Nokia has operations in more than 120 markets worldwide and operates a highly centralised treasury model, with payments streamlined into a global shared services centre (SSC) in Geneva, Switzerland. This hub operates as a payment factory for the 100 plus Nokia subsidiaries around the world and makes payments-on-behalf-of (POBO) for the subsidiaries, as well as handling payments directly from the subsidiaries bank accounts. It delivers cost savings and operational efficiencies via a standardised operational workflow model. Additional benefits include improved netting capabilities, easier compliance with the impending single euro payments area (SEPA) regulation, and a rationalised account maintenance structure.
The SSC, payment factory and sophisticated structure were not enough for Nokia, however, which wanted to take their cash management architecture to the next level by removing the proprietary banking connections and associated file formats in its multibank environment. What started out as a drive to optimise payments efficiency way back in 2008 ended up completing this year, with the last bank account being rolled out with the new open standards payments architecture in early 2013. The improved open standard connectivity and file formats make it easier to swap partner banks, integrate with them when chosen, and avoid the high cost of locked-in proprietary systems.
Greater portability, agility and efficiency have all come about since moving to the SWIFT platform for connectivity and security purposes, and to the ISO20022 XML financial messaging standard that the platform uses. The re-engineering of Nokia’s formal payments architecture to emphasise common connectivity, security and file formatting open standards across all its entities, so that silos, inefficiencies and flexibility were prioritised, is the final piece in the jig-saw of this long-running project.
Treasury flows are now supported using the SWIFT FIN service, which provides real-time information for greater payment and cash visibility, enabling more informed decisions to be made. The accounts payable (A/P) flows at Nokia are now supported by ISO20022 XML messaging via the SWIFT FileAct service. This best practice architecture is all designed to achieve a lower cost, open standard cash management procedure that promotes portability and operational efficiencies.
Mastering The Challenge
The main challenge for Nokia in completing its payments re-engineering process was to overcome the inherent complexity and costs associated with a large multibank proprietary cash management architecture. The corporate used to support a number of different host-to-host communication protocols and bank proprietary file formats in order to run its treasury, A/P and accounts receivable (A/R) flows. This original model had zero portability and agility, resulting in typically high banking integration costs and difficulties in swapping bank partners easily if more favourable transaction fees could be negotiated elsewhere.
The need for SWIFT and adoption of the ISO20022 XML messaging standard that aspires to be the de facto shared technical language for global payments was obvious to the treasury and gained support.
Simplified Open Architecture
The simplified payments architecture at Nokia means that the high integration and time costs previously associated with changing banking partners are now a thing of the past and the quality of payments has improved in terms of a reduction in failed transactions attracting an exceptions-handling fee – and in terms of the rich data that can be seen by the treasury right throughout the financial supply chain.
The new SWIFT interface provides a highly secure, resilient connection to the banks, with the FileAct service supporting the A/P and A/R flows, while the FIN service provides a real-time interface to optimise treasury operations. ISO 20022 XML financial messaging provides a standard global file format, which has had positive results on the on-going operational and maintenance costs at the firm.
Nokia now has a globally standardised cash management and payments architecture, which provides agility, portability and resiliency; all for less cost. The open standards approach has enabled the treasury to operate on a more efficient basis through the receipt of real-time data rich information that provides greater cash visibility and feeds into better financial management.