Corporates ask banks for tech contingency plans
Corporates are realising they need a plan B when a technical error hits their payment systems, but banks are showing limited appetite to produce one.
As corporate treasury becomes more dependent on digitization, its exposure to technical risks around payments being made and received has grown. Recognizing this increased risk, clients are asking banks about their contingency plans, and are not satisfied with the responses.
In August, HSBC suffered a high-profile outage in the UK when an error in the Bacs system prevented payments being completed. This affected everything from salaries being paid to home purchase deposits being sent. The fault hit just before a three-day public holiday, so some payments were made four days late.
It is not the first time a technical disruption has prevented payments being completed.
Banks are not showing any signs of looking to create sustainable contingency plans
Harcus Copper, director, global digital client access, at Barclays, explains that the bank’s clients have begun to ask about what the back-up plan is should their payment platforms go down. In response to the demand, Barclays has worked with AccessPay to develop the Contingency Payment Access solution, which is being rolled out to select clients during its trial phase.
Copper says clients were not satisfied with the low-tech contingency plan Barclays, and a number of other banks, could offer, adding: “The issue is with legacy technology and the need to do manual processing to complete the transactions off the back of a fax.
"We started to see clients asking in RFPs what the contingency plan would be, so we set the task as a bank to create a solution.”
With regards to cases such as the HSBC outage, Copper says the Bacs system at least has another option should the situation arise – Faster Payments. However, for the predominately business-focused Chaps payments, or those that are sent internationally, there is no fall-back option.
“Bacs payments have the back-up option of switching to Faster Payments,” says Copper. “If there are issues submitting Bacs instructions, it is possible to switch to using Faster Payments and have two days’ leeway before the payment is made.
“With high-value Chaps payments, there is no fall-back option, which is why we have specifically built the Contingency Payment Access solution for Chaps, together with international payments.”
Contingency Payment Access requires users to log in via a different URL to the standard Barclays.net to access a site managed by AccessPay.
Ali Moiyed, founder and chief architect, at AccessPay, explains: “The infrastructure is hosted by AccessPay. If Barclays’ systems go down, the payments are directed through AccessPay.”
Corporates then input the details to make the payment via Swift’s channels using the MT 101 file format. This gives wide reach on the number of institutions that can accept the files, both domestically and overseas.
Failure to access payment functionality
Harcus Copper, Barclays
Copper says: “It can be used internationally and with any bank if they have exchanged agreements to accept the MT 101 format.
“The process captures the payment instruction in an internet front-end and converts this to an MT 101, which can be easily supported in an existing automated workflow, and replaces the payment that would otherwise have to be done manually and sent by fax.”
The system does not replicate what has already been created through Barclays channels. Corporates with a substantial number of transactions will still have to set up the processing of each file on the platform themselves.
“If a corporate has implemented straight-through processing with Barclays, it is up to them to implement it again on this system,” says Moiyed. “Barclays did not make an integrated ERP system and the corporate had to add their files.”
The platform can also cope should there be a notable outage that impacts a large number of corporates. Before being rolled out to clients, the platform underwent resiliency testing. “The platform can cope with 10 million concurrent hits in a minute,” says Moiyed.
Harcus Copper, Barclays
The platform is not available by default, and corporates are being assessed for their suitability before they are signed up. Should a payment need to be made via the platform, the transactions are charged at the same rate as if they were made using the standard Barclays.net system.
“The only cost to them is receiving the Swift 3SKey tokens at a charge of £55 each. The key is produced and provided by Swift and is needed to securely log in to the system and authorize the transfer from the bank,” says Copper.
The reasons for needing a back-up solution are not always down to an outage on the bank’s part.
Copper says: “Failure to access payment functionality is not always a bank’s fault. It can be as simple as someone forgetting their smart card to access the system.”
Despite the impact of the tech outages – both in terms of payments not being made and to a bank’s reputation – Moiyed says he has not seen any large-scale interest by banks in establishing a contingency plan.
“Banks are slow to make changes," he says. "As long as fax is working, they are happy to continue using it. There have been cases of banks seeing outages on their systems, but they are not showing any signs of looking to create sustainable contingency plans.”