Published: January 01, 2000
Microsoft was a trailblazer for SWIFT Corporate Access during the early years, and has continued its pioneering approach by being the first corporate globally to adopt the ISO 20022 XML standard. The initial objective was to migrate to version 2 for bank statement reporting and subsequently expand to other interfaces using the XML standard. Not only has Microsoft achieved considerable quantitative and qualitative results, but the company is once more setting a precedent for other corporations seeking to manage their bank risk, achieve greater visibility and control over cash, and reduce the cost and complexity of bank connectivity.
In 2004, the treasury team at Microsoft was one of the first globally to deploy SWIFTNet for electronic bank statement reporting. With 84 bank relationships and around 900 bank accounts, this was a highly successful initiative that provided high-level visibility over 99% of cash globally. However, the credit crisis and geo-political risk that emerged has added a new dimension to risk. No longer was it sufficient simply to have visibility over cash: the company needed to be able to transfer money between banks quickly, manage counterparty risk more effectively and achieve greater efficiency in financial processing. Microsoft recognised that relying on proprietary bank technology was an impediment to these efforts. Furthermore, treasury needed enhanced data that would permit automatic payables and receivables reconciliation, auto-clearing and auto-posting.
Consequently, Microsoft embarked on a project with a view to enhancing its use of SWIFTNet and the quality and consistency of data that was exchanged. The objectives for this project combined both business and IT issues, as follows:
Microsoft identified ISO 20022 Cash Management v2 messages as the right format to achieve these objectives, even though this had not yet been implemented in other corporations. ISO 20022 v2 delivered the quality and granularity of data that treasury required, using SWIFTNet as the communication channel. Treasury approached its primary banking providers to discuss the feasibility of pioneering ISO 20022 v2. Bank of America Merrill Lynch committed to dedicating executive support, technical and business resources to the project both to support Microsoft’s business requirements and to build a lasting solution other companies could leverage.
Microsoft embarked on a project with a view to enhancing its use of SWIFTNet and the quality and consistency of data that was exchanged.
The first project phase was initiated in March 2010 and completed in April 2011 when Microsoft went live with ISO 20022 version 2-based bank statements delivered over SWIFTNet, which has since been followed by a related payments project. Over 500 accounts have already been migrated to the new infrastructure, representing over 75% of the company’s US-based cash.
As a pioneer in implementing ISO 20022 v2, it was important for both Microsoft and its primary banking providers to develop a solution that would benefit not only Microsoft, but also other multi-banked corporations that are seeking to achieve visibility and control over cash. Consequently, they aimed to design a best practice approach that had universal applicability. For example, there were challenges in implementing an ISO 20022 v2 without a defined standard or guide for the use of individual fields. In addition, banks are at different levels of maturity with SWIFT Corporate Access and XML, which had the potential to hamper straight-through processing (STP) efforts. [[[PAGE]]]
As it was clearly undesirable to have variations on the standard with each bank, Microsoft worked closely with its internal and external partners to find a common approach to version 2 adoption. The outcome of this was that all the banks involved agreed to use data fields in a uniform way, which would permit a high degree of STP. Furthermore, while not all banks yet supported this version of ISO 20022, Bank of America Merrill Lynch was able to support Microsoft’s pioneering efforts and the company is now on-boarding other participating banks as they move to version 2. Microsoft has also joined the Common Global Implementation (CGI) standards forum to continue the work that has already been achieved towards standardisation, an initiative that will benefit other corporations.
Treasury has now achieved better visibility of cash and it is easier to move cash between accounts and banks.
The success of the project reflects a high degree of constructive collaboration both internally and externally. Microsoft’s treasury teams, treasury controller’s group, various IT teams and Worldwide Financial Services Sales teams worked together closely; in addition, the project would not have been possible without the vital contributions by SWIFT and the company’s key implementation banks.
The rich data and bank-agnostic connection is a significant milestone for the company and leverages Microsoft’s own BizTalk middleware for easy translation of CAMT messages to the company’s ERP system. Overall, Microsoft has calculated a return on investment (ROI) of 44x over a three-year period, including the following:
Cost savings: Microsoft has identified cost savings of $1m for IT support over a three-year period. This figure is based on the annual dollar spend on modifying systems and resolving issues in response to updates or changes to bank systems. By leveraging SWIFTNet rather than using banks’ proprietary systems, this requirement no longer exists.
Asset efficiency: Treasury has now achieved better visibility of cash and it is easier to move cash between accounts and banks. As the speed of cash concentration has been increased, the company can now invest in return-generating assets more quickly, with an estimated approximate increase in returns of $5m per year.
Headcount savings: The company has achieved headcount savings in treasury operations and accounting of approximately $600,000 per year.
In addition to the quantitative benefits, there are a series of qualitative benefits:
This project illustrates that proprietary bank technology and integration formats are no longer a strategic differentiator for banks when engaging with their large, multi-banked customers. Instead, communication is becoming largely commoditised, with the value derived from the content that is exchanged, and how this can be integrated into core processes. While proprietary technology will continue to be an important element of an efficient cash management solution for many companies, multi-banked clients are seeking a more standardised solution. To meet their clients’ diverse needs, banks such as Bank of America Merrill Lynch are investing in: multiple connectivity channels, the ability to integrate with clients’ in-house systems, and timely, high-quality information. And as the experience at Microsoft illustrates, collaboration, both internally and externally, has been key to success.
George Zinn, Corporate Vice President and Treasurer of Microsoft explains,
“SWIFT and the XML statement V2 implementation allows us to have flexible relationships with multiple banking partners, enabling us to better measure, quantify and mitigate risk with a 360-degree holistic view of our exposures and, if necessary, to move money among banks with relative ease. Visibility to cash from a single portal is critical to us and we hear the same from other multinationals.”
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