Enterprising Payments Why Payment Hubs Make Sense · Mark K. Webster, CPA, CCM Partner Treasury...

Mark K. Webster, CPA, CCMPartner

Treasury Alliance Group, LLC

Enterprising PaymentsWhy Payment Hubs Make Sense

Jim Furry, CTPDir-Treasury Operations

Agenda

• Introduction

• Payment Hubs

• PPL Case Study

• Q&A

Introduction

Once upon a time, payments were easy…

There was only one!

But we keep inventing new ones!

King Croesus of Lydia invents the coin

ca.. B.C.550

ChecksTravelers Checks

Credit Cards

1970 1990 2000

Voice Response

Dumb Chip Cards

Shared ATMs

Global ATM Network

Popular InternetCheap Chipcards

Client/Server

Smart Chip CardsTelephone Bill Payment

PC Banking

Debit Cards

PayPalMobile

ElectronicCard

Transactions intended for one payment method are converted to another…

Convergence complicates life

with increased risk and reporting problems!

We struggle to adapt

Creating siloed systems with repetitive infrastructure!

Application Silos

Corporate

Consumer

Wholesale

High Value

Exceptions

Administrative Support

Platform Silos

it Card

Spaghetti anyone?E

Positiv

POS CARDS TRUST Ret. Corp. WS

EDI PC

EDI MVS

EDI Mail

EFT Light

PPDAP/PPDDS

Automated Accts Payable

Image Proof & Clearing

MICR Document Control

Payments Processing

PPD/PAP

EDI Wires Paper ClearingsACH

Payment Hubs

Enterprise Payment Hub

Data Management

Shared Services Manager

Payments Customers Rules

Balancing

Returns &

Repair

Reporting

Analytics

Security

& Risk

Payments Hub

Least Cost

RoutingTranslation Messaging

Release

Customer

Portal

Internet

Wire Room

Front Office

Back Office

ATM/POS

ChannelsPaymentsCheck

PayPal

Target

FedWire

Future

Why Payment Hubs

• Reduced cost

• Faster response time/Real time monitoring

• Open standards

• Fewer exceptions/Improved STP

• Improved compliance

• Network agnostic

• Available technology

• Flexible migration path

Bank 1

Bank 2

Bank 3

Bank n

PaymentsCheck

PayPal

Target

FedWire

Future

Corporate Payment Hub

PaymentsTrading

PartnersRules

Treasury

Workstation

General

Ledger

Payroll

Enterprise Payment Hub

Data Management

Shared Services Manager

Payments Customers Rules

Balancing

Returns &

Repair

Reporting

Analytics

Security

& Risk

Payments Hub

Least Cost

RoutingTranslation Messaging

Release

Customer

Portal

Internet

Wire Room

Front Office

Back Office

ATM/POS

Channels

Why Corporate Payment Hubs

• Reduced cost

• Reduced float

• Improved information management

• Real time reporting and analytics

• Improved risk management

• Bank agnostic

• Increased control

PPL Case Study

PPL CorporationPage 15

PPL Corporation

PPL Corporation, headquartered in Allentown, Pa., controls more than 11,000 megawatts of generating capacity in the United States, sells energy in key U.S. markets and delivers electricity to more than 5 million customers in Pennsylvania, the United Kingdom and Latin America. PPL is a $6.9 billion corporation that ranked 350 on the Fortune 500® for 2006. PPL's four principal business subsidiaries are PPL Generation, PPL EnergyPlus, PPL Global and PPL Electric Utilities. PPL employs about 12,600 people on three continents.

PPL Treasury Organization

VP-Finance & Treasurer

Dir-Treasury

Operations

Assistant

Treasurer

Dir-Investments &

Pensions

Jim Furry, CTP

Agenda

PPL Payment Architecture: Early 1990s

PPL Desired Architecture: Mid-1990s

PPL Actual Architecture: Mid-1990s to

PPL Payment Architecture – Future

(2008 and beyond)

PPL Next Steps

PPL Payment Architecture:Early 1990s

Accounts

Payable

Payroll

Investor

Services

Check Records

Common

FormattedChecks US Mail

PPL Payment Architecture:Early 1990s

Problems with this architecture…

– Still largely siloed

– Duplicate functionality

PPL settlement strategy (at that time):

– Implement single disbursement system that receives “requests for payment” from PPL payable sources:

• Accounts Payable

• Payroll

• Investor Services

PPL Desired Architecture:Mid-1990s

Accounts

Payable

Payroll

Investor

Services

Payable Records

Common

Disbursement

System

Formatted

ChecksUS Mail

PPL Actual Architecture:Mid 1990s to Today

Cash Receipts Details

Material/

Service

Supplier

Activities

Remittance

Processing/

Lockbox

Procurement

Other PPL

Front Offices

(Zainet, MCS,

CSS (x2),

Employee

Activities

Vendor

Payables

Paycycle

Investor

Activities

Consolidated Cashflow Database

Receivables /

Payables

Other PPL

Front Offices

U.S. Post Office

Electronic

Remittances

Bank Deposits

Paper Invoices

Fuel Vendor

Payables

Payables /

Receivables

Interest /

Dividends,

Payroll

Electronic Invoices

Receipts /

Disburse-

Legend:

Front Office

Treasury Back

Office

Treasury

Reporting

Common Check Print

PPL Payment Architecture:Mid 1990s to Today

Problems with this architecture…

– We didn’t quite get to the complete spirit of the vision for disbursements:

• With the PeopleSoft disbursement system, all transactions have to go through the A/P vouchering process to get to the disbursement system

– So we did not implement payroll into PeopleSoft A/P, …

– And we did not implement investor payments into PeopleSoft A/P

• Controls around disbursement issuance are centralized, but we still do not have a completely automated means to implement controls around disbursements

– Cash receipts are still processed and controlled in a separate system using totally different controls and procedures

PPL Payment Architecture:Future

PPL settlement strategy:

– Implement integrated cash settlement system (ICS):

integrated for cash disbursements and cash receipts

– Integrate Enporion’s existing physical supply chain

offerings with the new financial supply chain cash

settlement system (ICS)

– Reap business case benefits of new approach:

• Achieve reduced resources required to support

settlement business functions

• Enable greater staff flexibility resulting from common

processes, technologies and controls across

disbursements and receipts

• Operate with fewer support resources resulting from

fewer technologies supporting settlement

Treasury Back Office

Receipts /

Disbursements

Receivables /

Payables

SettledCash

Receipts

Invoices

Receiv

Digital

Material/

Service

Supplier

Activities

Procurement

Other PPL

Front Offices

(Zainet, MCS,

CSS (x2),

Employee

Activities

Vendor

Payables

Investor

Activities

Other PPL

Front Offices

Fuel Vendor

Payables

Payables /

Receivables

Interest /

Dividends,

Payroll

BankU.S. Post Office

Electronic

Including

Deposits

Legend:

Front Office

Treasury Back

Office

Check Remittances

Paper Invoices

Receip

Advantages of this design:– Supports settlement of payables and receivables in same

system

– Provides for an exception based settlement model• Flexible verification rules implemented by business analysts

• Flexible work queues with user-definable escalation parameters

– Enables consistent procedures and controls for disbursements and receipts

– Provides integrated cash information for near-term cash planning

– Provides full management visibility into cash operations:• Operational Work Management:

– Current status of all exception queues

– Ability to dynamically reallocate resources to queues requiring additional assistance, but still maintaining appropriate segregation of duties

• Performance Metrics:

– Measures against process SLA targets (including acceptable defect rate targets)

– Drill-thru capabilities to root cause reasons for results

PPL Next Steps

Implement Accounts Payable “OK to Pay” process on Passport A/P system

Implement Digital Mailroom for efficient extract, image and data capture

Implement Microsoft Dynamics GP for PPL’s “miscellaneous commerce”

Work with Enporion to build Integrated Cash System (ICS)

Integrate ICS with Enporion supply chain offerings – completing the integration of the physical and financial supply chains

Questions?

Mark K. Webster, CCM, CPA

Partner

Treasury Alliance Group, LLC

http://www.treasuryalliance.com

mark.webster@treasuryalliance.com

(216) 375-4155 (mobile)

(216) 932-1678 (office)

For further information:

Jim Furry, CTP

Dir- Treasury Operations

http://www.pplweb.com

jtfurry@pplweb.com

(610) -774-5237 (office)

Enterprising Payments Why Payment Hubs Make Sense · Mark K. Webster, CPA, CCM Partner Treasury...

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