Published: October 07, 2014
Among the most important innovations in cash and treasury technology in recent years have been the developments in corporate-to-bank connectivity, not least in the areas of integration, security and accessibility. This was the theme of the ‘Rethinking Connectivity’ workshop held at the 2014 BNP Paribas Cash Management University. The panel comprised: Marcus Hughes, Director – Business Development, Bottomline Technologies; Thierry Hamon, Treasury Controller, Valeo; Marie-Laurence Faure, Head of Marketing, Channel Products, BNP Paribas Cash Management, and was moderated by Eleanor Hill, Editor, Treasury Today.
As Marcus Hughes, Bottomline Technologies explained, one of the most transformational technologies that has emerged in recent years in the cash and treasury management space is cloud computing, also referred to as SaaS (software as a service). By accessing a managed, web-based service that provides both core cash and treasury management functionality and ancillary services, the need to maintain hardware and software in-house is reduced, solutions are often more cost-effective than licensing a system, and integration with both external parties (e.g., banks) and internal systems is far more straightforward as it is managed by the vendor.
A growing number of cash, treasury and payments vendors and their customers, are taking the opportunity of implementing a cloud-based solution to integrate SWIFT connectivity into their infrastructure. While the advantages of SWIFT connectivity are well-documented, particularly for multi-banked corporations, the advantages in terms of cost-effectiveness, risk mitigation, scalability and flexibility are enhanced by embedding multi-bank connectivity within a cloud-based solution as corporate treasurers and finance managers need to deal with only one solution and a single technology partner.
Thierry Hamon, Treasury Controller at international automotive supplier Valeo, illustrated the company’s experiences of implementing its TOTEM (Tools for Treasury Excellence in Cash Management) project. The objective was to provide treasury with a high performing, secure tool to manage cash management, including flow management, bank account reconciliation and forecasting, payments and reporting. This involved putting in place a SaaS-based treasury management system, together with bank connectivity via SWIFT and integration with group ERPs and payroll systems. The system would be used by more than 100 treasury professionals and 600 signatories in 26 counties across four continents and connect with 60 ERP, numerous payroll systems and multiple banks. Due to the nature of the business, the solution needed to offer multi-language capabilities and 24/7 support.[[[PAGE]]]
Bearing in mind the scale and complexity of the project, and the number of internal and external connections that were required, Thierry explained that standardisation and integration were particularly important themes. For example, while Valeo wanted to implement XML-based ISO 20022 formats, banks used different variations, which posed an obstacle to Valeo’s standardisation objectives. To address this, Valeo had consultants lead a workshop with all its main banks to agree a common format. It was also important to manage the scale and scope of the project carefully. A single contract was agreed with each bank, covering all relevant countries, avoiding enormous replication of effort. Co-ordination across the large number of project participants was essential, with a strictly controlled project scope to ensure the project was completed on time and within budget. In addition to managing the international cash, payments and reporting needs of the group, the project also needed to accommodate numerous local specificities, which was achieved by setting up a rigorous testing programme devised by experts in cash and payments processing.
With such a large number of users across a wide array of locations, and connections with a vast array of systems and counterparties, optimising security was an essential requirement. Using SWIFT for bank connectivity was an essential element in achieving robust security for bank communications, but this was only one aspect of Valeo’s security infrastructure. Operational controls were important, with rigorous pre-implementation testing and data controls to ensure the accuracy and reliability of the system and strict work flow segregation to maintain operational integrity. With a SaaS solution in place, Valeo defined a detailed service level agreement, including support response times, 24/7 support line access across three regions and stringent back up and disaster recovery planning.
Having implemented an ambitious project, Valeo’s Totem project has achieved a number of important outcomes. Treasury now has a single solution in place offering automated end-to-end processing across all locations and regions. All new transactions update cash positions and forecasts immediately, ensuring that operational and management reporting is always up-to-date. All users have access to a single source of data, and it is easier to implement a consistent approach to best practices.
Looking forward, Thierry emphasised the importance of banks’ support for technology innovations that are becoming increasingly significant for multinational corporate treasuries. For example, while many banks, particularly those in France, support 3SKey for personal digital signatures, this is not yet universal. There is still some way to go in achieving standardisation and transparency across banks, such as payment status reporting and consistent information in MT940 message to enable automatic reconciliation and account posting.[[[PAGE]]]
Marie-Laurence Faure, BNP Paribas emphasised the growing importance of mobile devices in cash and treasury management. Increasingly, users are seeking the ability to perform certain functions such as reviewing liquidity positions and approving payments through smartphones and tablets. Consequently, BNP Paribas has already launched mobile apps in Turkey, India and France to support these activities. In addition, the bank offers a range of capabilities to support customers’ payment workflow using its international, web-based electronic banking tool Connexis, such as enabling users to pre-authorise payment files within the accounts payable or treasury department, which can then be pushed to senior approvers for final validation via a mobile device. Mobile devices offer opportunities in treasury that extend beyond transaction workflow and reporting. For example, Marie-Laurence highlighted BNP Paribas’ Cash Management Atlas App for iPad which provides comprehensive cash management information on 48 countries globally, including information on permitted pooling techniques, payment and cash management instruments, clearing systems, tax and regulatory environment, and local market practices.
An important point that Marie-Laurence made was that as the integration and bank communication opportunities increase, driven by innovations such as cloud computing, treasurers are looking to avoid complexity and gain access to expert advice. To address this requirement and devise connectivity solutions that are specifically adapted to each company’s needs, BNP Paribas has pioneered the Corporate Digital Bank. This encompasses all the channels, transaction and information services offered by BNP Paribas within a single framework. The purpose is to offer the same range and quality of services to customers irrespective of the global communication channel(s) that they use, and to help customers to implement the most appropriate infrastructure to meet their needs.
The panel discussed other connectivity innovations that will positively impact the treasury landscape in the near future include the ongoing development of additional bank-agnostic messaging systems, such as SWIFT’s Alliance Lite2 and SAP’s financial services network (FSN). The growth of cloud-based solutions, where systems management undertaken by specialist vendors, is also likely to result in further outsourcing of activities to banks and vendors, such as reconciliation services and data transformation. Marie-Laurence Faure, BNP Paribas emphasised account reconciliation as a significant area of focus as part of corporates’ connectivity strategy. The ultimate goal of straight-through reconciliation will require deep, process-level integration between corporate clients and their banks. While the continued move towards treasury centralisation should help to achieve this, virtual account solutions are increasingly playing a critical role in achieving automated reconciliation, eliminating errors and reducing the need for manual intervention.
Marcus Hughes noted the growth of predictive analytics to improve the accuracy of cash forecasting using cloud-based solutions. He also highlighted cloud solutions as a means of adopting of payment sanction filtering by corporates. While banks retain ultimate regulatory responsibility for anti-money laundering, corporates are starting to see the benefit of screening their payment instructions before submission to banks, thereby reducing the number of false positives that banks have to handle and minimising any reputational risk to their business.
Thierry Hamon closed the session by emphasising that while huge steps are being made in connectivity and integration innovation, banks, vendors and corporates continue to have an obligation towards continuous improvement. As expectations, technology and business models change, there will always be new opportunities for treasurers, and their service providers, to deliver value.
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