Multi-Stage Payment Methods

INTRODUCTION:

The Multi-Stage Payment Methods or Bank Chain function enables business to make a payment via
more than one bank (for example, correspondent banks or intermediary bank of the house bank
and/or recipient bank and/or intermediary banks).

Without bank chain, when making a payment to a business partner abroad, business had to specify
their house bank and the business partner’s bank when processing payments. These two banks
represent the start and end of the payment cycle and it was down to the house bank to determine via
which banks the payment should be made. Using the bank chain function, you can now specify this
bank chain yourself, leading to faster payment transaction processing and considerable cost savings
through reduced bank charges.
(Reference: https://help.sap.com/viewer/6211bf1accac4f2e813e7f8e5fc19e99/6.18.11/en-
US/cf62d25320cd4608e10000000a174cb4.html )

We can define up to 3 correspondence banks in SAP

Bank chain configuration in SAP:

There are 3 type of bank chain which can be configured in SAP

1: Bank chain by house bank

2: Bank chain for bank to bank transfers

3: Bank chain for business partners

In this blog post we will be focusing mainly on Bank chain for business partner.

Generally configuration of bank chain will involve following steps irrespective of type of bank chain.

1: Define scenarios

2: Activate bank chain

3: Define general bank chain

4: Maintain recipient specific bank chain master data (for determination or correspondence bank)

1: Define scenarios

-Scenarios depict the search strategy which will be used for deciding the correspondence bank. 
SAP delivers some predefined scenarios which will be sufficient to cover any business aspect;
however we can create our own scenarios.

Defining scenario will be include scenarios definition and the characteristic of the scenario.
If general search checkbox is selected then system will look for correspondence
bank in general bank chain (to be defined in step 3) while processing the
payment.
NOTE: Step 3 is not required if general search checkbox is not selected.
Next we will maintain the ranking order for searching correspondence bank
based on various master data as shown below.

2: Activate bank chain

Based on the scenarios defined above we have to activate the desired scenario based on client
requirement.
3: Define general bank chain

This will be configured to select the bank chain if recipient specific bank chain is not maintained in
the master data level.

We will maintain correspondence bank in below node.

Under assignment tab, we will maintain the house bank details for which the above correspondence
bank should be considered for determination.
 

4: Maintain recipient specific bank chain master data

In this step we will maintain the customer /vendor specific master data as per the
bank accounts already maintained in vendor /customer master

Tcode: FIBPU
Upon execution we will see the list of bank accounts maintained for this particular
vendor /customer master.

Double click on bank accounts for which correspondence bank details are to be
maintained. Here we can maintain correspondence bank per sender bank (i.e.
house bank)

Now maintain the correspondence bank details as per currency and House bank

This completes the configuration for multi stage payment.

Now if you execute the payment run for above vendor then it will select the correspondence bank as
per above configuration and the same will be displayed in payment proposal as well as updated in
payment file .( At table level you can find these details in REGUH table as well) .

 
What is Bank Chain, Correspondent Bank and
Intermediary Banks?
Bank Chain is an SAP functionality which helps in making payment via more
than one bank. For example, payments via the correspondence banks or the
intermediary banks. In SAP, we are allowed to have at max 3 Intermediary
banks to process any bank transaction successfully.
Bank Chain addresses scenarios like, say, we have to make payment in US
dollars by Citibank, Berlin to a bank in the USA via Citibank, New York. Such
requirements can be addressed via Bank Chain functionality.

Let’s try to understand this with an example. If Bank A wants to move funds
to Bank B but neither has an account with the other then it will be necessary
to find an intermediary bank (I) that has a relationship with both A and
B. And then the funds would travel from Bank-A to Bank-I and finally to Bank-
B. Hope this helps in understanding the Bank Chain concept.
Before the advent of Bank Chain, when making a payment to a business
partner abroad. We had to specify the house bank and the business partner’s
bank when processing payments. These two banks represented the start and
end of the payment cycle. No third bank was involved. And, it was the
responsibility of the house bank ( or the payment initiating party) to
determine via which bank(s) the payment should be made. But now, using
the bank chain functionality we can easily specify the bank chain ourselves.
Leading to faster payment transaction processing and considerable cost
savings through reduced bank charges.

A Correspondent Bank or Intermediary Bank is a bank in Bank Chain, where

funds are transferred prior to reaching their destination, the beneficiary bank.
If the payment bank is across an international border, the intermediary bank
or Correspondent Bank may also act as the currency exchange provider.
The key difference between the two bank type is that a Correspondence Banks,
which are a third-party bank, are authorized to provide services on behalf of
another bank. So in this case, the Correspondence Bank acts like an agent of
the . Whereas, the Intermediary banks are also third-party banks used to
facilitate international transfer and funds settlement between two banks.
Another difference is that Correspondent banks are able to handle more
currencies comparatively.
Integration
Bank Chain functionality works only with Automatic Payments Program (Tcode
F110) functionality.

Bank Chain (Correspondent and

Intermediary) Setup in SAP
Time needed: 1 hour.
Bank Chain (Correspondent, Intermediary) Configuration in SAP

1. Define Scenario
TCode and Menu path: SPRO > SAP Customizing Implementation Guide >
Financial Accounting > Bank Accounting> Bank Chain > Define Scenario
Direct Table Maintenance:
Customizing Object: VC_TBCHO
Transaction: SM30

A scenario describes which criteria are used to find a bank chain. The
scenario determines how the bank chain will be sought.

2. Activate Bank Chain

TCode and IMG Path: SPRO > SAP Customizing Implementation Guide >
Financial Accounting > Bank Accounting> Bank Chain > Activate Bank
Chain
Direct Table Maintenance:
Customizing Object: TVCHAINCO
 Transaction: SM30

In this activity, we activate the bank chain function. In doing so, we

specify which bank chain is to be determined during a payment.
3. Create General Bank Chain
Payment is independent of a business partner’s bank details.

TCode and IMG Path: SPRO > SAP Customizing Implementation Guide >
Financial Accounting > Bank Accounting> Bank Chain > Create General
Bank Chain
Direct Table Maintenance:
Customizing Object: VC_TBCH1
Transaction: SM30

In this activity, we define general bank chains. This means that payments
can be processed via a general bank chain and are not dependent on the
business partner’s bank details.
4. Define Partner-specific Bank Chain
Payment is dependent on a business partner’s bank details.
SAP MENU, choose Accounting > Financial accounting > Bank
– House banks > Edit | to define Bank Chains for House Banks.
TCode for Create/Edit: FIBHU
TCode for Display: FIBHS
– Bank to Bank Transfer
TCode for Create/Edit: FIBTS
TCode for Display: FIBTU
– Business partners > Edit | to define Bank Chains for Customers and
Vendors.
TCode for Create/Edit: FIPS
TCode for Display: FIPU

If we want to make a payment via a Bank Chain, and the intermediary

bank dependents on business partner’s bank details, then in such case we
 have to define a partner-specific bank chain.

With these steps, we are done with the configuration and the required
Intermediary Bank Master data.

Next, we have to execute the Automatic Payment Run and check the Payment

Run Tables: REGUH for the intermediary bank details in fields like REGUH-
BTYP1, REFUH-BNKS1, REGUH-BNKL1 and others.
The above step by step process gives an idea of how we can set up the bank
chain in SAP. For detailed configuration steps, please check link: Detailed
Configuration of Bank Chain in SAP.
Do let us know your feedback in the comment section below.