Global Head of File Delivery and Connectivity Technology,
Treasury and Trade Solutions, Citi
The drive by corporates to create a cash-management model with greater visibility, control and efficiency has been a consistent theme for decades.
However, recently there has been an increased focus by corporate practitioners on achieving these goals. Many firms are no longer willing to use proprietary standards and data-exchange software – the traditional host‑to-host model – to connect with their banks.
Instead, treasury wants to centralise, automate and standardise processes by using bank‑agnostic solutions that borrow from market best practices and that are driven by independent bodies such as SWIFT or software providers such as SAP. Ideally, companies want turnkey solutions (or at least rapid implementation times) with clearly defined costs.
Part of this change in mindset is driven by the need to reduce costs – many treasury budgets have been reduced in the post-crisis period. Some firms claim that too often the savings generated by judicious selection of a treasury work station and ERP system have been swallowed up by higher‑than-expected bank integration costs.
Similarly, companies have become increasingly aware of the ongoing costs, including maintenance and training, which result from using multiple connectivity options or file formats.
In addition, many companies now want the increased flexibility that non-proprietary standards offer because they allow them to more easily switch banks should they need to.
As a result of this change in mindset, treasury’s objectives when selecting banks have broadened. While relationships, quality of solutions, geographical reach, pricing and other traditional factors remain critical when selecting banks, the ability to connect via a wide range of channels – omnichannel banking – has become increasingly important.
Even where companies are willing to commit to a host-to-host connection, they want banks to add value by providing solutions to accelerate ERP integration or project implementation.
Finding standardised ways to connect
Corporates still experience multiple challenges associated with connectivity. But increasing collaboration between banks – often through organisations such as SWIFT – is gradually helping to overcome them.
Perhaps the most significant development in this area in recent decades has been the industry’s adoption of the ISO 20022 XML standard, which has simplified corporate-to-bank communications and can play an important role in advancing automation and dematerialisation.
For many companies, a bank’s ability to accept payment, collection and other cash-management communications using the ISO 20022 XML schema is now a prerequisite: banks that do not use the standard are much less likely to make an RFP shortlist.
ISO 20022 XML is at the heart of the global standardised communication channel SWIFT, which, since it was opened to corporates in 2006, has rapidly gained ground. SWIFT delivers common standards, formats and process for communication of information and instructions between companies and their banks.
As a result, it eliminates the need for customisation and makes data integration with multiple banks straightforward. Overall, SWIFT offers corporates the potential to achieve lower costs, reduce maintenance requirements, improve visibility and control, and increase straight-through processing rates.
Another increasingly popular non-bank connectivity option is SAP’s Financial Services Network (FSN), which Citi joined in September 2013. SAP FSN simplifies interaction between corporations running SAP as their ERP and their banks by acting as a bureau between the two. The client simply outputs a file from its ERP, transfers it to the SAP FSN (which is hosted in SAP’s S/4HANA secure cloud), which then translates the file into whatever format the company’s banks require, and distributes it.
The process works in reverse when banks send communications to their corporate clients. While SAP FSN therefore achieves broadly the same results as SWIFT, it removes the need for companies to make changes to their processes and file formats or invest in on-site infrastructure in order to connect with their banks in a uniform way.
SAP FSN is a pay-as-you-go subscription service and SAP is working with partners to provide access to additional subscription-based services such as reconciliation.
Citi has also developed a tool called CitiConnect® ERP Integrator, which enables SAP – via a set of templates – to automatically extract payment details in a suitable format for bank processing. The CitiConnect ERP Integrator uses the standard F110 and F111 payment processes in SAP and therefore requires no file programming or changes to internal SAP processes: it is cost-effective and non-intrusive.
All payment instruments across the more than 100 countries supported by Citi through the CitiConnect platform are available. The CitiConnect ERP Integrator has the potential of accelerating client onboarding by 60%.
Other corporates have made different connectivity choices. One of the world’s largest consumer-goods companies exchanges business communications using ISO 20022 XML through an AS2 Infrastructure. Any bank wishing to work with this company must therefore ensure that it can effectively integrate with AS2 standards.
Streamlining integration and broadening access
While an increasing number of companies choose to implement standardised connectivity solutions such as SWIFT or SAP, they are a means to an end. The need for efficiency in implementing host-to-host connections has also increased in recent years: corporates want integration to be achieved quicker and smoother.
One effective way to accelerate integration is via SWIFT MyStandards, a cloud-based customer onboarding and testing tool (Citi was one of the first banks to gain a licence for MyStandards in May 2015). MyStandards is an online repository of formatting guidelines for payment types that allows companies to become familiar with various data requirements before implementation.
Crucially, MyStandards is also fully interactive: clients can upload files for testing via an easy-to-use interface and receive instant feedback – if mistakes are detected, they can correct them and upload the file again for testing.
In the past, this cycle of uploading, testing and feedback would have required direct interaction with a bank and taken at least a day. Now it can be completed in hours. MyStandards’ functionality enables developers to help ensure their data is ready in advance of testing with their bank and consequently can accelerate implementation times, lower costs and reduce time to revenue.
Demanding the world – and getting it
Corporates’ needs and objectives are changing. They continue to want greater visibility, control and efficiency but are no longer willing to accept connectivity compromises to achieve them. The way treasury executives work is also shifting. There is increasing demand for self-service and capabilities to enable them to do their job on the move, for example.
Citi constantly evolves in response to clients’ changing needs because it recognises that innovation separates leaders from followers in the banking world. Citi has led the way in making commitments to connectivity channels such as SWIFT for Corporates, SAP FSN and other emerging platforms. The bank consistently invests in new solutions that enable clients to accelerate implementation and optimise the value of their bank connectivity.
Similarly, CitiDirect® BE now enables clients to generate a wide range of ad-hoc reports, from user numbers and privileges to payment traces, without contacting service support. And CitiDirect® BE Mobile and CitiDirect BE® Tablet allow clients to authorise payments and monitor accounts wherever they are.
Supported by Citi’s omnichannel strategy, clients can be confident of a consistent user-experience and data set whether they access services via host-to-host, mobile or any other connection.
This feature appears in Citi’s latest Treasury and Trade Solutions Perspectives magazine. To read the magazine click here.