Dassault Systèmes, principally a maker and leader of design and product lifecycle management (PLM) solutions, had a clear objective it wanted to meet: to better organise, control and secure the payments issuing from its European shared service centres (SSCs). The group treasury, therefore, applied the concept of straight-through processing (STP) to build a payment factory governed by XML ISO 20022 standards, using SWIFT’s 3SKey electronic signature security architecture and SWIFTNet transmission to reach its aim and its bank partners across Europe.
Over the past few years the financial and economic environment has changed and the mode of communication between banks and corporates has evolved as well. Companies are looking for more and more harmonisation of internal processes, and to ensure the security of payment and data flows while dealing with external partners. This helps efficiency and delivers a resilient best practice approach to modern business.
The single euro payments area (SEPA) reform is also an important argument in favour of introducing a payment factory implementation, simply because if you are overhauling a payment infrastructure anyway to ensure compliance then you might as well improve your system at the same time and take advantage of the standardised instruments and environment. The harmonisation of payments within Europe, and the standardisation of the payment format on XML ISO 20022 messaging, has motivated more and more corporates to centralise internal workflows. A payment factory permits firms, at the same time, to harmonise the communications offered by SEPA and to centralise the payment transactions.
As a result of progress in information and communication technology and the evolution of regulation, the treasurer now focuses more on risk management. The main objective of Dassault Systèmes, as a multinational cross-border group, was to have a global automated solution enabling the centralisation, harmonisation and security of our processes. Indeed, the payment factory recently introduced was naturally viewed as a method to better manage the risk and improve visibility on financing needs and liquidity management.
The geographic structure of Dassault Systèmes cash management, organised in three zones spanning Asia, Europe and the US, governed the decision to create a first payment factory in the middle time zone in Europe at its headquarters, which centralised all regional processing in one hub covering three important European SSCs. The centres cover southern Europe, Middle East and Africa (EMEA), including France, Turkey and Israel; central Europe including Germany and Poland; and northern Europe including the UK and Scandinavia.
Such an ambitious project needs to be based on a strong organisation, a unified and automated process, secure high technology procedures, narrowly defined planning and, of course, on reliable partners. Defining the organisational plan was the first, key step and it was quickly decided to centralise the payments issued by three European SSCs at the firm’s headquarters (HQ) in France, creating only one processing centre and economy-of-scale savings.
The means of achieving this was to implement an STP payment workflow, combined with electronic signatures (using 3SKey authentication) and SWIFTNet transmission to reach all bank partners across the region. Dassault Systèmes decided to apply the STP concept since it is one of main characteristics of a payment factory. The new architecture was designed like a hub enabling an automatic and straight link between the main finance enterprise resource planning (ERP) software, provided by PeopleSoft, with the treasury management system (TMS) supplied by Kyriba, and the bank and supplier systems that Dassault Systèmes regularly interacts with.
After the process was plotted, the technology systems that would be used to harmonise and secure the payments was addressed, with SWIFT connectivity quickly identified as essential for providing the desired multi-bank capability.
In October 2010 Dassault Systèmes adopted SWIFTNet as its sole and unique bank communication protocol to transmit all files to its main banks in a harmonised manner. The payment files should be sent in one standardised format it was decided, XML ISO 20022. To secure the transmission of payments to banks by SWIFTNet, the firm centralised everything at its core treasury in the French HQ, including the management of signatories’ limits and insisted upon SWIFT’s 3SKey electronic signature and security architecture.
Selecting a centralised bank partner was also important. As of today, among banking partners, there are still some institutions that are not yet using the 3SKey technology. Therefore, the challenge was not only to centralise the payment flows internally on one TMS, but also to choose a well-structured and reactive bank partner that could help centralise the payments on its system before forwarding them on to other, still in a secure manner, to beneficiaries all over Europe. Dassault Systèmes main bank in its ‘home’ market of France, Société Générale (SocGen), got the role: to centralise and send the 3SKey signed payments directly to other banks which have not yet implemented the technology.
Planning: Define the Actions, Timeline and Assign Resources
Analysis and implementation of XML ISO 20022
This is a quite long stage and it took Dassault Systèmes several months to develop a core message in ERP in a flexible manner. The idea was that the standard would, as much as possible, be close to the requirements of the issuing bank. Indeed, the difficulty of this piece of the puzzle is the adaptation of the XML ISO 20022 to the rulebooks of the different banks. Though the SEPA Credit Transfer (SCT) instrument was based on an ISO 20022 standard, some banks had their own interpretation of the format. In some cases, Dassault Systèmes had to develop the format to be compatible with each bank. The testing was quite time consuming since this phase was covering all the project scope (i.e. 20 entities in Europe and was performed in collaboration with the internal IT department and bank’s teams.
Interfacing ERP with TMS
The creation of the in-house hub aimed not only at achieving communication between the two systems but the fluid transmission of data in the correct format. Another gain is that the payment flows centralised on one treasury platform generate automatic forecast information into Dassault Systèmes’ cash management tool, improving visibility and delivering better liquidity and asset management.
The difficulty was the updating of ERP suppliers’ databases with the International Bank Account Numbers (IBANs) and Bank Identifier Codes (BICs) needed for SEPA payments and with the Basic Bank Account Numbers (BBANs) or local BANs for non-SEPA out of region payments. Since the data format was variable, the files feeding with mandatory payment information according to the beneficiary bank was quite difficult, especially in the Nordic countries where local BAN (Giro) were required.
SWIFTNet and 3SKey implementation
This was very challenging because Dassault Systèmes had to combine and centralise the different types (suppliers, expenses, etc) of payments on one Kyriba supported TMS, which is also the firm’s SWIFTNet and electronic signature platform. On to this was added the 3SKey approval workflow, depending on the payment type and bank signatories limits before files are released via SWIFT’s FileAct channel to the main banking partners in Europe.
The major gains achieved by introducing a payment factory are illustrated below, but chiefly Dassault Systèmes benefitted from a fully automated payment chain from ERP via TMS, straight to the bank. The re-jigged process is as follows:
ERP (payments input) ? TMS (cash forecast creation) ? 3SKey electronic signature ? SWIFTNet FileAct transmission ? Centralising bank ? SWIFTNet FIN sending ? Banks in Nordic and other European countries.
Dassault Systèmes centralised payments to more than 10 beneficiary banks in 10 European countries on a platform within its treasury. On a quarterly basis, 12,500 payment flows are now transiting the department in a secure manner.
Since the payment process is completely automated from the ERP to the banks, the gain in time previously spent on manual paper-based validation, via fax, is widely appreciated. The treasury team can now concentrate more on value-added tasks, rather than on monitoring payment flows.
The payment format streamlining, and in particular, the adoption of XML ISO 20022 led to the replacement of local banking formats and significant reduction in the use of local e-banking sites. This was a key success point for Dassault Systèmes, whereby not only was the security of its bank flows enhanced, but also security was improved on systems access by reducing the number of bank platforms and several tokens to just one TMS for the group and one 3SKey per signatory.
Finally, the interface between systems allows Dassault Systèmes to improve treasury cash forecasts by receiving automatic information in the TMS, thereby optimising the cash management and liquidity functions, which are naturally crucial for any multinational group like Dassault Systèmes or similarly-sized firms.
- This case study is based upon an entry into the gtnews Awards for Global Corporate Treasury 2012, sponsored by Bank of America Merrill Lynch (BofA Merrill). The winners of this year’s annual awards, now in its third staging, will not be announced until a gala dinner on 24 May at the Sofitel Grand Hotel in Amsterdam, the Netherlands. This entry is shared here as a best practice guideline but is not necessarily the winning category entry. This will only be revealed on the night. To see all the shortlisted entries and for more information about the awards click here.
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