Shared services debate: Crossing the payments divide

Shared services debate: Participants

JL, J&W Associates What are the differences between a payment factory and a shared service centre?

PC, Vodafone A payment factory makes payments but doesn’t necessarily manage the procurement process or the accounting. A shared service centre should combine finance, supply chain and HR within a single instance of the same ERP system across all subsidiaries, and manage all the purchase approvals, payments, accounting and bank reconciliations. A payment factory will make the payments but there’s still the problem of how you reconcile the payments and get the data into your accounting systems.

JLS, Statoil Our payment factory was established out of a need for enhanced cash control. Everybody is on the same SAP system, so our definition includes providing infrastructure, doing implementation, the programming with the banks, execution and clearing. An accounting team handles the inter-company cash offsetting. It’s a zero balancing system, which goes all the way into the accounts. We don’t brand it as a payment factory. We brand ourselves as an in-house bank, as like the one-stop-shop for treasury and payments for a unit. No bank accounts are opened by the operational units but we bring that on board within the combination of the treasury and the SSC.

BC, Philips We went for a payment factory in 1998 because we had too many ERP [enterprise resource planning] platforms. We didn’t want all 400 to 500 sites to start connecting to all their various local banks. In addition we were not sure about the quality of the connections they already had, the security levels or if they always used the cheapest way to make payments. We had planned to move the payment factory operations into an SSC when the decision came to sell, so we then decided to keep the operations in treasury.

OB, Volkswagen A shared service centre can be used for a specific function. We’re in charge of the factoring for the whole group and in relation to every importer. We handle thousands of payments, in huge volumes, so we are de facto a payment factory.

JL, J&W Associates You can have a shared service centre for a single function or it can be multi-functional. Phil, why are you setting up a shared service centre?

PC, Vodafone Vodafone has roughly 20 operating companies. One of the main reasons for the shared service centre is to bring all the accounting and transactional processes together. We intend to have one common accounting ledger but with local versions for each country. But these will be derivations of the same common ledger. It’s important from a transparency point of view. By bringing it all together we will have more visibility and control.

JLS, Statoil At Statoil, the drivers for establishing a global shared service centre were compliance and transparency. There were cost benefits as a consequence, but costs weren’t our priority.

PC, Vodafone Another driver is harmonization of processes. We spent a year looking around the Vodafone Group to design one harmonized version. It meant bringing all the operating companies together discussing processes and agreeing one collective way forward.

CB, Bank of America There has been a cultural shift, with more focus on central control of corporations and the need for more visibility or transparency of operating companies.

RM, Citi Sarbanes-Oxley is a driver too. Over the last 15 years, CEOs have got into less trouble for financial underperformance than for governance, ethical reporting and transparency. The cost to overheads of compliance and managing the downside of a headline risk has grown so much that these things come together well in a shared service centre, both for control and cost. Companies that go global find it’s a better strategy to have as many of the utility back- and middle-office functions in a shared service centre as possible, so that when they move into a new market, they go on a variable cost marketing and distribution model, as opposed to a full admin cost model.

KB, HSBC We’re dealing with two or three corporates for which the issue of governance has played a critical role. They’ve achieved what they wanted in Europe, North America and Asia and they’re looking at developing areas, particularly Latin America and Africa.

PC, Vodafone Our move towards a shared service centre has enabled an opportunity to look at the way we work and change certain areas. For example, the account structure has been influenced by Sepa [the Single Euro Payments Area]. We will also look into early payment discounts, factoring, etc, because of the increased visibility we will have when all the operating companies are on the same ERP system. There will also be more opportunities to work with suppliers and banks on improving working capital.

OB, Volkswagen We buy the receivables of all the factories through two channels. One is an automotive company with the group risks on the balance sheet and the other is a financial services company, with third party on the balance sheet. The processes are the same, with the financial services arm and the other a group treasury vehicle. We fund the factories, so whenever they have a car ready to be sold, we buy the receivable, pay them cash, and we get the payment from the importers at maturity. Volkswagen has a number of brands, with different policies in different markets, with different payment terms and different strategies. But we in Brussels have a view on what each brand is doing in every market, what the payment terms are and what risks are taken on which importer. It’s a huge reporting instrument. At the same time, it’s a huge funding instrument, and the only short-term funding vehicle for the group.

JL, J&W Associates Vodafone is planning to put much of its transactional processing in one place. You have a different strategy.

OB, Volkswagen If you want lower costs, you go to Hungary. If you want a better tax return, you go to Ireland or stay in Belgium. If your aim is straight-through processes, it doesn’t matter where people sit, it’s a question of establishing common processes and procedures throughout the group. It has become so easy to connect to other systems and do it remotely. Why move people around?

RM, Citi Your legal vehicle could sit in one space, your systems in another, your core processes and outsourced functions elsewhere. It’s a centre of excellence concept, rather than a question of location.

JL, J&W Associates The strategy is concentration of function in a shared service centre. Implementation depends on technology.

CB, Bank of America Clients express a need to keep executive decision making in house. There’s a concern about handing over executive responsibility to third parties, because then that in-house expertise could go stale.

JLS, Statoil We have a scattered approach in terms of geography. We are setting up shared services in IT facilities, HR and finance, with the aim of standardizing process and compliance. But we would like to tap into the expertise that we have in various locations.

PC, Vodafone We chose Hungary for a number of reasons. There are already multinationals in Budapest managing SSCs very successfully. There’s the quality of local resource, government support, the communications and the network.

JLS, Statoil We haven’t looked into setting everything up in one location. Some of our services need to be where the business is; facilities for example, and certain finance functions. Our business areas have pushed us to centralize and standardize, but as close to us as possible. Statoil is a global company but it’s still manageable. It is also regional. A lot of our operations are out of Norway, so we have a strong shared service centre in our head office.

BC, Philips Until recently we had three company-run SSCs: Lodz in Poland that services Europe, Bangkok in Thailand that services Asia, Chennai in India that services North America.

RM, Citi Sharing a location with other multinationals can be good and bad. In Chennai, all four banks have cash management SSCs, and people move across the street for $10 more. If there are too many there you will have turnover problems. Citibank has five shared service centres, and we take a ‘follow the sun’ approach. Ours is a hot back-up, where people do their day’s work, go home, and whatever’s in the queue moves on to the next location. If India gets too expensive, I can move volume to Dublin and Penang while I rebalance.

OB, Volkswagen For banks, payment is part of your core business. But we’re a necessary evil, a function inside the company. Nobody knows the treasury people. We’re there to support the business. When brands don’t notice the SSC and the business is as smooth as possible, that is when we render a service they need.

KB, HSBC You need to automate the process as far as possible to remove increasing labour costs over the long term. If you can automate it so that nothing requires manual processing, everyone’s happy.

CB, Bank of America For the corporate world, it’s a regional picture, becoming global. For the banks it has been a global picture for some time and there is the possibility for corporates to learn from that.

Bridge the gap

JL, J&W Associates How are you using technology?

BR, Deutsche Bank We should enable the shared service centre. We’ll bridge the gap but not provide an SSC outsource service. We’ll excel at our core competencies in banking. We’ve got investments to make in infrastructure which will get larger, driven by SSCs consolidating volumes and increasing the purchasing power of the customer. The customer’s going to drive you for better cut-off times, processing power and pricing. I invest in technology to deliver against those requirements, as opposed to diluting my strategy and trying to do outsourcing as well. SSCs need to be bank-agnostic in the way that they connect. The bank has to bridge the gap between the customer’s ERP system and the bank. Swift should be a good choice, but there are costs involved and decisions to be made between whether the customer opts for a bureau or for a direct approach. There’s a need to provide a bank-agnostic approach that theoretically enables the corporate to move to another bank, should it so wish.

KB, HSBC A payment can start in Manila, go to a central processor in the US, be received at the bank in the UK and end up being paid to a beneficiary in Europe. Technology has enabled this to take place in milliseconds. The best solution depends on the internal organization and technical infrastructure of the client. They dictate whether or not they are bank-agnostic. Certain clients are happy to link with two or three core banks. A strategy where they could lift and shift to another bank at short notice for reasons of cost only is not their primary concern, with factors such as service, geographical reach and relationship playing important parts.

CB, Bank of America Clients looking to develop a Swift strategy are those compelled to keep more than one banking relationship. Some are interested in Swift solutions but we haven’t seen the bank independence that is nirvana to a lot of corporates. They deliver one file to one institution and a different file to another, through the same telecommunications, security and encryption links, but not the same file and not the same process.

PC, Vodafone We use Swift for all of our treasury payments and we like the fact that we get confirmations before we send the payment files. But for the SSC, we’re planning to go initially with one bank, arranged in such a way that we keep our options open.

BC, Philips Our original wish was to create a bank-independent solution. Treasury would be the link to the banking world and our operating units wouldn’t worry which bank we used for making payments. But we came across the same problem as always with non-standards. Banks say they can take a standard message, but one’s standard is different from another’s, even if it’s the same Swift message. Our strategy, therefore, was to reduce the number of banks to two so we only have two different files to create.

We have built up a large account structure across the globe to back up the payment factory, which in turn is linked to our global liquidity management structure, and this is not something you can change overnight. It’s a huge threshold cost involved to move banks.

PC, Vodafone It’s important to have two or three payment banks to keep up the competition.

JLS, Statoil There’s more to switching between banks than having standard connectivity. We see cash management relationships as strategic, which is also key for the treasury function. We deal with four banks, which is still manageable. Swift can add value in secure connectivity, but if you only have four, there’s not much added value.

Different types of connectivity emerge in accounts payable and receivable handling, so you need EDI [electronic data interchange] connections with your vendors. I’m not convinced Swift is for us. We have tried to go for standard connectivity, non-proprietary solutions.

RM, Citi Once you’ve got that standardization and automation within your direct remit you can extend that to the other areas. The differentiating issue is not in how you deliver transactions to banks. The next wave will be about information value add, integrating non-financial and financial data to deliver the transparency, visibility, control that is needed. Connectivity is the roadway and everybody shares it.

NG, Swift Banks have their own proprietary channels and they are good solutions for certain segments of the market. But for corporates with multiple banking relationships, looking for a bank-agnostic channel to reach those banks, Swift becomes the natural choice.

OB, Volkswagen Our high-value payments, treasury payments, have been going through Swift for seven or eight years. For commercial payments, until recently there was no solution via Swift. You have FileAct, which we use increasingly, but it’s a different technology. One is for high-value payments in treasury and the other is using the pipes to send information. You still have the issue of reconciling the payments. What clearing systems can and cannot accept still seems to be an issue, so working on that is the next step. In risk management, it’s not wise to work with only one bank. You will never find a bank that can cover all your needs. A group like ours needs to work as well with local banks in local markets, especially in emerging markets like China, Brazil, India, etc.

Rigid rules

JL, J&W Associates With operations like FileAct there’s a range of standards. Does this concentration of activity require meticulous standards, or can you get away with choosing whatever’s available?

NG, Swift For individual urgent payment instructions such as treasury payments, the default choice is Swift and the FIN message standards. For commercial payments, files of bulk payments, FileAct becomes the more appropriate delivery mechanism over Swift. With FIN, we apply rigid rules around the format of instructions and these are validated by Swift. However, with FileAct you can send any file of data over Swift. We are format-agnostic when it comes to files.

JL, J&W Associates But that’s a nightmare, isn’t it? Even FIN messages are different. With FileAct, the spectrum is huge. Do you have a strategy for bulk processing?

NG, Swift FileAct is incredibly flexible. If you have a file format that works over a bank’s proprietary channel, you can use that same file format and deliver it over Swift. If your strategy is to move towards a single pipe – one gateway and one network connection giving you access to your various banking partners around the world – Swift can be that channel. The flexibility of FileAct helps make that possible. The ideal for most corporates would be to also find a common file format that could be used with all of their banking partners.

JL, J&W Associates If you use four or five banks, how do you manage so many standards?

JLS, Statoil You don’t. Once you have chosen the bank relationship for that region, you make sure you get to a format that works for you. We have a SAP ERP environment that provides certain standards, but I have not yet seen any bank relationship where connectivity or file formatting is a non-issue.

BC, Philips We have asked our banks to use the standard SAP output we will produce from our payment factory. Both have confirmed they can take it, meaning we will be sending one format out, which is also the same format we will be getting in from our internal clients. This looks promising, but as we all know, the devil is in the details.

OB, Volkswagen We hope that Sepa will bring standardization but it’s worrying how different national communities are implementing Sepa instruments. Vodafone, Philips, Statoil and Volkswagen all work outside Europe too, and there will still be diverse standards in the other regions. One standard for Europe would be great, but the Americans don’t want Iban [international bank account numbers] and BIC [bank identifier codes]. That’s the next step.

JL, J&W Associates How do you manage your partners?

PC, Vodafone Every bank likes to be referred to as a strategic partner. But we like to keep our options open. Ideally two to three partners would be a nice balance for managing payments. We need partners that are pragmatic and flexible.

KB, HSBC Often the first time you see a partnership developing is during the project implementation. Corporates can judge how successful that’s going to be by the interaction over file testing, documentation, etc. This is often where multiple partners get introduced, be they internal to the corporate organization, guys doing the IT on the channel links or external consultants. A partnership develops when the bank truly adds value.

BC, Philips Partnership is a word to be careful with; I see it as a business transaction between commercial organizations. Everybody’s trying to make a buck. It’s a true partnership only if somebody is willing to come up with a suggestion that hurts themselves.

RM, Citi We all know we’ve got the investment of time and capital and resource that goes into making the pipes work. It’s not something you want to do every year. The banks are not being magnanimous, because once the pipes work it smooths things for both sides.

JL, J&W Associates Banks, as providers and supporters of shared service centres, what makes them effective?

BR, Deutsche Bank It’s worth spending time getting the implementation right and a good project plan in place. Then it’s wise to adopt a phased approach so that you get testing done and examples of success in place to help you and the corporate customer market it to the rest of the customer’s group. You need a marketing approach, because there’s bound to be resistance. We have a project management team to coordinate this and we also have a treasury solutions team that works with the client at identifying measures of success and the best ways to talk to the operating companies. The word partnership is overused but you’ve got to work closely with each other.

RM, Citi The earlier you engage at a detailed level the better. Shared service centres and payment factories are associated with bank relationship consolidation. Multinational organizations have a view that a central mandate means the subjects will follow. That’s not the way it works. Invariably, it’s a foreign bank replacing a local bank in SSC structures, but those relationships have been there for 30 years. Presenting sound economic logic is never enough. It’s worth going to the country to get the local businesses on board, because otherwise you have operating companies throwing spanners in the works.

KB, HSBC Senior endorsement is key. The higher you can go up the organizational chain, the better. We’re sometimes asked: "How can we sell this to the opcos?" but if the corporate is asking the bank to assist, you have to first ask if the company bought into it internally.

Often a shared service centre is established on the back of, or secondary to, a country-wide ERP rollout. Make sure that that ERP or back-office system rollout has occurred before the SSC takes on different business units. Trying to achieve two critical projects at one time has a high probability of failure. It’s better to migrate a whole business unit or division or country in one go.

CB, Bank of America Make sure the feedback loop is there to ensure the buy-in from the people who are keeping you in touch with the business. The service you continue to provide may not be what your customer wants as time goes on.

JL, J&W Associates What is the impact of the new infrastructures and new consolidations as a result of Sepa?

BC, Philips We are asked to provide a lot of detail with our payments. High value – low value clearing; I should not have to know if a payment in Spain is just above or just below the threshold, but I have to give separate codes for that. I find it hard to keep track of which countries need an Iban or not. Intermediary banks change all the time. But these details are required by our bankers. Shouldn’t we look at who should provide what information? I am not a clearing systems expert. Should I know everything that the banks need to know for their own business? Banks already have this information. The value proposition from the banks is to provide this expertise.

JL, J&W Associates You want more value-added services. But that’s not changing the business model. It’s making it more efficient.

JLS, Statoil We provide a service from invoice all the way to reconciled cash. They give us their invoices and provide us with a purchase order. They see reconciled cash on their balance sheet. Can’t that model be copied in our relationship with the banks? There are a few players like OB10 and Itella, positioning themselves as partners between suppliers and us. If you have all the elements to create an accurate invoice, you also have the data to create a payment. Why are we using hubs to get data traffic across our systems, to package it again, secure it again, and ship it to the banks? Couldn’t the banks play a role in invoice handling?

PC, Vodafone If the banks get involved in invoicing, they can support suppliers with working capital. You can build early payment programmes within ERP systems so that approved invoices for certain suppliers are automatically paid early by a bank, which receives payment from the purchasing company at a later date. Once an invoice is approved it becomes like commercial paper, it’s like a corporate IOU that can be sold and discounted. A bank can go to the supplier and say: "I’ll give you cash now and take the receipt from the buyer later." There’s a gap between supply chain, procurement, treasury and payments. Bringing that together has been talked about but as yet the banks haven’t jumped in.

JL, J&W Associates Is this a shared service opportunity or something you want from banks?

PC, Vodafone Both, because you’re going to need a team in your shared service centre that identifies the type of payments and the suppliers that may want early payment. It will only work when you’ve got a difference between credit ratings between the companies, where you’ve got an arbitrage where somebody’s prepared to sell one credit to get the cash early. That will benefit corporates and middlemen.

JLS, Statoil You can only achieve that in a shared service setting, because you need a treasury willing to look further than their typical liquidity-handling cash-control attitude, and procurement who go into the procure-to-pay process and not just from sourcing to purchase orders.

OB, Volkswagen If you want banks to do something you have been doing yourself, you have to hand over a well-designed and clean process. Once you have a clean process, why should you outsource it? If you have an electronic payment system, the next step is one electronic signature system, one electronic invoice system, one remittance advice system. I’m not sure we need banks for that. Working capital management is our core business, not theirs.

JL, J&W Associates But you don’t disagree with the objective of enhancing and extending what the SSC does?

OB, Volkswagen Banks cannot help us with the money lost in inefficiencies. It’s an issue between the sales and procurement and the end of payment reconciliation. We have the data; it’s our job, treasury people, to make those processes clean and efficient.

BR, Deutsche Bank Once Sepa Phase 1 is done and the payments side has gone well, e-invoicing is where the European Commission will look next. This is where the real savings are.

RM, Citi Banks have to get involved. Pure connectivity banks should have the strategic choice of whether they invest in proprietary electronic banking systems or partner with Swift. To move from idea to execution, there are five areas that need assessment.

Banks have not had the domain expertise as they cross over from treasury to procurement and logistics. We’re looking at hiring people around AP/AR, beyond treasury. Corporates are happier to pay a higher price to technology companies than to their bank to do this. If that’s the way they want it, we have to partner with technology companies. Do corporates want to put all their eggs in one basket? There’s a strategic vulnerability issue.

Next is risk appetite. Is your bank’s cash management service happy to do the financing on the arbitrage for your supplier base? When it is your existing supplier on a post-delivery basis, most banks are happy. That can morph into a need for pre-production working capital by that supplier. It falls down there, unless you’ve got a bank that’s so universal they’re willing to go down the chain.

It also falls down on distribution. Your distribution network expands faster than the bank’s familiarity with that segment. The congruence of the company’s needs and the credit appetite for the bank is the fourth issue. Finally, given the price you want it at and the return for which we’re willing to look at it, we’re not going to get the scalability on these bilateral deals.

BC, Philips We haven’t touched on central collections. We focus outgoing payments over two channels but for incoming payments we still depend on a number of banks to collect the money for us locally, only to be moved into our central overlay structure on a daily basis.

CB, Bank of America Sepa will drive genericism. The EU is redirecting focus towards electronic instruments. Paper instruments that drive local banking relationships will disappear. Direct debits will become uniform. The infrastructure makes collection factories possible.

BR, Deutsche Bank Online payments are in the pipeline for Sepa, because the more methods you enable the consumer to pay by, the greater the chance of collecting those monies by electronic means in a timely and efficient manner.

CB, Bank of America The arrival of Sepa is also simplifying corporate legal structures as they relate to invoicing, payments and collection. In future, it will be more common for the shared service centre to be the single invoicing entity on behalf of the corporation.

KB, HSBC Many corporates have focused on transferring payables into a shared service centre environment, whereas they’ve still got people in different opcos dealing with receivables. To get receivables right requires innovation. Hopefully, Sepa will provide some of that through standardization, XML messaging and formatting.

Lower hanging fruit

JL, J&W Associates Are there any other dimensions to the new business model for the shared service centre?

RM, Citi There are developments in T&E and in procurement spend, starting with low-value items, where having a pre-approval process requiring three signatures doesn’t make sense. High volume/low value items are moving to things like P cards. T&E stuff is moving to T&E cards. Having done the big-ticket items around the payments pieces, you’re going to lower-hanging fruit, but it’s still worthwhile.

BC, Philips We are trying to make maximum use of electronic payments, particularly for minor accounts. In the US, for example, we have rebate vouchers. For them, a say $5 cheque is made out that you bring to the bank and get cashed. We have been discussing a solution in which we could send a file to, for example, the customer’s phone company and have them credit their bill for the $5.

JL, J&W Associates The strategy is to broaden and deepen the range of services and to get into new niches. As you get more concentration, how are you going to manage this exposure to centralization?

RM, Citi Multiple locations and hot back-up reduces the risk of centralization. It’s not shared service centres driving it. It is the standardization. Suppose the site in India is shut down; because you’ve got standard profiles, operating environments, somebody in Hungary could authorize and release the treasury payments. The risk related to site is more important than the risk related to data or human resources, because those can be accessed from other places.

OB, Volkswagen In certain areas you have to have people sitting together. In others it doesn’t matter. They’re working on the same system with the same processes with a virtual shared service centre. I would never support having two SSCs doing the same thing.

JL, J&W Associates So process and standardization spread the risk because there are so many people doing it around the group.

CB, Bank of America If you get process standardization to the degree that Sepa is going to support, corporates are back into the process of evaluation they were in before SSCs, where specialization was the justification for the creation of the SSC. Why would the process not then move to the specialists? It would be logical to genericize even further into an outsourcing arrangement, because that is where the specialists are. Corporates will drive down into the cost equation again.

JL, J&W Associates How are you handling outsourcing?

JLS, Statoil We know our business best, and we can serve our own business areas best. The argument has often been that we are special, we need to know the whole chain end to end and therefore we can do it better than a shared service setting. Once we’ve been through the pains of standardizing processes, the people holding back may look at outsourcing opportunities in certain areas where there are inevitably better specialists in the market.

BC, Philips When you move to a professional service provider they tend to enforce best practice procedures. Sometimes you need an outside force to enable change.

RM, Citi It’s sometimes easier to get a change manager to do it. What you’re willing to centrally mandate by policy should be the first thing you put to a shared service, where the organization feels so strongly that they’re saying: "Sorry, no democracy here". The moment you get beyond that, you want the bank in the middle because change needs to be well managed. That may be a driver for outsourcing.

JL, J&W Associates There’s evidence that companies pay over the odds for outsourcing. How are you competing with that?

PC, Vodafone You need to look at the choice between saving, say, 10% to 20% of the cost of running that SSC by outsourcing it, compared with the risk of any poor performance from the outsourcing partner affecting your real business.

BR, Deutsche Bank Clients may indicate that they’re interested in outsourcing but when you get down to reality you have to balance your offering with the client’s requirements. You want to deliver what the client wants, but if that’s not part of your standard offering, there’s no scale and then where’s the cost saving?

CB, Bank of America You will only outsource to someone who specializes and can do it better and/or cheaper than you. There are BPOs [business process outsourcers] who can do that. They will come to the banks for help in facilitating the relationship between provider and corporate.

RM, Citi If it is non-core, and you’re willing to let somebody else drive and discipline it, then outsource. The moment you outsource something that’s so core you want to control every step of the way, you lose the cost saves. It’s unrealistic to expect that any process can be made cheaper and more efficient by outsourcing it.

OB, Volkswagen But what is core changes over time.

JL, J&W Associates What is changing? What changes the definition of core and non-core?

KB, HSBC Once a shared service centre’s running, the incremental added value often diminishes, year on year. You’ve brought in as many functions as you can. You’ve achieved as much automation as you can. Sometimes it takes a change of person responsible for the SSC function to decide it may be appropriate to outsource.

OB, Volkswagen Companies are no wiser than management. They react to what’s happening. If something goes wrong in one area, it becomes core, because the company focuses on it.

BR, Deutsche Bank We’ve talked about corporates not wanting to put all their banking eggs in one basket, and this is where core versus non-core is important, because you’re doing that when you outsource. Most of these entities aren’t banks, so you’re putting eggs in a basket that may not even have a credit rating. Part of the negotiation has to be: ‘What if you (the outsource provider) go out of business? How do I switch quickly?’ It’s important to get that sorted out.

JL, J&W Associates I’m seeing agreement about payment services, including invoicing, reconciliation and agreement on depth of servicing, collection factories and so on. But there’s no agreement on whether you will allow Citi or Bank of America to do these processes.

RM, Citi One of the reasons the banks don’t want to do it is there’s no cost or headcount arbitrage between the corporates who want to do this and the banks that they deal with. For the bank to be able to do it, it has to be highly automated and STP. If that’s the case, there’s no reason to give it up.

CB, Bank of America One area of exception is treasury itself. That is one area where the banks do have specialist expertise and scale.

NG, Swift If it’s highly commoditized and automated.

CB, Bank of America A lot of what we’re asked to do from a business process outsourcing perspective, we’re no better than a corporate or BPO at doing. However, in treasury there are circumstances where the corporate has no treasury, no expertise, and they don’t want to buy a treasury management system. We do have management systems and expertise, and we can do it better than corporates.

JL, J&W Associates What is the new-wave business model for SSCs and payment factories?

RM, Citi If you get critical mass around your payments and collections, what follows is the benefit that stems from the visibility and the transparency of the liquidity. It’s evolutionary. If I pull in payments and collections, I will see the working capital opportunity.

PC, Vodafone It gives you the visibility to go down another level and take the opportunities. You can review and improve processes and increase automation, then decide whether to outsource.

RM, Citi At some point you’re going to get diminishing returns on how much more you can do with payments and collections.

KB, HSBC The SSC often facilitates the closer convergence of the financial supply chain and the physical supply chain as the SSC has a holistic view of the whole production and payment process across many countries or entities. It’s a question of: ‘How can I get paid quicker for the goods that I’m making? How can this be more automated, more streamlined?’

Improving technology

JL, J&W Associates What technology improvements do you see over the next five years?

NG, Swift Swift is working on a number of areas. For the gateways that provide the connectivity into Swift we’re looking at how to give those a smaller footprint. The goal is lighter implementations that can be more easily deployed. We’re also exploring a broader range of connectivity options to make it easier for corporates to connect to Swift. We’re enhancing the architecture of the Swift network to make sure we remain the most robust and secure. We’ve talked about the role of ERP systems with SSCs. We also want to make it easier to integrate these key applications used by corporates with Swift.

KB, HSBC The payments business may learn from other industries. For example, a colleague was relaying that you can be sitting on a beach in France with your 3G phone, watching Manchester United score a goal. You want that content on demand. If you take your handset from Vodafone, they will require paying for the service. This may have been delivered via another provider in France who also needs to be paid. There’s a range of processes and several amounts due involved and you want to see the item detail on your bill and know what it’s costing. There’s a whole raft of payment technology and timings and the exchange of information in that. I see this kind of seamless technology filtering into the banking payments and supply chain.

BR, Deutsche Bank We all hope that we’ll get to better standards, and XML and ISO2022 will be adopted on a more global scale than just Sepa. A decent standard on mobile payments and online payments is the only way we will get rid of cash and cheques.

RM, Citi Digital identity acts as a constraint. There are still too many interactions with the bank that require a web signature. If we get a solution around that, a lot more could flow through the pipes.

NG, Swift Banks and corporates have approached Swift on this. We are exploring options around bank mandates and individual identity.

JL, J&W Associates So we’ve got this nirvana, these new technologies, a new extended range of shared service centre functions. How do you see the SSCs being organized?

CB, Bank of America I see more partners being involved, so there’s the potential for sharing your database with external parties who add value. As banks consolidate, I see demand for them to do more. Building a partnership, to provide the cash or the credit cards, is going to be a part of the solution. I like the idea of this virtual shared service centre, but the compensation required in terms of communication tools isn’t there yet.

PC, Vodafone We are already starting to remove the process of physical signatures for approval of supplier payments. The approval process is all within SAP, so once the PO is approved, goods delivered and invoice receipted, the payment is ready to go and there’s a direct link to the payment bank; there’s no need for further manual approvals.

KB, HSBC Banks are looking at ways to add value. Europe is moving towards electronic billing, following on from market practice in the US. Many corporates wanted automated analysis of their bank-charges invoices and several banks have signed up to this and are developing it. This will help provide more straightforward information to corporates that are banking in many countries, enabling them to easily analyse their bank charges statements.

JLS, Statoil The regulatory environment is not keeping up with the pace of technology, and it’s apparent in the invoicing area and VAT handling, etc. I haven’t often seen technology as the deal-breaker. If you are running inefficiently in some areas, it is to do with the lack of regulation or of streamlining.

RM, Citi It’s not technology. We’ve got the ERP that connects most of the enterprise well. I want to get the same kind of connectivity across my supply-chain banking relationship and my distribution chain. There has to be collaborative information exchange. It’s got to be a collaborative data-based ecosystem around the company.

BC, Philips My dream is still to have a single bank account per currency in the name of the treasury so that our businesses should never have to deal with the real money. The only thing the businesses should have to worry about is getting the information about the cashflows. They should not have to care about the cash itself. That’s for treasury to deal with.