and approach to collaboration. On our end, it was the IT project manager who drafted the operating plan and progress reports, his job was to manage risks and address all issues and communications within and outside the project team.

As part of the project, we enabled document exchange with «1С:Enterprise » using the customer’s file systems and document exchange with SAP through SAP PI integration tool. When implementing integration with Gazprombank, we took into account the format for sending and receiving documents used in the bank’s API.

We adapted Host-to-Host to make sure it supported formats and exchange protocols that had already been implemented within SAP and 1C, so as to reduce the need for upgrading these systems to a minimum. We also made sure that the exchange of documents with the bank met strict requirements for IT security.

What was special about this project?

V.F.: – Above all, the biggest thing was automation of exchange of Ruble payment documents and foreign currency control documents between all SIBUR enterprises and Gazprombank. Secondly, it allowed to mitigate risks, and speed up the payment process, reducing staff time, owing to the switch from Internet banking to direct integration between SIBUR companies’ accounting systems and Gazprombank.

Thirdly, another important outcome is that we eliminated the risk of unauthorized changes in the outgoing payment orders (migration to SAP PI, which is used to share documents from SAP ERP).

The fourth thing is IT security, namely, implementation of user authentication and authorization in the system and the switch to centralized storage of digital signature certificates (using CryptoPro HSM).

Another important aspect is that the new functionality was scaled to span the entire SIBUR Group and how the pilot production went.

O.M.: – In this project, we used CryptoPro HSM for centralized secure storage of digital signature certificates and keys. This product wasn’t initially envisaged in the solution architecture, but it was added to comply with SIBUR’s IT security requirements, and we adapted the Host-to-Host to enable integration with this product.

Initially the exchange of Ruble payment documents was implemented based on Gazprombank’s corporate format, but in the course of the project, it was switched to ISO20022, which was enabled by means of Host-to-Host as well. The system supports different document formats even when dealing with the same bank.

The second phase of the project – automation of foreign currency documents exchange – took place in 2020, amid the pandemic and nationwide teleworking. All the infrastructure-related works, which are normally performed on site, were done remotely, as the customer gave us access to all stands so the new functionality could be tested and demonstrated to users. This made sure we could meet all the deadlines.

How did you organize the tech support for the solution and training?

O.M.: – SIBUR’s team is responsible for first and second line tech support, while the third line was implemented on our end. Training was offered both to key business users and tech people – system and application administrators. In addition to training sessions, they received solution description and complete documentation.

What are the outcomes of the project in terms of performance and payback?

V.F.: – The existing solution allows a member of the payment factory to manage all of the Group’s payments within one bank. There is no need for additional control procedures, which has significantly simplified digital signature paperwork. Speaking of project payback, in this case, it has more to do with enhancing the control environment and reducing the risks of fraud rather than driving up revenues. Viewed like this, the project has been a success.

What needs to be a special focus of attention in such projects?

O.M.: – From the very start, you need to engage representatives of all stakeholder divisions within the company to make sure that all business needs, requirements to infrastructure, architecture and security of the solution, internal policies and regulations are factored in.

Works need to be planned recognizing the fact that the bank, which the customer wants to enable integration with, is just as much a participant of the project. Customer expectations may require adjustments on the bank’s end, and these need to be planned separately. During migration to Host-to-Host and the first few months of working with the new channel, you may want to allow for a backup channel: for example, negotiate with the bank the option of using the Internet banking service at the same time with Host-to-Host.

Splitting a project into several phases is a common approach, and in such projects, you will want to implement documents gradually, in small groups, however, you should start with the bank, which accounts for the largest volume of interactions with your customer. This way, the customer will observe and evaluate the effects of automation soon enough.

Integration of Host-to-Host solution with the customer’s accounting system needs thorough analysis in terms of their possible adjustments. In case when for some reason such systems cannot provide the information required by the bank’s API, this needs to be enabled on Host-to-Host’s end.

What are your plans for further automation of interactions with banks and other counteragents?

V.F.: – This year, we are expanding the project to additional banks, and we expect to have our banking perimeter fully covered with the new solution by 2022. Implementation of Host-to-Host is one of the most important steps towards Touchless Payment, when end-to-end procurement based on properly adjusted control systems within each function will enable sending payments without human intervention. This would allow fully eliminating human factor risks.