In my last post I outlined the five primary forces that I think are fundamentally changing the way corporations approach back office finance functions and their banking partners.  However, one of the dynamics I did not explore is the dependency of the business model changes on technology.  Changes to accounting systems and bank connectivity will be critical factors in the success of corporate transformation efforts.  To realize cost efficiencies, A/P organizations must be able to efficiently route payment instructions to their key banking partners using highly reliable, secure and cost-effective communications channels.  To benefit from a centralized treasury, cash managers must be able to obtain detailed, up-to-date account statements from their financial institutions in order to perform end-of-day investment and borrowing activities. 

I have compiled a list of the top five forces I think are transforming the technical interfaces banks and corporate customers use to communicate electronically.  These five forces are the technology changes complementary to the business model changes outlined in my last post:

1.       ERP Consolidation – More multi-national corporations have a project underway to standardize and consolidate the various ERP applications being utilized within their enterprise.  Standardization enables consistent business practices across divisions and the creation of shared service centers.

2.       SWIFT Connectivity – Several hundred large corporations have registered to participate in SWIFT’s corporate access programs (SCORE).  SWIFT connectivity can reduce the costs and complexity associated with corporate banking communications by replacing the mix of web, fax and host-to-host transmissions with a single connection to banks worldwide.

3.       ISO 20022 XML – Otherwise known as the Universal Financial Industry (UNIFI) standard, ISO 20022 XML is designed to replace the myriad of local file formats (e.g. EDI, NACHA) used for payment processing around the world with a single, global message scheme.  See my blog entry on ISO 20022 for more details.

4.       Multi-Bank Cash Reporting – Multi-bank reporting applications aggregate end-of-day and intra-day balances for all accounts onto a single web portal.  Treasury personnel with visibility to all cash positions at bank accounts worldwide are better equipped to perform cash forecasting, borrowing and investment activities.

5.       Bank Relationship Management Software – Bank connectivity has become such a complex issue for corporations that several ERP vendors have introduced specialized software modules to simplify integration.  For example, SAP recently introduced its “Bank Relationship Management” application.  See my blog entry on SAP BRM for more information.

For those interested, I published a more detailed view of the 10 Forces Transforming Corporate Banking Connectivity on the www.gxs.com web site.