The Complexity of a Cloud ERP Bank Integration

By Steven Otwell
Director of Payments, Kyriba

As many companies prepare for an ERP cloud migration and look to digitize their enterprise applications, both ERP companies and system integrators are poised to capitalize on this and reap the benefits of years of migration project work.

The majority of these projects will be global in nature and need to tackle the complexity of global banking integrations. And, many system integrators agree that cloud ERP bank integration is one of the most complex aspects of the project.

Streamlining ERP Bank Connectivity with MBC (multi-bank connectors)

This may be a challenge in any ERP migration project. Although many IT teams will look to SWIFT or Alliance Lite2 for standardization, the truth is that every bank still requires its own unique formats for both connections and pushing approved payment formats to the banks.

For example, FTP is a protocol that sets the communication between the sender and the receiver. As anyone who has used an FTP knows, it is independent of the file itself. SWIFT cooperates with standard-setting bodies such as ISO 9362, ISO 10383, ISO 13616, ISO 15022, ISO 20022-1 and ISO 20022-2, however, the complicated and varied data formats continue to plague banking interactions.

Let’s take a look at the process and sequence of events IT has to go through to get a single bank connected to an ERP for a simplistic use case of bank connectivity:

Step 1: Gather banking requirements from the business

Step 2: Place it in the project queue

Step 3: Wait for the business to complete the contracts/required paperwork with the bank

Step 4: Set the first call with the bank, which may also include finance, treasury, the connectivity team, bureau and bank

Step 5: Collect the bank specs and begin development

Step 6: Set the first test call with bank, coordinate with the business, the connectivity team and the bank

Step 7: Most formats will need to be tested multiple times. In some cases, we have seen 5 tests needed for one format.

Step 8: The format then leaves development

Step 9: Staging

Step 10: QA

Step 11: Non-production

Step 12: Penny Test

Step 13: Production

The steps it takes to get even one bank connected to an ERP are extensive, and some international banks can take more than one year to get into production. Often the complexity of such bank ERP integration is underestimated. 

Payment Formats: Another Challenge for Cloud ERP Integration

Once the bank is connected, we have seen single payment formats take more than six months to make it through production. Sending a U.S. domestic ACH NACHA file to a bank is a fairly straightforward process. However, other complications can arise from managing a global banking footprint. As such, all format scenarios need to be individually tested with each bank.

An example of some required fields include:

  • Origination Bank
  • Branch
  • Origination Country
  • Receiving Country
  • FX Exchange
  • Currency
  • High Value or Low Value
  • Country-specific Field
  • Payment Purpose Code
  • Protocol

Once the analysis is complete, it is easy to see how some businesses can have hundreds of required formats, taking into consideration all of the banks, currencies, countries, etc. To further the complexities, IT teams have to work through regional differences in the banks. For instance, CITI is not a single bank, they may be under the same banner, but CITI is made up of 1,000s of banks globally with many regions, and even branches, with their own unique requirements.

Furthermore, there are inherent difficulties that each geography may have. Latin America has specifications that are not recognized anywhere else in the world around Boleto payments, Germany and France can utilize EBICS, SEPA across Europe, BACS in the UK, Zengin in Japan or banknotes in China.

One final component that IT may not be ready for or willing to take on is the management of SWIFT. Many corporates are looking to implement SWIFT via AL2, but IT may not be prepared for the requirements. In 2020, SWIFT is instituting new mandates around both security and certifications. Companies choosing to manage their own BIC via AL2 will have to have in-house SWIFT domain expertise and go through an annual certification and testing program. If that certified resource leaves the business, IT will need to train and certify a new resource.

Kyriba for Cloud ERP Bank Integration

Rather than having the IT department pick up another area of development and maintenance that is not their area of expertise, we encourage corporate IT departments to look at Kyriba for your full cloud ERP integration requirement for bank connectivity. We have been able to accelerate global cloud ERP bank integration projects by more than 80 percent with our out-of-the-box, bolt-on bank connectivity, and our shared payment format library of more than 45,000 pre-developed and tested global payment formats. With more than 1,000 clients utilizing our connectivity, we look forward to a discussion to accelerate your cloud project and migration efforts. Request a demo today.