Why centralization alone isn’t enough—and how POBO and in-house banking change the game
Here’s the thing most companies get wrong: they treat centralized payments like an efficiency play. Fewer bank accounts. Bulked payments. Lower admin burden. And while that’s not wrong, it’s barely scratching the surface.
Because when you design centralized payments with strategy in mind—when you align structure, technology, and control—you unlock far more than savings. You create visibility, leverage, and agility across your entire global financial operation. And if you’re not aiming for that, you’re leaving value on the table. A lot of it.
The false comfort of “centralization”
Many organizations are proud to say they’ve built a payment factory. In practice, that often means they’ve centralized operational processing. They’ve taken payment execution into a shared service center, consolidated their teams, and reducing cost per transaction. It’s a step in the right direction, and the gains are clear for everyone to see. But it isn’t a strategy, and it doesn’t create the kind of ecosystem multinational organizations need to create an effective payment strategy.
What we’re really centralizing in the above example is labor. Most payment factory models continue to process payments from each entity’s accounts, on their behalf, under their name, exactly as they would have previously done for themselves. The model is operationally efficient (especially if the alternative is each entity managing payments itself). But it stops short of transforming financial ownership or visibility. It’s about processing payments faster and cheaper—not smarter.
The mindset driving this kind of transformations usually motivated by cost reduction: using lower-cost labor, often offshore, to process payments at a lower price point. This is great for cost control, and it can help to boost efficiency. But neither of these are where the real value of centralization actually lies.
Strategic control: what it is, and what it enables
Strategic control means knowing where your cash is, where it’s going, and what it costs, in real time. It means consolidating power without sacrificing flexibility. It means enabling real-time, data-driven decisions around liquidity, FX exposure management, and audit readiness. This is the backbone of a treasury function that’s built to lead.
The strategic leap happens when organizations move from shared processing to Payments on Behalf Of (POBO). POBO is—a structure that routes payments through a limited set of centralized accounts. Every transaction is executed by a central financing entity or designated shared-service structure. POBO doesn’t just centralize execution—it consolidates control both legally and operationally. It reduces accounts, enhances oversight, simplifies FX, and becomes a foundation for broader financial integration.
POBO isn’t just a payment method—it’s a structure for establishes real-time visibility, reduces complexity, and drives better decision-making across treasury and finance.
In my 25 years of experience driving treasury transformation projects for corporate leaders around the world—including Booking Holdings, Chevron, Estée Lauder, Microsoft, and Texas Instruments —I’ve seen what happens when POBO is done right. These companies have built some of the most advanced global treasury infrastructures in the world—leading-edge solutions designed to optimize payments, reduce risk, and increase agility. Treasury becomes predictive, not reactive. Working capital gets deployed more efficiently. And payments become an engine for visibility—not just execution.
Their approach allows treasury to become predictive, not reactive. They deploy working capital more efficiently and effectively. And their payments engine acts as an engine for visibility, —not just execution.
The design decisions that make or break POBO
Strategic design is where most projects go off-track. Companies underestimate the number of decisions that must align across treasury, AP, tax, and IT. They rush implementation without first answering key questions. Questions that matter even more when POBO is part of a broader treasury structure.
- What’s the right account structure to support our POBO framework across entities and currencies?
- How do we ensure regional compliance when routing payments through a central model?
- How do we design POBO to optimize visibility and minimize foreign currency risk?
- How do we align stakeholders to maximize adoption and long-term value?
- How do we align teams across functions and regions to enhance scalability?
The answers to these questions aren’t just a matter of technical operational, or aesthetic preference. They each represent a strategic lever. The right answers enable flexibility and scale. The wrong answers lock you into workarounds and inefficiencies that erode value and confidence.
From payment factory to strategic infrastructure
Centralized execution is a starting point. But without structural integration, it’s just a starting point.
The finishing line is the implementation of an in-house bank (IHB).
A payment factory reduces friction. An IHB redefines control.
At its core, an IHB is a centralized legal and operational entity—often a financing affiliate—that acts as the internal bank for a company’s subsidiaries. Rather than each entity maintaining its own external banking relationships, the IHB manages payments, collections, intercompany loans, and foreign exchange centrally. It moves beyond shared processing by consolidating financial ownership and liquidity management into a single, strategic structure. And it does so while reducing your enterprise’s financial reliance on external banking partners.
As Citibank notes in their article In-house Banks: As Relevant as Ever in Today’s World, “In-house banks may not be a riveting topic, yet they remain a linchpin of top-performing corporate treasuries.” And while adoption is still growing, in-house banking is still seen as a play for the biggest multinationals only:
- Only 10% of companies under $2 billion in revenue have implemented an IHB
- Adoption rises to 39% for those between $2–10 billion
- Then climbs to 64% for $10–25 billion companies
- And hits 70% among companies above $25 billion
But this progression isn’t just about size—it’s about strategic maturity. The companies adopting in-house banks are the ones managing complexity at scale. And the fact that so many haven’t yet adopted one represents a huge opportunity to transform the effectiveness of your treasury.
IHB Adoption by company size / revenue
POBO embedded in an in-house bank doesn’t just streamline execution—it becomes the structural framework that supports FX management, intercompany lending, liquidity forecasting, and more. It’s not just a better way to pay—it’s a smarter way to operate. For a deeper understanding of in-house banking and its benefits, check out Serrala’s guide, In-House Banking: The Strategic Advantage for Treasury Professionals.
Technology enables the shift—provided you design for it
For corporates leveraging SAP as their ERP system, technology like SAP’s Advanced Payment Management In-House Bank (APM-IHB) facilitates this transition—from a standalone payment factory to a fully integrated treasury platform. APM-IHB brings together centralized payment routing, virtual accounts, automated balance tracking, seamless end-to-end processing, and real-time intercompany postings into a single environment that connects POBO with the broader in-house banking ecosystem.
When combined with SAP’s Multi-Bank Connectivity (MBC), this infrastructure extends all the way to external banks—enabling direct communication without file transfers. The result is a secure, fully traceable real-time workflow from invoice to execution. With full audit trails and embedded compliance.
This kind of design creates the foundation for strategic enablement: real-time visibility, stronger fraud controls, improved compliance, and actionable insight across the enterprise.
That said, the tech can’t carry the strategy on its own. It’s the execution of the design that determines whether you get a scalable, strategic outcome or just another centralized process.
AI is coming—(but only if your data is ready)
According to HSBC’s 2024 corporate risk management survey, 61% of finance leaders believe AI will become increasingly critical to effective risk management decision-making over the next three years. But only companies that have centralized and standardized their information flows and data will be in position to effectively capitalize on it.
In treasury, AI is already reshaping forecasting, risk modeling, anomaly detection, and exposure planning. But AI is only as effective as the data it feeds on. And if your payments and processes are fragmented, your AI is flying blind.
Centralized payment models like POBO unify your cash movement data, and link subsidiaries, currencies, legal entities, and payment flows into a structured ecosystem. This unlocks data-driven decision-making by creating a data ecosystem that AI tools can effectively parse and analyze.
You only get one shot at doing this right
Most POBO programs roll out in phases, whether—by region, business unit, or legal entity. But the foundational design only happens once. That first model becomes the global blueprint. And if it’s built on flawed assumptions, the entire structure becomes difficult to scale, inflexible to adjust, and costly to fix.
With experience leading over 100 in-house banking projects focused on POBO, ROBO, FX, and cash pooling, I’ve seen just how much depends on getting that initial design right. I’ve helped leading organizations around the world avoid pitfalls, uncover hidden risks, and optimize every aspect of their solution—from account structure and intercompany logic to integration and governance.
The insight a business needs to choose the right approach is difficult—if not impossible—for most to access internally. External experience helps clients mitigate project risk, align budget and timeline expectations, and extract maximum long-term value from their systems.
It’s important to stress that the risks aren’t in the tools—they’re in the system’s design. And the gap between strategic impact and just “making it work” comes down to experience. When you get that design right, everything changes. It becomes the foundation for a scalable, strategic model that drives results across regions, entities, and currencies.
Microsoft: what “right” looks like
We’ve worked with Microsoft for more than 20 years. First, we designed and implemented their original in-house banking solution within SAP. Since then, we’ve been their system integration partner and strategic advisor, guiding their IHB’s expansion, enhancement, and extension. With Microsoft’s strong corporate culture of continuous improvement, their IHB structure has evolved to support additional functionality, broader geographic reach, and tighter integration with their finance and operations infrastructure.
As one of the most technologically advanced companies in the world, Microsoft is relentless in pursuing innovation—not just in the products they deliver, but in how they run their business. Their treasury team is no exception. Driven, collaborative, and deeply strategic, they bring the same discipline to cash and liquidity management that Microsoft brings to global technology leadership.
Microsoft didn’t just adopt best practices for POBO and IHB design,—they helped shape them. Their treasury team pushed for intelligent automation, deep integration, and scalable global structures to support growth. And they expected their partners to deliver at the same level. Collaborating with a team this visionary and rigorous pushed our own thinking. And resulted in one of the most sophisticated in-house bank environments operating today.
Today, Microsoft’s in-house bank supports:
- 450+ legal entities domiciled in 117 countries operating under a unified IHB model
- 700+ bank accounts integrated into IHB for auto sweeping & funding with affiliates
- One of the first fully automated global cross-currency/country/bank ZBA structures
- Tightly integrated POBO, IHB cash pooling, intercompany netting, and loans.
- $500M+ reduction in idle cash unlocked and reinvested to boost working capital
- Multiple Alexander Hamilton Awards for treasury excellence (See one example)
As Jim Scurlock, Director of Global Cash Management, explained in a case study webinar I co-presented with him and Sunny Ho, Group Treasury Manager on his team, Microsoft’s in-house bank serves as the operational backbone of their global cash strategy—facilitating centralized payments, intercompany settlements, intercompany loans, cash flow forecasting, and real-time liquidity management. At this scale, POBO isn’t just a process—it’s part of an integrated infrastructure that enables strategic execution.
[Watch the webinar replay with Microsoft here.]
How can Serrala help you create a POBO architecture that supports future-oriented treasury and finance strategy?
Don’t let your payment strategy stall at centralization. Use POBO to create visibility, enhance control, and prepare for the next evolution of treasury. Payments are no longer a back-office function—they’re a strategic lever.
POBO is the first step. The in-house bank is the platform. The difference is in the design.
If you’re still thinking about payments as an efficiency problem, you’re missing the bigger opportunity. The future of treasury isn’t just centralized—it’s connected, intelligent, and designed to lead.
Our treasury services team at Serrala has decades of experience building IHB and POBO architectures that support wholesale transformation of finance operations for multinational companies. Get in touch today to learn how we can help you.
