Innovation gathers momentum for treasurers

Connectivity

Corporates remain under growing pressure to achieve better visibility of global cash, tighter control on working capital and enhanced efficiencies in risk management. One way to achieve this is by improving bank connectivity, says Gautam Jain, global head of client access at Standard Chartered. The main development in connectivity over the past decade has been the increasing importance of bank-agnostic standards and platforms. This trend has accelerated in 2012, driven by the need to cut costs as well as regulatory initiatives such as the Single Euro Payment Area (SEPA).

“Over the past year, there has been a maturing of the new global message standard, XML ISO 20022, which has greatly improved the quality and reliability of information exchanged between banks and their corporate customers,” explains Marcus Treacher, global head of eCommerce for payments and cash management at HSBC. By standardizing messages using XML, opportunities exist to improve connectivity between enterprise resource planning (ERP) and bank systems, make multi-banking simpler and facilitate electronic bank account management (eBAM) services, says Treacher.

While XML is a global standard, one of the challenges facing corporates is that banks and countries have implemented different versions of it. For example, the data fields for the urgency of a payment may vary. This can be annoying for corporates (although much less so than using multiple formats). However, efforts by the Common Global Implementation (CGI) initiative to define a standard XML format are gaining ground. For example, Citi rolled out XML version 3 (2009 ISO maintenance release), aligned with CGI guidelines, across its global footprint of more than 90 countries last year, according to Hemant Gada, head of channel services at Citi Transaction Services. “Adoption of ISO 20022 XML continues to grow rapidly, with Citi crossing the 1 million XML transactions per month milestone in 2012,” he says.

Why SWIFT is gaining ground

XML is also a factor in another major change – the growth in the use of SWIFT for bank to corporate connectivity. In 2012 the number of corporates connected to the global SWIFT network passed 1,000, which is 10% of the total user base globally. “Corporates require multi-bank connectivity and standardization of their treasury flows in order to establish greater control over who they bank with by making it simpler to switch volume and transaction traffic among supplier banks,” explains Treacher at HSBC. “This increased flexibility and more open competition is a key feature of the current global corporate banking landscape as companies make constant and ongoing assessments as to the strength of their banks as counterparties.”

The opening of the SWIFT network for corporate customers sets up a wide range of opportunities for payment optimization, especially for companies with global operations, no matter whether they have centralized or local structures, according to Gisela Helms, global head of product development, eBanking at UniCredit. “The exchange of cross-border and cross-bank data in the SWIFT network enjoys the highest standards of security and availability,” she adds. “This provides the chance to exchange payment messages and files over a single infrastructure as well as use other services for FX or money market operations.”

UniCredit offers corporate customers full connectivity to the SWIFTNet network for many different messaging services demanded for communication between a corporate and their corresponding financial institutions, including messages for payments, treasury, reporting and securities. To increase efficiency and simplify customers' use of FileAct with UniCredit banks, a single access point for the entire group has been created for all SWIFTNet FileAct for corporates traffic. This enables corporate customers to use SWIFTNet FileAct as an additional communications channel for eBanking.

Filipe Simao, head of client advisory at BNP Paribas, notes that bank connectivity is an obvious area for corporates to focus on improving efficiency through greater centralisation, as it has few organisational implications. “Companies can benefit from lower technology costs and improved control even if other financial activities such as payment initiation continue to be performed on a decentralized basis.” His colleague Jean-François Denis, head of payments and local offers, points out that the bank has “undertaken the largest number of SWIFT implementation projects”. He adds: “But, it’s not just client-facing technology that we have invested in. For example, at the back end, we have made some very structural choices with a shared SEPA platform which provides a comprehensive and coherent offer.”

Meanwhile, RBS is seeing growing interest from companies in SWIFT's MT798 messaging. “Under the SWIFT for corporates programme, corporate SWIFT members may execute trade transactions via SWIFT with their banks that are MT798 enabled,” explains Ken Deveaux, global head of channels at RBS. “Import, standby and export letters of credit and guarantees may be executed through either Fin or FileAct. This enables a company that is multi-banked to use one trade portal and consolidate all trade transactions in one location. This benefit is similar to using a treasury workstation where all bank account information is accessible.”

The introduction of Alliance Lite2 by SWIFT provides another way for corporates to gain access to the network. Alliance Lite2 is a cloud-based connection to SWIFT that enables corporates to send and receive all types of SWIFT messages and files. Crucially, as a cloud service, Alliance Lite2 requires very little equipment and limited upfront investment.

Paul Bramwell, senior vice president for treasury in SunGard’s AvantGard business unit, says that the single biggest advance in treasury technology in the past few years has been the acceptance and growth of cloud-based services and solutions. However, he believes that, while Alliance Lite2 will undoubtedly appeal to some corporates unwilling to make upfront investments, it will not replace other methods of connectivity “There are still many reasons to use a SWIFT service bureau that offers peripheral services to the connectivity and adds value to a corporation using SWIFT to aggregate its balances globally and concentrate payments through a single connectivity platform,” he says. “The broad appeal of SWIFT to most corporations is the sheer size of the network and the relative ease of consolidating and reporting global liquidity positions in a standardized format.”

Other developments in connectivity

While SWIFT continues to garner headlines, other providers have also been innovating in the connectivity market. A number of banks have developed technologies that make life easier for corporates struggling with data transformation and multiple formats.

“Standard Chartered has developed the universal adaptor, a flexible online tool, which eases clients’ burden of data transformation,” says Jain. The universal adaptor hosts a format repository, allowing clients either to choose from a wide array of pre-defined formats (including industry standard, bank proprietary and ERP or treasury management systems formats) or design their own format for integration across online/or direct channels. The tool presents a host of client benefits, by removing the need for no on-premise installations and no system development and switching costs, while bringing them speedy realization of efficiencies. The bank is now extending the benefits of this tool to its partner banks and service providers.

Addressing a similar problem, Citi has developed its CitiConnect ERP Integrator. “Connecting to banks traditionally has been a difficult, costly and time-consuming exercise for customers,” says Gada at Citi. “Extracting the correct information for each payment instruction for each bank and country can be a significant investment. Leveraging existing SAP functionality to extract payment information, CitiConnect ERP Integrator is an effective way to produce comprehensively populated ISO 20022 XML payment files in a very short amount of time.”

Meanwhile, SAP’s Financial Services Network (FSN), which launched in October 2012 with Bank of America Merrill Lynch, Bank of Tokyo-Mitsubishi UFJ, Citi, Deutsche Bank, Nordea, RBS and Standard Chartered as development partners, offers a cloud-based connection that aims to simplify transactions between corporations and their financial institutions.

“FSN is aimed at providing corporates with a plug-and-play bank integration including access to banks’ value added solutions,” explains Gada. “Direct connectivity between corporate and financial institution has historically been reserved for the larger clients and those with in-house IT knowledge,” adds Deveaux at RBS. “Cloud technology looks set to change this, providing a ready connection to multiple financial institutions and business partners, without the need for on-site hardware or customized development and implementation.”

Hosted by SAP as an on-demand offering, FSN aims to facilitate multi-bank routing, multi-format payments, on-boarding and corporate services application development and deployment. The network is also intended to facilitate core transaction management among banks, corporations and treasury service providers. As part of the development of the network, banks and corporations are contributing their expertise and resources to create a plan – described as a road map – that helps to deliver full financial integration, connectivity and service among all participants.

“The road map being put into place will bring about new applications that enhance how corporations and corporate treasurers communicate with their banks,” says Don Trotta, global head, banking industry development, at SAP. While some observers view FSN as a competitor to SWIFT – and one with a good chance of success, given that around 60% of the world’s largest companies use SAP – there has been speculation that FSN might connect to SWIFT and be a complementary rather than competing service.

The road to eBAM

One of corporates’ most frequent demands in recent years is for eBAM to ease the administrative burden associated with account opening, closure and maintenance of credentials. “eBAM is acutely relevant to our customers, many of whom have a large number of accounts across various banks and are looking to minimize the risk and administration efforts that such multi-bank relationship models incur,” explains David Watson, global head of client access products, product management, GTB, at Deutsche Bank.

Efforts to develop eBAM are taking place both at a multi-bank level and at individual banks. While SWIFT has completed a pilot exercise for the eBAM Central Utility (which uses XML), there is uncertainty about the next steps for the initiative and the time to market of an offering. “We have continued to see a general push for eBAM connectivity by corporations, but the messaging has been slow to commence,” says Bramwell at SunGard’s AvantGard business unit. “The delay of the Central Utility clearing service has led to further uncertainty with respect to when eBAM will be a fully-fledged service offering but that hasn’t stopped corporations from looking to solve the underlying issues related to BAM.”

As a result of uncertainties over the SWIFT initiatives, the focus has for the time being shifted back to banks and technology providers’ proprietary account management solutions. “SunGard has completed several trials with the largest banks to ensure readiness to send and accept eBAM messages on behalf of clients,” says Bramwell. In addition to the provision of all the core message types related to eBAM around the ISO 20022 XML format, SunGard has built a workflow tool enabling clients to map out and customize the solution to accommodate their internal controls and processes.

RBS, which was involved in the SWIFT pilot, has focused on the underlying functionality of end-to-end eBAM activities, its proprietary channel Online Client Service and XML formatting. “On underlying functionality, we have made our whole set of requirements for account opening available to our clients online as well as deployed the entitlement management functionality which we are now piloting with clients (this enables clients to retrieve online what entitlements they have outstanding with us),” says Deveaux. RBS has also engaged in significant preparatory work on digital signatures and plans to go live with this in summer.

Also on the proprietary side, Citi has enhanced CitiDirect BE eBAM, which now integrates paper requests into the solution - which also includes signer management, account management (account opening/closing and maintenance) and reporting. “As a result of this enhancement, clients can now create and track requests to Citi, while authorizing the requests via wet-ink signatures,” says Gada. “This provides more efficiency and an easier user experience. More than 50 countries have been eBAM enabled within Citi’s global footprint.”

HSBC has enabled electronic account opening on its proprietary global internet channel, HSBCnet, and in 2013 will add to this capability with the release of eBAM services on the channel. This follows the launch of file-based eBAM messaging in 2011. “Our goal is to create a holistic account administration service worldwide, that our clients can access via any of our global digital channels, to reduce the time and cost wasted on paperwork for bank administration,” says Treacher.

While the efforts of banks are laudable, eBAM remains a work in progress. “eBAM is now getting beyond just being ‘a good idea’. Clients are beyond exploring the benefits – now they are exploring implementation,” says Tom Durkin, global head of integrated channels at Bank of America Merrill Lynch Global Transaction Services. “It’s a marathon – and we’re not near the finish. eBAM is still a priority for corporate clients, as evidenced by the number of RFPs now containing eBAM-oriented questions. They are looking for banking providers who are focused on this space and are helping drive the industry forward.”

Electronic banking portals

Many of the leading banks have updated their banking portals in the past year: a common theme is the ability to view a wide variety of customizable information at a glance. “We have introduced a new dashboard to our CashPro Online homepage,” says Cindy Murray, head of global treasury product infrastructure, platforms and eCommerce at Bank of America Merrill Lynch. “We listened to our clients and designed a homepage dashboard that clients can customize to closely align to their specific workflow, helping them streamline their operations and become more efficient.”

Bank of America Merrill Lynch also made significant enhancements to its CashPro Accelerate product, which meets a common challenge of many businesses – to establish a visual display of cash positions, reconcile transactions and automatically populate general ledger journal entries. It uses Microsoft Office Excel and an XML interface to auto-populate bank account data from the bank’s portal and imported BAI files from other banks into customized charts and spreadsheets with embedded formulas. “This allows our clients to spend less time gathering data and more time making strategic decisions,” says Murray.

Mobile access is also increasingly important for portals. Citi launched CitiDirect BE Mobile 18 months ago and is developing a tablet version, while HSBC is set to introduce the ability to initiate payments on mobiles and will also launch an applet version of HSBCnet which can be used on smartphones and tablets.

“We are seeing a distinct shift in the way that clients access treasury services, as their comfort with mobile technology increases and consumer trends are imitated in clients’ professional lives,” says HSBC’s Treacher. “That means that the initial drivers of the uptake of mobile technology solutions are mobility and convenience. In time we will see the functionality driven further by these two characteristics, perhaps with people being able to link online banking services with other applications available on smartphones, such as smart analytics and predictive services, to track cashflow and available funds better, location services for controlled access, voice recognition for ease of navigation, better integration with video-links to relationship managers, and advanced security – perhaps through face recognition or similar biometric software.” Treacher says that some of these themes may appear fanciful; however the pace of innovation in the smart device arena is profound. “For example 12 months ago we were curious about whether treasurers would authorise large payments from a handheld device, and we’ve seen that demand is clearly there,” he says.

This article was originally published in The 2013 guide to Technology in Treasury Management.