Published: August 01, 2009
Until 2005, Alcatel had been using a banking system provided by one of its primary cash management banks for high volume payments and we had no immediate plans to change. However, in December 2005, the bank announced that the system would be decommissioned during the course of the following year, which meant that we had no choice but to change the way in which we made our payments. We had two options: either to migrate to the new web-based banking system that the bank proposed, or find an alternative, bank-agnostic tool for bank communications. We reviewed the new web-based banking tool, but decided that it was less user-friendly than we would have liked, and we saw the attraction of a bank-independent system. We also wanted a solution that would support IBAN (International Bank Account Numbers) in anticipation of SEPA (Single Euro Payments Area) which the bank’s system did not do.
Another issue which we needed to deal with was the lack of visibility over cash across the business, for which we needed a global treasury management system (TMS) to replace our existing software. We went through a selection project and chose a vendor; however, this coincided with the merger between Alcatel and Lucent. Lucent already had a TMS in place, so the decision was made to freeze the project until the merger become effective in December 2006. Since then, we have returned to our TMS project, selecting SunGard’s AvantGard Quantum to implement across the business.
As part of the project to migrate to a new bank communication tool, we recognised the need, and opportunity, to further automate our payments process. We looked at technology solutions available in the market, and the clear solution was Trax, now SunGard AvantGard Payments, particularly having spoken to existing users of the system, such as Air France, who were very satisfied with the solution, based on ETEBAC 3 formats.
We decided to implement Trax, and transmit MT 101 payment messages through SWIFT. We signed contracts in June 2006, and defined our workflow during July and August. By September, we had started operations and the first pilot country, Portugal, was live on the new infrastructure by mid-October. In December 2006, we achieved full deployment based on a basic set-up, to which we added further features later. Our initial implementation included connectivity to two banks: Société Générale and ABN AMRO.
During 2007-2008, Alcatel-Lucent set up three shared service centres (SSC) for accounts payable, accounts receivable and accounting. The business was highly satisfied with the capabilities of AvantGard Payments and there was significant momentum to add as many accounts as possible to the SSC. In particular, account statements were all available through a single channel and automatically reformatted so that we had a consistent view over account information.
Alcatel-Lucent already had a commercial bank within the group, so we already had the infrastructure and expertise in place to connect to SWIFT. We had also been connected to SWIFT under the TR-CO (treasury counterparty) model since 2005 for exchanging confirmations with banking partners. The goal was to cover as much of the Alcatel-Lucent business as possible globally, which was not easy for a company which had grown through acquisition. Today, only our accounts in Africa are not yet connected through SWIFT, although we are working on this now. [[[PAGE]]]
For our Tier 1 banks, which included our core cash management banks and those with which we had substantial payment volumes, we joined the MA-CUGs of the relevant banks and subsequently SCORE. We use both FIN (MT 940 and MT 101) and FileAct for these banks. For our Tier 2 banks, we send MT 101 and MT 940 through one of our core banks. For Tier 3 banks, we need only reporting (MT 940 and MT 950) which are sent directly through Electro Banque, our own bank.
One of the most important successes of the project has been to standardise our business processes, security and reporting across our accounts payable function. We have around 700 users of AvantGard Payments, so this was a vital step in achieving efficiency, visibility, control and auditability. We have also rationalised our interfaces considerably both into and out of AvantGard Payments, and worked with our banks to ensure the same file formats for MT 101 messages.
We have implemented SEPA payments in six or seven countries with a variety of banks, including BBVA, BNL, BNP Paribas, Deutsche Bank, KBC and Société Générale. In reality, implementing SEPA has not proved difficult, as SEPA payments are just a different format, which is supported in AvantGard Payments and SWIFT. Our banking partners too were mostly ready to accept SEPA payments. Although we were ready to migrate to SEPA payments as far back as summer 2007, we delayed for six months so that we could standardise on SEPA formats rather than having to implement both domestic and SEPA formats. AvantGard Payments validates the files that are received from SAP and our TMS, and checks the BIC and IBANs, so we know that payment files are correct before passing into SWIFT, leading to very few rejections.
In addition to SEPA formats based on XML ISO 20022, it is our intention to roll out XML formats in Saudi Arabia and some countries in Eastern Europe, such as the Czech Republic and Poland, which currently require different formats, but these will be handled in exactly the same way using AvantGard Payments.
In addition to the close integration between AvantGard Payments and SWIFT, we have ensured that our in-house systems are also integrated tightly, which is particularly important as all bank communication takes place through AvantGard Payments, which then may be required in other systems. For example, the interface between AvantGard Payments and AvantGard Quantum is a two-way interface: payment instructions are sent from Quantum to AvantGard Payments; the payments system sends payment information to Quantum for forecasting, in-house banking and account postings. There is also a two-way interface between AvantGard Payments and SAP: payments are sent from SAP to AvantGard Payments; bank account information is sent from AvantGard Payments to SAP. The last phase in this process will be to integrate SAP with AvantGard Quantum for medium-term forecasting.
It is our objective to incorporate over 95% of our bank accounts globally into our centralised payments infrastructure, and we are well on our way to achieving this. We have some countries still to include, such as China, where the project is developing quickly. For example, we have recently decided to use XML formats for domestic payments in China, which will be a major achievement once completed.
We have had a very positive experience in implementing SWIFT and our overall treasury and payments infrastructure. Standards are very important, and at times, it can take a lot of work to convince all banks to accept and provide the same formats, and this has been an ongoing challenge. For example, we were not prepared to send MT 103 messages or deviate from standard MT 101 messages; although this has been an ongoing challenge, it has been an important factor in the success of the project. Other companies in France are maintaining dozens of formats, but it was not our intention to do the same; we find that even two or three formats creates challenges. We have threatened to change banking partners, of which we have two or three in each country, to force the issue, and in some cases, we have changed domestic cash management banks.
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