I was a treasurer when I founded BELLIN, and focussed on the idea of solving information logistics issues within the treasury. Instead of concentrating only on the central treasury function, I considered it important to collect all information regarding treasury around the world, in real time, without pushing people to report to the treasury for the treasury’s sake only. My vision was that everybody, wherever they were in the world, should be able to operate in a professional treasury environment for their local needs and treasury-related tasks. The bare minimum that everybody needs is a payment system. So the idea was clear: the treasury platform had to be available to every group within the company that needed to provide payment functions covering the local requirements. From such a beginning, you can build up a solution that covers cash management, payment services and liquidity forecasting, including contract management for interest, foreign exchange (FX) and commodity risks with the respective valuations, enabling netting and worldwide single invoice-based reconciliation, as well as credit management.
One of the end results of this concept has been a recent project realised with Virgin Atlantic. The company’s treasury was seeking one payment hub solution connecting to multiple channels in multiple formats, recognising the fact that Virgin Atlantic runs businesses in many locations, not just the UK.
Most corporate treasurers agree that in order to maximise liquidity planning in volatile market conditions, transaction and balance information from multiple banks must be consolidated and available on a real-time basis.
Corporate treasurers who require independence from banks’ proprietary electronic banking systems (EBS) are looking to adopt payment gateways that support multiple banks and payment products to benefit from reduced costs and increased flexibility. Multiple EBS solutions often prevent automated straight-through processing (STP) and lock the company into resource-intensive, inefficient manual processes that attract higher banking charges due to payment repair costs and late payment penalties. Although banks have used the SWIFT payment network for decades, it wasn’t until July 2009 that SWIFT changed their rules to allowing corporates to directly participate in SWIFTNet.
Corporates now have the potential to increase flexibility, decrease complexity and lower costs by adopting the SWIFT network. Virgin Atlantic addressed the need for an integrated payment gateway by adopting BELLIN’s payment gateway and tm5 treasury management system (TMS).
The Company and the Task at Hand
Since it was founded in 1984, Virgin Atlantic Airways has become Britain’s second largest carrier serving the world’s major cities. Now based at London’s Gatwick and Heathrow airports and Manchester airport, it operates long haul services to 30 destinations worldwide, as far apart as Las Vegas and Shanghai. Virgin Atlantic has carried around 58 million passengers since it began operations. Group treasury is managed from a central UK location, with responsibility for all treasury activities worldwide, using a hub and spoke approach.
Historically, day-to-day payments and liquidity reporting was performed using multiple EBS and manual spreadsheets. An increase in demand and the desire to adopt a payment factory model created the need for an integrated treasury management and payment gateway solution that could meet the growing demands of the company.
Virgin Atlantic Key Objectives: Standardise and Future-proof the Payment Processing Platform
- Enable a payment factory model.
- Improve the range of payment products.
- Provide automated interfaces from multiple enterprise resource planning (ERP), accounts payable (A/P) and receivable (A/R) systems.
- Support STP.
- Optimise cash management and liquidity planning.
- Reduce IT licence and maintenance charges.
- Improve security and controls.
- Implement the balanced treasury concept to achieve efficient distribution of treasury work throughout the group.
Several vendors offering a payment solution and integrated TMS were shortlisted and asked to respond to a request for proposal (RFP). Virgin Atlantic was seeking a web-based integrated treasury and payment platform, ideally with an unlimited seat licence to support a load balanced treasury approach. The solution chosen was based upon the BELLIN tm5 TMS and payment gateway. In addition, to reduce costs and to allow the project to start without any IT infrastructure delays, the vendor’s application service provider (ASP) hosted solution was selected with an enterprise licence, which meant there was no limit to the number of users on the system.
A feature of the solution was to have a common payment process across the enterprise, including system access controls and payment signing authorities. The ‘four eyes’ (two individuals) principle for controlling system changes was adopted. A number of sub-optimal interfaces between the internal ERP systems, external EBS and IT vendor applications were replaced by a single payment gateway, which could send payment files to the banks and receive account balance and transactional information centrally.
The load balanced treasury concept was seen as a key requirement by Virgin Atlantic. The solution required the chosen vendor to build interfaces to banking systems that had not been fully deployed for corporate access, so testing needed to be rigorous. The project was managed by a distributed project team made up from the banks, vendors and Virgin Atlantic. The single payment gateway was supplied by BELLIN, who built the technical interfaces with the banks and SWIFT, and they also provided the technical development resource and consultants. Banking Alliance consultants imbedded in the Virgin Atlantic project team developed interfaces, established connectivity with the banks and SWIFT, configured the system and managed acceptance testing on behalf of Virgin Atlantic.
Implementation of the System ?
Phased implementation was agreed up front to encompass multiple banks, payment products and business units across several locations. This required existing payment systems to be maintained during the transition to the new system. The technical development was carried out in the following three stages:
- Host-to-host connections between BELLIN and the EBS to provide a single payment gateway.
- Deals and cash flows were interfaced from the existing TMS into BELLIN to provide cash management reporting.
- SWIFTNet connectivity using FileAct and FIN messages.
Payment Product and Message Types?
Payment products included US dollar automated clearing house (ACH), international ACH, BACS debits and credits, cheques, cross-border payments, single euro payments area (SEPA) credit transfers (SCT), UK Faster Payments, CHAPS and Fedwire. The XML ISO 20022 file format and MT messaging was used between BELLIN and the banks. A key challenge was to ensure the payment status messages could be automated (confirmation, payment status and payment errors).
An MBTI multi-bank arrangement was established with Citibank to forward payments to recipient bank accounts over the SWIFT network. Banks who participated in the project included Lloyds Banking Group, Bank of America and Citibank. Voca and Lloyds Banking Group provided SWIFT connectivity to the BACS network.
The Virgin Atlantic treasury project pioneered many new technologies and achieved several industry successes, including:
- First corporate to use the Citibank CMX platform.
- First corporate to use Bank of America’s pass-through payment mode for ACH payments.
- First UK corporate to establish a ‘machine-to-machine’ connection to Bank of America.
- First UK company to purchase the BELLIN TMS and payment gateway.
- First BELLIN corporate client to adopt SWIFT.
- First company to establish an interface between SunGard Quantum and the BELLIN tm5 treasury system.
- First corporate to adopt Enterprise Exchequer for US wires and ACH payments.
In addition, the project was an early adopter in the following areas:
- One of the first corporates in the UK to use a web-based TMS and payment platform.
- Adopting the XML ISO 20022 payment standard.
- One of the first corporates to adopt SWIFT.
The solution provides timely and accurate cash flow information with higher visibility of liquidity, bank fees and the payment process while obtaining a significant reduction in payment charges and an increased flexibility and choice of payment products. Adopting SWIFT allowed Virgin Atlantic to reduce transaction fees compared with multi-banking and EBS-based transactions.
The solution involved banks and vendors within the UK, US, Canada and Germany and has allowed Virgin Atlantic to use a payment platform of their choice. This solution was made possible by the expertise and dedication shown by all parties involved. The final stage of the project will be to transfer all payments via the SWIFT network.
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