Financial institutions across the world are increasingly becoming orchestrators of a comprehensive ecosystem comprising multiple non-banking partners. This is of special importance in under-banked regions of the world where such ecosystems are essential for expanding the scope of financial inclusion. And in a multi-party ecosystem, it is critical that banks and their partners work cohesively, without conflict and dispute for such ecosystems to flourish. Mutual trust is key and there must be standard processes to establish and ensure trust. The need for invoice approvals in a partner ecosystem, or a system in which partner commissions are rolled out after their approval is key for smooth functioning of such engagements.
Even banks with an extensive geographic network of branches cannot be physically present in every remote area. Or sometimes, the value of business from a certain region does not merit the cost of physical presence. But even in the remotest regions there are communities that need banking services. In such situations, banks engage with partners that have a wide presence in that region. These are usually non-banking entities with extensive local networks. End customers transact with the bank via these agents or partners. The transactions can range from deposits and withdrawals to paying for utilities and mobile recharge. The non-banking partner usually provides the physical infrastructure while the technical capacity is provided by the bank.
Such ecosystems not only bring financial services to previously unbanked communities and regions, but also help people avail of banking services securely. For example, a large bank in an African country has tied up with a leading retail chain to facilitate banking services. Account holders can use the retail network to withdraw and transfer money, pay bills, and even make purchases.
For every transaction made using the partner network, there is a commission to be paid by the bank to the partner. The commission is computed in the system and invoices are raised as per pre-determined frequencies. Regulatory frameworks in some countries require these invoices to be checked and approved by the partner before pay-outs can be initiated. In fact, the invoice approval functionality has two key use cases. The first use case entails commission-based pay outs implemented for direct selling agents by a leading Indian bank. And second, local merchant or partner network payouts as implemented by a leading African bank. In both cases, invoice approvals ensure transparency, reduces conflict, and establishes trust. This ecosystem necessitates the use of a digital platform where partners can view, verify, approve, or reject invoices. Once approved the invoice is sent for clearance and if rejected, the issue is analyzed, addressed, resolved, and processed. Such a platform must ideally be available on multiple end use channels including partner portals, internet banking and mobile, so that the process can be executed on demand.
Invoice approvals require automation of the current manual and mail-based debit approval process. This will not only reduce operational costs but also eliminate the potential for fraud in the case of partner pay outs. Also, in the corporate scenario, partners will have sufficient lead time to arrange for money, so that there is no possibility of insufficient debit.
Given the strict regulatory requirements, invoice approval systems need to work optimally at all points of time. Banks operating with a partner network need robust digital platforms that can automate, streamline, and seamlessly manage these systems. Updating existing banking infrastructure to facilitate these processes is time-consuming, expensive, and risky as well. Instead, banks can choose to work with experienced third-party vendors who can implement a cloud-native middle layer solution over their existing systems that can facilitate such processes.
Complete financial inclusion is high on the world’s agenda. And working with a network of non-banking partners not only furthers the inclusion agenda, but helps the bank expand its services to previously untapped geographies and communities. It is a valuable revenue stream that must be maximized. Managing invoice approval practices well is key to building a robust partner ecosystem.
