.gif)
CLEARING HOUSES - Risk reduction
GSM operators today are faced with an increasingly daunting task: how to manage the
financial and data clearing settlement of multiple roaming agreements. In addition to having to deal with an estimated 200 to 300 roaming partners each, they must all comply with complicated industry-wide standards and regulations for invoicing, data record format, settlement and more. Eugene Bergen Henegouwen proposes a solution
According to the GSM Association website, its 700 mobile operator members across 218 countries and territories now serve more than 2.5 billion customers. This means an almost unfathomable amount of mobile traffic must be documented and accounted for each day, hour and minute. And with about 500,000 new GSM connections being made globally every hour, this complexity is only going to intensify for the world's operators. Now add more market growth factors, including the proliferation of non-voice services, particularly SMS and MMS, and price reductions for users. All will lead to increased traffic.
The implications to operators are staggering.
Fortunately, they do not have to go it alone, as there are a number of clearing house specialists who have the expertise, experience and knowledge of the GSM wireless and banking industries and their multifaceted rules. This experience is especially important when it comes to financial clearing, an area where billions in Euros and other currencies are at stake.
Financial settlement of multiple roaming agreements is a complex and costly process for any operator to undertake autonomously. As more and more subscribers roam outside their home country borders to a wider range of countries, operators must collect and settle communications-related charges in a wide variety of currencies. Also, as imagined, the cost for highly qualified personnel and the systems required to manage this process is great, and the need for accuracy is imperative.
The best alternative is to make use of a high-quality, fully automated financial clearing house (FCH) to manage receivables and payables. On one side of the house, the FCH proactively collects customers' receivables. Obviously, the sooner this happens, the better, and this should be executed within about 40 days. On the other side is payables. An FCH manages foreign exchanges and all bank costs, ensuring that this part of the process is timely and accurate.
Revenue assurance, profitability and cost savings - all key components in today's competitive environment - also result from utilizing an FCH. First, the need for expensive personnel and an expensive in-house clearing system is eliminated. Second, a fully automated FCH provides operational efficiency while eliminating the risk of human error. A good FCH also improves debt management through proactive debt collection, allocation of funds and a clear audit trail.
A variety of FCHs are available for operators today, and operators must be sure the one chosen is fully functional. For example, the system should be able to take care of all types of traffic that may cross an operator's network, including GSM voice traffic, messaging (SMS and MMS, including interworking) and data (3G, GRPS and WLAN) transactions. Having a system that supports CDMA/TDMA clearing is important, as well, given that actually, subscribers worldwide do not want to be constrained in the network they use on their travels. The FCH should also integrate into the operator's accounting system for easier reconciliation and management of ledgers, and it should eliminate banking fees while ensuring competitive foreign exchange rates. Just as importantly, an operator must have access to its information via online reporting 24 hours a day.
At the end of the day, GSM operators need help most with reducing the risk while improving their return via a service that provides clearing and settlement for all of a GSM operator's international traffic. The invoicing and collection services available through an FCH should aim to simplify an operator's settlement processes with each of its roaming partners for all billing records exchanged during an invoicing period. This includes receivables from all partners who sent roamers into the operators' network, and payables to all partners where the operator's subscribers utilize a service. All settlement functions are consolidated, with the FCH acting on the operator's behalf. The operator simply funds its account, and the FCH settles with all of its roaming partners - removing the complexity involved with the current bilateral settlement process that is becoming prohibitively costly and way too time consuming as the number of partners increases.
Roaming, especially international roaming, is a significant part of operator revenues. However, before any exchange of money can even take place via an FCH, an operator must first have billing data detailing its roaming voice and data sessions. This data is essential for accurate invoicing and settlement. For an operator who has hundreds of roaming partners, the process of exchanging billing data is extremely complicated and tremendously expensive to undertake on its own.
Using a third-party data clearing house (DCH) is typically the option of choice for operators who want to ensure this critical part of their business is handled correctly. A DCH handles the exchange of billing data with an operator's roaming partners. Whether the visited or home operator, the DCH provides a single point of contact for the exchange of roamer billing records. This results in streamlined processing of roamer billing data and a single source of information regarding roaming customers as well as a way for the operator to calculate its financial position with roaming partners. And in an ideal world, the DCH should provide the operator with a number of features, including the ability to process vital and sensitive operator interactions regardless of technology type, billing format or signaling standard.
The advantages of using an independent DCH are much the same as for a FCH: revenue assurance, compliance with industry standard regardless of roaming partner, cost savings and operational efficiency. With all these benefits, it makes perfect sense for an operator to look outside itself for a DCH provider.
As the wireless industry continues to mature, operators are showing a preference for clearing services from a single source that can provide both data and financial solutions in the global marketplace. The key advantages for an operator of having a single provider for its DCH and FCH are both operational and practical. On the operational side, the operator can be certain that all billing data and supporting reporting is fully integrated between the DCH and FCH, eliminating risks of data leakage and ensuring full transparency across the entire clearing process from file processing through to final settlement. On the practical side, the operator benefits from one account manager, one contract and an end-to-end commitment from the clearing house to the customer.
Ultimately, operators are provided with the convenience and cost savings associated with bundled services, and they benefit from the critical relationships needed to ensure data and reporting integrity required for financial clearing and settlement. To give you some idea of the level of processing we are already seeing, I can reveal that the Syniverse FCH generates and receives more than 18,000 invoices and settles over 8,000 roaming partner positions. As this trend continues, FCH providers will benefit from an upturn in their business from operators who have made the decision to outsource their requirements rather than trying to run this side of their operations in-house, as traditionally been the case.
It's a dynamic industry at the moment, and this is causing suppliers to augment their capabilities to keep abreast with the demands. For example, Syniverse acquired at the end of 2007 the wireless data and financial clearing business of Billing Services Group Limited (BSG). As a result, our current and future customers are provided with the convenience and cost savings associated with bundled services, and they also benefit from the critical relationships needed to ensure data and reporting integrity required for financial clearing and settlement.
Also, during any period of change and consolidation, it's important that independence is maintained when it comes to verifying and validating the source data provided by the DCH. This data should still be subject to the same stringent quality checks that are applied to all other DCHs, even if they are run by suppliers. And they also should be fully able to provide financial clearing services for operators who have already established a relationship with other data clearing houses (DCH).
I think it's this transparent approach and attention to detail that will show operators that the time is right for them to consider outsourcing their FCH and DCH operation in order to achieve cost benefits and efficiencies. If they do, it will benefit them and also the suppliers who work hard to provide a trusted source for their important - and sensitive - clearing operations.
Eugene Bergen Henegouwen is Executive Vice President, Syniverse, EMEA
www.syniverse.com
Share this article with others
Post to del.icio.us
Printed from http://www.eurocomms.com/features/112451/CLEARING_HOUSES_-_Risk_reduction.html
Comment on this article
Skip to comments
We encourage users to analyse, comment on and even challenge European Communications's articles, including the one above - 'CLEARING HOUSES - Risk reduction'
User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site.
Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. We will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site.