Médecins Sans Frontières (MSF)/Doctors Without Borders is an international humanitarian organization, best known for their medical assistance in conflict zones and in countries affected by endemic diseases. MSF manages operations in more than 70 countries, providing medical support in the afore-mentioned areas. As a non-profit organization, MSF receives funding from individual donors and private institutions from all around the world. This global footprint generates significant cash flows and financial transactions in multiple currencies, resulting in high foreign exchange (FX) exposures. Previously, these were not adequately managed through a structured FX risk management process.

Three key problem areas

The decentralized and informal nature of MSF’s FX risk management process increased their exposure to currency uncertainty, with both inflows and outflows lacking an aligned approach. Zanders highlighted the following three problem areas:

• No centralized FX hedging strategy. Incoming flows, such as funds and grants, received globally by MSF entities with fund-raising activities (“funding entities”) were directed to one of the five Operational Centers headquartered in Europe to fund field operations. Funds were transferred in their received currency which often differed from the functional currency of the Operational Centers (EUR). The Operational Centers then bore high FX exposures on the received funds as there was no FX hedging strategy in place. The market fluctuations of unhedged currencies resulted in deviations from MSF’s annual target budget.

• Funding of field operations with limited FX risk management. From the Operational Centers, quick transfer of funds to the relevant field operations was prioritized, often without considering FX implications. This posed challenges to the Operational Centers when applying FX risk management techniques as date and amount of outgoing funds was not always known. 

• Insufficient provisions for funding unpredictability. Managing the FX exposure at the Operational Center level was challenging due to uncertainties in the timing and size of grants, variation in income due to inconsistent global performance, lack of internal communication on currency needs, seasonal income peaks and unpredictable funding requirements from their field operations.

A two-step solution

Through discussions, it became clear that MSF’s priority when it came to FX risk management was to safeguard the income from grants and the distribution to field operations, by protecting their annual budget rate. We applied two-steps from our Zanders’ Financial Risk Management Framework to deliver this objective.

• Step one: Identification and Measurement

In the first step, our objective was to identify the FX exposures to determine the correct approach to manage the FX risks. This led to a high-level quantification of the FX risk for each of the five Operational Centers.

To manage this risk, we advised MSF to establish an FX risk management function to manage the FX risk in a coordinated and centralized manner. This allowed for the creation of an FX hedging program consisting of a 12-month rolling forecast of inflows and outflows. This enabled MSF to hedge their net exposures for the next budget year. If the forecast had a high level of accuracy, MSF could hedge a high ratio of this forecast.

By centralizing the FX exposure, net amounts could be hedged centrally to protect the organization from large FX volatility. The hedging contracts would then determine the annual budget rate for that year, and thereby achieving the objective of protecting the annual budget rate.

• Step two: Strategy & Policy

Here, we designed a future FX risk management process and guidelines, incorporating best market practices. We developed an ‘in-common platform’ concept, enabling MSF to centralize and standardize their FX risk management process. This was formalized in an FX risk management policy.

A structured approach to FX risk management

The introduction of an FX hedging program has given the MSF team more clarity on their FX risk exposure. This enables them to manage fluctuations in currency more proactively and pragmatically to minimize the impact on their budgets and optimize funding for their field operations.

“The result is extremely positive,” says MSF’s Treasury Lead. “We used the FX hedging program to determine the annual budget rate for next year. With this, we are very close to our budget, and we have managed to protect at least 80% of the funds and grants for the budget.” Furthermore, the FX hedging program inspired MSF entities to tackle other treasury challenges collectively as opposed to addressing them individually.

However, there are still further improvements ahead. “There are challenges we still face around the accuracy of the forecast,” added the Treasury Lead. “This is something we still need to work on. MSF is now sometimes over hedged or underhedged. To accommodate this, I ask the entities to update the rolling forecast on a regular basis.”

For the future, MSF is considering hedging more than 80% of their budget, but this is dependent on further analysis and improved accuracy of the forecast and performing variance analysis comparisons on the forecast.

The introduction of a comprehensive FX risk management policy has also been crucial in giving MSF more control over their cashflows. By clearly defining stakeholder roles and responsibilities and emphasizing the principle of segregation of duties, MSF has introduced a centralized approach for managing their FX exposures. The group-wide FX hedging program promises significant financial and operational benefits. This strategic shift empowers MSF with greater control over its financial landscape. With a solid variance analysis mechanism on the horizon, MSF is assured to enhance cash flow forecasting and expand its FX hedging program with confidence.

Leverage our FX risk expertise

For organizations eager to navigate the complexities of FX risk and enhance their financial resilience, Zanders stands ready to share its insights and expertise. Contact us today to explore tailored strategies that can transform your financial operations and secure your organization's future. Together, let's unlock the potential of strategic FX management.

For more information, visit our NGOs & Charities page here, or contact Daan de Vries.

When UGI International, a supplier of liquid gases across Europe and in the US, faced challenges in obtaining real-time visibility on its cash positions, they partnered with Zanders to elevate the performance of their Kyriba system. This started with the transition to the Swift banking system.  

A quest for transparency

UGI International (UGI) is a leading supplier of liquid gases, operating under 6 brands across 16 countries. Every day, the business generates a consistent stream of high value and high volume in-country and cross-border transactions. This feeds into a complex network of disparate, multinational cashflows that the business’ treasury team is responsible for managing. When Nuno Ferreira joined as Head of Treasury in 2021, Kyriba was already in place, but it quickly became apparent that there was considerable scope to increase the use of the treasury management system to tackle persistent inefficiencies in their processes.  

“Lack of visibility was one of our key issues,” says Nuno. “We didn't have access to accurate cash positions or forecasts, so we were lacking visibility on how much cash we had at the end of each specific day. The second thing was that the payment flows were very decentralized. In the majority of countries, payments were still being done manually.” 

Lack of centralization was something that needed to be addressed and this demanded an overhaul of UGI’s approach to bank connectivity. The company’s use of the EBICS (Electronic Banking Internet Communication Standard) protocol had become a significant obstacle to them improving cash transparency and automating more of their payment processes. This was due to EBICS only allowing file exchanges with banks in a limited number of UGI European countries (France). Payments and transactions that extended beyond these geographies had to be managed separately and manually.  

“We had Kyriba but because it was only connected with our French banks with EBICS it wasn’t able to serve all of the countries we operate in,” Nuno explains. “We recognized that going forward, to get the full software benefits from Kyriba, to reduce operational risk, and to get more visibility and control over our cashflows, we needed to connect our treasury management system to all of our main banks. These were the drivers for us to start looking for a new bank connectivity solution.”

The transition to Swift 

The Swift (Society for Worldwide Interbank Financial Telecommunication) banking system offered broader international coverage, supporting connectivity to all of UGI’s core banks across Europe and in the US. But making the transition to Swift was a substantial undertaking, requiring a multi-phased implementation to bring all of the company’s banks and payments onto the new protocol. Recognizing the knowledge of Swift and resource to oversee such a large project wasn’t available in their internal treasury team of 6 people, UGI appointed Zanders to bring the technical knowledge and capacity to support with the project. 

“In this day and age, where a lot of technology is standard technology, what you get out of a TMS system depends on who helps you implement it, how much they listen to you, and how they adapt it to meet your needs,” explains Nuno. “You can find technical people easily now, but what we needed was an advisor that not only provides the technical implementation, but also helps with other areas—even if they are outside of the project. There is a lot of knowledge in Zanders about Swift and Kyriba but also about treasury in general. I knew if there were problems or issues, or even questions that fell outside of what we were implementing, there would always be someone at Zanders with knowledge in that specific area.”  

This access to wider expertise was particularly relevant given there was not only a complex implementation to consider but also the compulsory Swift security attestation and assessment. The Swift Customer Security Controls Framework (CSCF) was first published in 2017 and is updated annually. This outlines a catalogue of mandatory and advisory controls designed to protect the Swift network infrastructure by mitigating specific cybersecurity risks and minimizing the potential for fraud in international transactions. Each year, all applicable users of the banking system must submit an attestation demonstrating their level of compliance with Swift’s latest standards, which must be accompanied by an independent assessment. This spans everything from physical security of IT equipment (e.g., storage lockers for laptops) and policies around processes (e.g., payment authorization) to IT system access (e.g., two-factor authentication) and security (e.g., firewall protection). 

“We were not just talking about technical and system controls—we also needed to ensure that there were process controls in place,” says Nuno.  “We didn’t have the right skillset to undertake this security assessment ourselves and we needed consultants to help us to provide the standalone reports showing that UGI follows best practices and has controls in place. This is where the second project came in. Zanders helped ensure everything was in place - the technical parts and the process parts - for the security assessment.”  

Driving change, unlocking efficiency 

With the migration to Swift, Zanders has been able to work with the UGI team to centralize their treasury processes, unlocking new functionality and elevated performance from their Kyriba system. This has dramatically reduced the manual effort demanded from the team to administer cash management. 

“While before I was getting information from all the legal entities over Excel spreadsheets, now we don't need to reach out to our local entities to request this information – this information is centralized and automated,” explains Nuno. “This reduces operational risk because instead of uploading files or creating manual transfers within the online banking systems, it is fully integrated and so fully secured. Which also means we don't need to continuously monitor this process. This also reduces the manual activities and hence the number of FTEs required locally to run daily cash management processes. The intention was to have a secure straight-through processing of payments.” 

The Swift security assessment facilitated by Zanders, not only ensured UGI achieved the baseline standards set by Swift, it also helped to raise awareness of Kyriba and the importance of security protocols both within treasury and in the IT and Security teams. 

“Kyriba isn’t just a system to provide a report - if something goes wrong, it really goes wrong and creating this awareness was an added benefit,” says Nuno. “Doing this assessment forced us to make time to really look at our approach to security in detail. Internally, this prompted us to start discussing points that we would never normally address - simple things like closing your laptop when you’re away from your desk. This then starts to become part of the culture.”  

The initial drivers behind the project were to tackle lack of visibility in UGI’s treasury systems. These outcomes were accomplished. The transition to Swift and the integration with the business’ Kyriba system has provided the accurate, real-time visibility on cash positions Nuno and the wider treasury team needed. 

“When you don't have this visibility, you can’t manage your liquidity properly. There is value leakage and this impacts your P&L negatively on a daily basis,” says Nuno. “I now have this control and my cash position is accurate, so any excess cash or even FX exposure can be properly managed and generate higher yield to our shareholders.”  

There is a lot of knowledge in Zanders about Swift and Kyriba but also about treasury in general. I knew if there were problems or issues, or even questions that fell outside of what we were implementing, there would always be someone at Zanders with knowledge in that specific area.

Nuno Ferreira, Head of Treasury at UGI

Advice delivered with commercial empathy 

Overall, this project underscores the value of having an advisor that not only brings deep technical expertise to a project but also understands the realities of implementing treasury technology in a large, international corporate environment.  

“One of the things I really liked was the flexibility of the Zanders team,” says Nuno. “They have a very structured approach, but it’s still flexible enough to take into account things that you cannot control - the unknown unknowns. They understand that within the corporate space, and with banks, it’s sometimes hard to predict when things are going to happen.” 

This collaborative approach also unlocked additional unexpected benefits for the UGI team that will help them to continue to build on the Kyriba system performance and efficiency improvements achieved. 

“The technical capability of our team has grown with these projects,” says Nuno. “From a technical standpoint, we now understand what we can do ourselves and how to do it, and when we need to go to Zanders for help. This knowledge transfer has enabled us to do a lot of things by ourselves that before we needed to go to an external partner for help with, and at the end of the day, this saves us costs.”  

For more information, please contact our Partner Judith van Paassen. 

Security in payments is a priority that no corporation can afford to overlook. But how can bank connectivity be designed to be secure, seamless, and cost-effective? What role do local connectivity methods play today, and how sustainable are they? This article provides an overview of various bank connectivity methods, focusing specifically on the Electronic Banking Internet Communication Standard (EBICS). We'll examine how EBICS can be integrated into global bank connectivity strategies, while comparing it to alternative methods. The following section offers a comparison of EBICS with other connectivity solutions.

For a comprehensive overview of bank connectivity methods, including insights from an SAP perspective, we recommend the article Bank connectivity – Making the right choices.

Compared to alternatives, EBICS contracts are cost-effective, and EBICS connectors, along with supporting online banking software, are equally affordable. Whether through standalone solutions provided directly by banks or SAP ERP-integrated systems, EBICS consistently proves to be the most cost-effective option when compared to SWIFT or individual host-to-host connections.

The downside of EBICS? Outside the GSA region (Germany, Switzerland, Austria) and France, there are significant variations and a more diverse range of offerings due to EBICS' regional focus. In this article, we explore potential use cases and opportunities for EBICS, offering insights on how you can optimize your payment connectivity and security.

EBICS at a Glance 

EBICS, as a communication standard, comes with three layers of encryption based on Hypertext Transfer Protocol Secure (HTTPS). In addition to a public and a private key, so-called EBICS users are initialized, which can present a significant advantage over alternative connection forms. Unlike Host-to-Host (H2H) and SWIFT, which are pure communication forms, EBICS has an intelligent signature process integrated into its logic, following the signing process logic in the GSA region. EBICS, developed by the German banking industry in 2006, is gaining increasing popularity as a standardized communication protocol between banks and corporates. The reason for this is simple—the unbeatable price-performance ratio achieved through high standardization.

Furthermore, EBICS offers a user-specific signature logic. Primary and secondary signatures can be designated and stored in the EBICS contract as so-called EBICS users. Additionally, deliveries can be carried out with so-called transport users (T-transport signature users).

In practice, the (T) transport signature user is used for tasks such as retrieving account statements, protocols, or sending payments as a file without authorization.

It is worth noting that for the intelligent connectivity of third-party systems or even service providers that create payments on behalf of clients, the T user can be utilized. For example, an HR service provider can send an encrypted payment file using the provided T user to the bank server. The payment file can be viewed and signed separately on the bank server via the relevant treasury or EBICS-compatible banking software.

Furthermore, through EBICS, individual records and thus personal data in the case of HR payments can be technically hidden. Only header data, such as the amount and the number of items, will be visible for approver.

Is the signature logic too maintenance-intensive? Fortunately, there is an alternative available to the maintenance of individual users. A so-called Corporate Seal User can be agreed upon with the bank. In this case, the bank issues an EBICS user based on company-related data in the (E) Single signature version. The (E) signature is transmitted directly to the bank for every internally approved payment, which is comparable to connectivity via SWIFT or Host-to-Host.

Strategic Adjustments with EBICS

Regional standards like EBICS can be used to connect regional banks and send or receive messages over the bank's internal SWIFT network through a so-called request for forwarding, also known as European Gateway or SWIFT Forwarding. Using this service, it is not necessary to connect every bank directly via Host-to-Host or SWIFT in order to become cost-efficient in your corporate banking.

A SWIFT Forwarding agreement is drafted and signed with your individual bank. Payment files are sent to the bank via a defined order type intended solely for forwarding. The bank acts here as a mere transmitter of the message. Incidentally, the same principle can also be adapted for account statements. Several banks in the GSA-region and France proactively market the service as an additional cash management service to their corporate customers. Account statements are centrally collected via the bank's SWIFT network and sent to the corporate via the existing EBICS channel. This procedure saves implementation efforts and simplifies the maintenance.

We like to summarize the advantages and disadvantages of integrating SWIFT forwarding via the EBICS channel:

Advantages

• High maintenance Host-to-Host connections are avoided.
• A dedicated SWIFT connection can be avoided without neglecting the benefits.

Disadvantages

• A bank with a well-developed interbank network is required.
• Transport fees per message may apply.

In general, corporates can take advantage of this specific EBICS setup when dealing with banks that manage a small portion of their transaction volume or when the technical connections with certain banks are more challenging. This approach is especially beneficial for banks that are difficult to access through local connectivity methods and have medium-to-low transaction volumes. However, for banks with high transaction volumes, connectivity via Host-to-Host or even a dedicated SWIFT connection may be more appropriate. Each situation is unique, and we recommend evaluating the best banking connectivity setup on a case-by-case basis to ensure optimal performance and cost-efficiency.

Future of EBICS: Changes Until 11/2025

Since November 2023, banks have been offering EBICS 3.0 as the most recent and up-to-date version. This version is binding in the GSA (Germany, Switzerland, Austria) region until approximately November 2025.

Here is a summary of the most important changes:

• Increased Standardization: Local EBICS “flavors” are unified to simplify implementation.
• Enhanced Encryption: Since version 2.5, the minimum encryption level has been 2048 bits. This is continuously increased with the EBICS 3.X version.
• XML Only for EBICS-specifics: Protocols like PTK are migrated to pain.002 HAC.

The new version of EBICS increases the security of the communication standard and makes it more attractive in the EU given its updates. In addition to Germany, Austria, Switzerland, and France, we observe the communication standard is increasingly offered by banks in Spain, Portugal, the Netherlands, as well as in the Nordic countries. Recently, the first banks in Poland have started to offer this communication standard–a rising trend.

In summary, EBICS is a cost-effective and powerful standard that can do much more than just bank connectivity. For companies that mainly use Host-to-Host or SWIFT for bank connectivity within the Eurozone, it may be worthwhile to look at EBICS and consider switching their connectivity method, provided their banking partner offers EBICS.

Treasurers dealing with multiple jurisdictions, scattered banking landscape, and local requirements face many challenges in this regard. Japan is one of the markets where bank connectivity is indeed a challenge, especially when it comes to connecting with local banks.

Traditional options

The initial reaction from treasurers not familiar with local market conventions might be to seek connection through the SWIFT network. However, in Japan only a handful of banks offer SWIFT connectivity. Second natural choice is the Host-to-Host connection (H2H). This is the classic File Transfer Protocol (FTP), or preferably the secured version (sFTP) setup. Some will say old fashioned, rather than classic, since it is as old as the internet. Nonetheless, it is still popular, and frankly quite often the best fit for the purpose. However, if there are dozens of local banks to connect to, it can be difficult to be expected to connect to each of them with a direct H2H. While this could be technically feasible, it would be nothing short of a nightmare to maintain, with the initial setup being time-consuming in the first place.

Other solutions

There is an answer, or should we rather say ANSER, to this question. ANSER, an abbreviation of ‘Automatic answer Network System for Electrical Request’, is a data transfer system provided by NTT Data Corporation since 1981, which links banks with firms.[1] ANSER then is a way to connect a corporate client to the bank. The system has been around for a while, and together with Cash Management Service (CMS) centers it is a part of the so-called Firm Banking solution in Japan. Since its inception, ANSER offered a wider range of services, through which corporates could access their banking information. Among the offered channels are telephone, fax, firm banking terminal, and personal computer. With the ever-increasing need for speedy and accurate information exchange, the more traditional ways, such as telephone and fax, gave way to the more sophisticated and automated solution, namely eBAgent.

eBAgent making use of API

The said eBAgent is a proprietary middleware platform offered by NTT Data. The solution establishes an automated connection with banks through the above-mentioned ANSER network. In short, eBAgent offers a gateway to multiple local banking partners in Japan utilizing the ANSER network. The remaining part for the corporate is then to establish a connection between the TMS and eBAgent, and secure appropriate contracts with the eBAgent provider, NTT Data, as well as the banks.

As for the connection protocol, the choice is between the classic sFTP, or Application Programming Interface (API). The latter has the real-time advantage, with less lag between the pick-and-drop sFTP connection. API seems to be a choice for an increasing number of corporates these days in this area. What is also interesting, apart from the API connection, are the supported formats for transfers and bank statements. In addition to the local Japanese ZENGIN, the protocol also offers data transmission in a proprietary XML format. This XML format is actually quite simple, with a very limited amount of tags. In addition to this, unlike the ISO 20022 standard, it contains only one level of tags, without the nesting function. Depending on the exact ERP/TMS infrastructure, eBAgent can also provide conversion services from and to the IS 20022 standard. As for the connection to eBAgent, the whole setup seems easier said than done. However, some TMS providers, in response to the demand from the market, started offering off-the-shelf solutions for a plug-and-play connection to eBAgent. Kyriba and Reval already offer it, with SAP set to roll out its solution on the S/4HANA and Multi Bank Connectivity (MBC) platform in early 2024.

Various ways to connect TMS / ERP with banks in Japan

How to connect with local banks in Japan?

It all depends on the exact landscape of banks and systems. It may just as well turn out that a hybrid solution would be best suited. There is no one-size fits all, as each corporate is unique, thus careful consideration and design will be paramount for a stable and reliable connection with banks. One thing is certain, solutions that involve obtaining bank statement information and enact payments by telephone or fax are simply no longer sufficient. In this day and age, when much sensitive information is exchanged between corporates and banks, having a reliable, automated solution is indispensable.

If you would like to know more, do not hesitate to get in touch with Michal Zelazko via m.zelazko@zandersgroup.com or via + 81 (0) 8 3255 9966

[1] https://www.boj.or.jp/en/paym/outline/pay_boj/pss0305a.pdf

However, possibly the most important point for corporates to be aware of is the planned move towards explicit use of the structured address block. In this second article in the ISO 20022 series, Zanders experts Eliane Eysackers and Mark Sutton provide some valuable insights around this industry requirement, the challenges that exists and an important update on this core topic. 

What is actually happening with the address information? 

One of the key drivers around the MT-MX migration are the significant benefits that can be achieved through the use of structured data. E.g., stronger compliance validation and support STP processing.  The SWIFT PMPG¹ (Payment Market Practice Group) had advised that a number of market infrastructures²  are planning  to mandate the full structured address with the SWIFT ISO migration. The SWIFT PMPG had also planned to make the full structured address mandatory for the interbank messages – so effectively all cross-border payments. The most important point to note is that the SWIFT PMPG had also advised of the plan to reject non-compliant cross border payment messages from November 2025 in line with the end of the MT-MX migration. So, if a cross border payment did not include a full structured address, the payment instruction would be rejected. 

What are the current challenges around supporting a full structured address? 

Whilst the benefits of structured data are broadly recognised and accepted within the industry, a one size approach does not always work, and detailed analysis conducted by the Zanders team revealed mandating a full structured address would create significant friction and may ultimately be unworkable. 

Diagram 1: Challenges around the implementation of the full structured address. 

From the detailed analysis performed by the Zanders team, we have identified multiple problems that are all interconnected, and need to be addressed if the industry is to achieve its stated objective of a full structured address. These challenges are summarized below:  

• Cost of change: The 2021 online TMI poll highlighted that 70% of respondents confirmed they currently merge the building name, building number, and street name in the same address line field. The key point to note is that the data is not currently separated within the ERP (Enterprise Resource Planning) system. Furthermore, 52% of these respondents highlighted a high impact to change this data, while 26% highlighted a medium impact. As part of Zanders’ continued research, we spoke to two major corporates to gain a better sense of their concerns. Both provided a high-level estimate of the development effort required for them to adapt to the new standard: ½ million euros. 
• Fit for Purpose: From the ISO 20022 expert group discussions, it was recognized that the current XML Version 9 message would need a significant re-design to support the level of complexity that exists around the address structure globally.  
• Vendor Support: Whilst we have not researched every ERP and TMS (Treasury Management System) system, if you compare the current structured address points including field length in the XML Version 9 message with the master data records currently available in the ERP and TMS systems, you will see gaps in terms of the fields that are supported and the actual field length. This means ERP and TMS software vendors will need to update the current address logic to fully align with the ISO standard for payments – but this software development cannot logically start until the ISO address block has been updated to avoid the need for multiple software upgrades.
• Industry Guidelines: Whilst industry level implementation guidelines are always a positive step, the current published SWIFT PMPG guidelines have primarily focused on the simpler mainstream address structures for which the current address structure is fine. By correctly including the more complex local country address options, it will quickly highlight the gaps that exist, which mean compliance by the November 2025 deadline looks unrealistic at this stage. 
• Regulatory Drivers: At this stage, there is still no evidence that any of the in-country payments regulators have actually requested a full structured address. However, we have seen some countries start to request minimum address information (but not structured due to the MT file format), such as Canada and US. 
• Time to Implement: We must consider the above dependencies that need to be addressed first before full compliance can logically be considered, which means a new message version would be required. Whilst industry discussions are ongoing, the next ISO maintenance release is November 2023, which will result in XML version 13 being published. If we factor in time for banks to adopt this new version (XML Version 13), time for software vendors to develop the new full structured address including field length and finally, for the corporates to then implement this latest software upgrade and test with their banking partners, the November 2025 timeline looks unrealistic at this point in time.

A very important update 

Following a series of focused discussions around the potential address block changes to the XML Version 9 message, including the feedback from the GLEIF³ the ISO payment expert group questioned the need to support a significant redesign of the address block to enable the full structured address to be mandated. The Wolfsberg Group⁴ also raised concerns about scale of the changes required within the interbank messaging space.

Given this feedback, the SWIFT PMPG completed a survey with the corporate community in April. The survey feedback highlighted a number of the above concerns, and a change request has now been raised with the SWIFT standards working group for discussion at the end of June. The expectation is that the mandatory structured address elements will now be limited to just the Town/City, Postcode, and country, with typical address line 1 complexity continuing to be supported in the unstructured address element. This means a blended address structure will be supported.    

Is Corporate Treasury Impacted by this structured address compliance requirement? 

There are a number of aspects that need to be considered in answering this question. But at a high level, if you are currently maintaining your address data in a structured format within the ERP/TMS and you are currently providing the core structured address elements to your banking partners, then the impact should be low. However, Zanders recommends each corporate complete a more detailed review of the current address logic as soon as possible, given the current anticipated November 2025 compliance deadline. 

In Summary 

The ISO 20022 XML financial messages offer significant benefits to the corporate treasury community in terms more structured and richer data combined with a more globally standardised design. The timing is now right to commence the initial analysis so a more informed decision can be made around the key questions. 

Notes: 

1. The PMPG (payment market practice group) is a SWIFT advisory group that reports into the Banking Services Committee (BSC) for all topics related to SWIFT. 

2. A Market Infrastructure is a system that provides services to the financial industry for trading, clearing and settlement, matching of financial transactions, and depository functions. For example, in-country real-time gross settlement (RTGS) operators (FED, ECB, BoE). 

3. Global Legal Entity Identifier Foundation (Established by the Financial Stability Board in June 2014, the GLEIF is tasked to support the implementation and use of the Legal Entity Identifier (LEI). 

4. https://www.wolfsberg-principles.com/sites/default/files/wb/pdfs/wolfsberg-standards/1.%20Wolfsberg-Payment-Transparency-Standards-October-2017.pdf 

Intraday Bank Statements offers a cash manager additional insight in estimated closing balances of external bank accounts and therefore provides the information to manage the cash more tightly on the company’s bank accounts.

In a changing global floriculture market, Royal FloraHolland created a new digital platform where buyers and growers can connect internationally. As part of its strategy to offer better international payment solutions, the cooperative of flower growers decided to look for an international cash management bank.

Royal FloraHolland is a cooperative of flower and plant growers. It connects growers and buyers in the international floriculture industry by offering unique combinations of deal-making, logistics, and financial services. Connecting 5,406 suppliers with 2,458 buyers and offering a solid foundation to all these players, Royal FloraHolland is the largest floriculture marketplace in the world.

The company’s turnover reached EUR 4.8 billion (in 2019) with an operating income of EUR 369 million. Yearly, it trades 12.3 billion flowers and plants, with an average of at least 100k transactions a day.

The floriculture cooperative was established 110 years ago, organizing flower auctions via so-called clock sales. During these sales, flowers were offered for a high price first, which lowered once the clock started ticking. The price went down until one of the buyers pushed the buying button, leaving the other buyers with empty hands.

The Floriday platform

Around twenty years ago, the clock sales model started to change. “The floriculture market is changing to trading that increasingly occurs directly between growers and buyers. Our role is therefore changing too,” Wilco van de Wijnboom, Royal FloraHolland’s manager corporate finance, explains. “What we do now is mainly the financing part – the invoices and the daily collection of payments, for example. Our business has developed both geographically and digitally, so we noticed an increased need for a platform for the global flower trade. We therefore developed a new digital platform called Floriday, which enables us to deliver products faster, fresher and in larger amounts to customers worldwide. It is an innovative B2B platform where growers can make their assortment available worldwide, and customers are able to transact in various ways, both nationally and internationally.”

Our business has developed both geographically and digitally, so we noticed an increased need for a platform for the global flower trade

Wilco van de Wijnboom, Royal FloraHolland’s Manager Corporate Finance

The Floriday platform aims to provide a wider range of services to pay and receive funds in euros but also in other currencies and across different jurisdictions. Since it would help treasury to deal with all payments worldwide, Royal FloraHolland needed an international cash management bank too.

Van de Wijnboom: “It has been a process of a few years. As part of our strategy, we wanted to grow internationally, and it was clear we needed an international bank to do so. At the same time, our commercial department had some leads for flower business from Saudi-Arabia and Kenya. Early in 2020, all developments – from the commercial, digital and financing points of view – came together.”

RFP track record

Royal FloraHolland’s financial department decided to contact Zanders for support. “Selecting a cash management bank is not something we do every day, so we needed support to find the right one,” says Pim Zaalberg, treasury consultant at Royal FloraHolland. “We have been working together with Zanders on several projects since 2010 and know which subject matter expertise they can provide. They previously advised us on the capital structure of the company and led the arranging process of the bank financing of the company in 2017. Furthermore, they assisted in the SWIFT connectivity project, introducing payments-on-behalf-of. They are broadly experienced and have a proven track record in drafting an RFP. They exactly know which questions to ask and what is important, so it was a logical step to ask them to support us in the project lead and the contact with the international banks.”

Zanders consultant Michal Zelazko adds: “We use a standardized bank selection methodology at Zanders, but importantly this can be adjusted to the specific needs of projects and clients. This case contained specific geographical jurisdictions and payment methods with respect to the Floriday platform. Other factors were, among others, pre-payments and the consideration to have a separate entity to ensure the safety of all transactions.”

Strategic partner

The project started in June 2020, a period in which the turnover figures managed to rebound significantly, after the initial fall caused by the corona pandemic. Van de Wijnboom: “The impact we currently have is on the flowers coming from overseas, for example from Kenya and Ethiopia. The growers there have really had a difficult time, because the number of flights from those countries has decreased heavily. Meanwhile, many people continued to buy flowers when they were in lockdown, to brighten up their new home offices.”

Together with Zanders, Royal FloraHolland drafted the goals and then started selecting the banks they wanted to invite to find out whether they could meet these goals. All questions for the banks about the cooperative's expected turnover, profit and perspectives could be answered positively. Zaalberg explains that the bank for international cash management was also chosen to be a strategic partner for the company: “We did not choose a bank to do only payments, but we needed a bank to think along with us on our international plans and one that offers innovative solutions in the e-commerce area. The bank we chose, Citibank, is now helping us with our international strategy and is able to propose solutions for our future goals.”

The Royal FloraHolland team involved in the selection process now look back confidently on the process and choice. Zaalberg: “We are very proud of the short timelines of this project, starting in June and selecting the bank in September – all done virtually and by phone. It was quite a precedent to do it this way. You have to work with a clear plan and be very strict in presentation and input gathering. I hope it is not the new normal, but it worked well and was quite efficient too. We met banks from Paris and Dublin on the same day without moving from our desks.”

You only have one chance – when choosing an international bank for cash management it will be a collaboration for the next couple of years

Wilco van de Wijnboom, Royal FloraHolland’s Manager Corporate Finance

Van de Wijnboom agrees and stresses the importance of a well-managed process: “You only have one chance – when choosing an international bank for cash management it will be a collaboration for the next couple of years.”

Future plans

The future plans of the company are focused on venturing out to new jurisdictions, specifically in the finance space, to offer more currencies for both growers and buyers. “This could go as far as paying growers in their local currency,” says Zaalberg.

“Now we only use euros and US dollars, but we look at ways to accommodate payments in other currencies too. We look at our cash pool structure too. We made sure that, in the RFP, we asked the banks whether they could provide cash pooling in a way that was able to use more currencies. We started simple but have chosen the bank that can support more complex setups of cash management structures as well.” Zelazko adds: “It is an ambitious goal but very much in line with what we see in other companies.”

Also, in the longer term, Royal FloraHolland is considering connecting the Floriday platform to its treasury management system. Van de Wijnboom: “Currently, these two systems are not directly connected, but we could do this in the future. When we had the selection interviews with the banks, we discussed the prepayments situation - how do we make sure that the platform is immediately updated when there is a prepayment? If it is not connected, someone needs to take care of the reconciliation.”

There are some new markets and trade lanes to enter, as Van de Wijnboom concludes: ”We now see some trade lanes between Kenya and The Middle East. The flower farmers indicate that we can play an intermediate role if it is at low costs and if payments occur in US dollars. So, it helps us to have an international cash management bank that can easily do the transactions in US dollars.”

The average car contains 3-5km of cables while a plane has more than 650km and it takes more than 1,000km for an oil platform to function. There are more energy cables around us than we realize, and they are produced to handle extreme temperatures, deep oceans, or high air pressure. One of the industry leaders in energy (and some telecommunication and LAN) cables is a French multinational called Nexans. Worldwide, 26,000 people work for the Nexans group, with yearly sales of around €7 billion.

“We have new markets that need to be equipped, and there are old markets that need to change all the installations they made 40 years ago – for example, in the US,” says Thomas Wagner, financial manager at Nexans. “But the cable industry is quite a mature market. A significant part of our sales are in Europe.”

In 2013, most sales (57%) were in Europe. But like many in the past few years, Nexans had to deal with a complicated environment, with a global market in crisis, higher bank fees, lots of tools, and – of course – regulations.

Customized matrix

In 2010, the Nexans group decided to define the key strategy for its treasury in a global project. Wagner says: “We started with a worldwide survey to see where we could improve our operations. The area of bank relationship management was quickly identified because we were dealing with more than 100 bank groups worldwide, and our subsidiaries had more than 900 different bank accounts. This number was too high for a group of our size.”

The group’s first objective was to start streamlining their banking relationships. Nexans managed the bank selection process in three steps. First of all, it prepared a cash management RFP (request for proposal) to evaluate the capabilities of the different banks. In a ‘request for quotation,’ Nexans received detailed answers from the banks and analyzed whether the proposed solutions were meeting its requirements.

For this analysis, Zanders created a customized evaluation matrix for us, with a scoring model for each bank.

Thomas Wagner, financial manager at Nexans

“Then we sent our additional follow-up questions and remarks to the banks, and they returned precisions on the previous RFP. Subsequently, we came to a shortlist, and we organized face-to-face meetings with the remaining banks. Finally, based on the selected cash management banks, we developed a global cash pooling architecture together with Zanders and started its implementation.

On the technology side, it was important for the project team to check the capacity of the bank to be able to move to Swift. We wanted to standardize and harmonize the format as much as possible.”

Rationalization criteria

The bank rationalization consisted of defining new core banking partners at the group level. “It meant that we had to reduce the number of banks and bank accounts related to that,” says Wagner. For a bank, a larger share of the wallet in the project is attractive and results in lower banking fees for Nexans. However, the number of banks was not only minimized. A trade-off was also needed to reduce the counterparty risk per bank.

Nexans used four criteria for the banks to be eligible for cooperation. Apart from the bank’s credit rating and the banking fees, a condition for the group was that the bank would become a core partner – not only for cash management but also for providing credit to the group when necessary. Also, it was important for Nexans that the bank would be able to answer the company’s technology and service requirements. Based on the criteria, Nexans ended up with a selection of global cash management banks after previously working with mainly local banks – due to a large number of mergers.

“We also needed to optimize the structure of the group’s bank architecture, in order to reduce the fees at the group level.” The main focus was on bank relationships. “Reducing the costs was an important goal, but building a strong win-win relationship with the banks was key. We therefore made the bank selection not only based on price but also wanted a footprint making Nexans able to deal with all its future business,” Wagner explains.

One of the goals was to decrease banking relationships from 100 down to 20 or 30 banks and to reduce the number of accounts to less than 600. Apart from bank rationalization, the other important objectives of this treasury strategy project were improving bank communication, establishing a payment factory and in-house bank, as well as making necessary changes to the current treasury management system.

Wagner adds: “We intend to have around 550 bank accounts, so during the project, we will close roughly 350 accounts. The bank rationalization was the cornerstone for the rest of the project. It was clear that our bank communication had to improve, and in some countries, we needed to change our outdated communication tools. Especially in Europe, with the realization of SEPA, we took the opportunity to implement new technology.”

One bank, one currency

Where Nexans really wanted to improve was on foreign exchange payments. It decided to build a bank organization that would limit cross-border payments. “Without that, we would not have been able to implement a payment factory. We need to leverage the group.” Besides that, a cultural aspect played a role too. The Nexans group was built by buying several entities spread all over the world, each with its own relationships and financial culture. Technologically, it was not possible to control the company on each level of detail.

Therefore, new technology was implemented for the payment factory and the in-house bank too. Wagner explains: “When a Nexans entity based in France, for example, needed to pay in US dollars to a client in the US, it was using an account opened in Paris, generating a payment outside of France – so it was cross-border, with a transaction fee of roughly €5-6 per payment. The new situation allows this entity to use an account located in New York. This meant the price became a domestic one. To discover this advantage, we needed help from treasury experts and found that in Zanders’ consultants. They knew that, with the new technology, one entity of the group was able to pay on behalf of the other entities. This payment factory allows Nexans Services to have one account open in each currency country and to offer services to each entity. It opens an account in the US for USD, in London for GBP, etc. In the end, we have one balance per currency.

So, a subsidiary in France paying someone in the US now happens via the payment factory. We then reduce the external fees to these flows; internally, there are only booking flows, no financial flows between the two entities. Because we have a cash pool in place, we also save money on the interest we pay our banks.

Thanks to the new bank architecture, we are now able to pay on behalf of our entities. We are a global group, so the banks must be able to follow us wherever we are. That’s why we decided to give one currency to one bank.

In a treasurer’s way

Most of the banks are now active and around 60% of the sales of the group have been covered. The project was launched in April 2011 and in August Nexans chose its banks. The implementation part, however, was much more complicated and lasted a lot longer. Wagner adds: “The finalizing part will always be the longest one. Implementation is a process that never really ends – we keep on discovering that new changes are needed. In some countries it is very difficult to do the implementation and so in these cases it’s easier to adapt the system.”

Still, in the relationship with its banks Nexans is stronger now, which leads to a more flexible and reactive behavior from the partner banks. Wagner notes: “One of the big returns on investment of this project was the fact that we converted cross-border flows to booking flows. We will have return on this investment after four or five years.”

Zanders consultant Ruud Mullens managed a big part of the project, interpreting the client requirements and, after implementation, structuring the bank relationships too. “It was important for us to have skilled resources that could help,” says Wagner. “We didn’t have the necessary internal resources and needed someone to react to certain developments and to negotiate with the other parties involved. The team that Zanders proposed to us was really pragmatic, had a strong methodology and was able to look at the project from a treasurer’s point of view. In order to improve our treasury organization the global idea had to be clear and Zanders understood that need.”

What did Zanders do for Nexans?

• Assisted in managing the bank rationalization process
• Prepared detailed RfP document, customized to Nexans’ specific requirements
• Provided an evaluation model to validate and evaluate the answers from the banks in the selection process
• Assisted in analyzing and evaluating bank proposals
• Developed account and cash pool architecture
• Followed up contract negotiations with banks
• Helped to implement the new bank infrastructure

A transfer to a new system is usually a complicated and time-consuming process. This particularly rings true for a company like GlobalCollect, which processes hundreds of thousands of online transactions for banks all over the world on a daily basis. How did this payment service provider (PSP) tackle the complicated challenge of adopting SWIFT as its new system?

In 1994, the current GlobalCollect was set up as a division within the old TPG Post company to ensure a well-organized payment system for parcel deliveries. Back then it was dealing with offline payments, such as cash on delivery, but when digitalization took off, the postal company decided to go online with its payment services. Now, GlobalCollect is a fast-growing company, independent of TPG Post, which processes worldwide online payments for retailers operating internationally. This PSP offers them one platform so that they do not have to deal with the complexity of various foreign banks and their payment systems.

Connections and conversions

Michael Roos, vice president of merchant boarding at GlobalCollect, says that the market for PSPs has quickly become ‘professionalized’. “The industry has developed enormously over the past 10 years, also as far as legal and statutory regulations are concerned. We fall under the supervision of the Dutch central bank, De Nederlandsche Bank, and are affected by the EU’s Payment Services Directive (PSD). Companies who conduct business abroad, such as airlines or online retailers, need to receive payments from abroad. That adds to the complexity as it is a huge challenge setting up all the connections. You not only have to deal with the local banker, but also with all sorts of foreign banks.” A PSP not only has all those necessary local connections but is able to offer the client various payment methods via one point of access. “As a company you then have not only the local payment method, such as iDeal in the Netherlands, but also those in other countries where you have customers.”

Since GlobalCollect processes many millions of transactions each month, it is able to compete on price – something a single company cannot do with only several hundred transactions. Customers enjoy a more favorable rate – despite working with an intermediary – than they would with a bank. Besides dealing with the complexity of connections, GlobalCollect’s clients enjoy large-scale benefits for other services, such as currency conversion. “Collection of foreign currency can be outsourced,” Roos adds. “If you get paid in Brazilian real, which is not freely convertible, we do the conversion. Clients then have quicker access to their money in their own currency.”

New for corporates

 When GlobalCollect was starting up, it began with a few bank interfaces. “But after about 15 years we had more than 50 interfaces within an out-of-date infrastructure. In order to bring this infrastructure up to a technological standard that was market compliant, we decided that SWIFT was the best solution. But to get started we didn’t have the required know-how and manpower. So when we looked around for a company with plenty of expertise we hit on Zanders. I had spoken to Sander van Tol about three or four years ago and remembered that Zanders knew a lot about SWIFT. In the spring of 2012 I met Jill Tosi and in October the project kicked off.” Zanders taught GlobalCollect about the possibilities and impossibilities of SWIFT. “And Zanders was the right choice,” says Roos. Originally, SWIFT was a connectivity channel for banks, and since 2000 it has also become available to corporates. When GlobalCollect decided to start using SWIFT’s Alliance Lite2, a new cloud-based SWIFT communication tool, it was new to the market. Roos says: “As one of the first adopters, we were working with a completely new SWIFT system.

The interfaces particularly were new and unknown.” GlobalCollect’s reason for acquiring SWIFT was twofold. On the technical side, the number of interfaces had to be reduced. On the other hand, SWIFT had to standardize formats and the provision of information. Roos adds: “In order to be able to profit from the systems we had to have good information. Good information is standardized in IT, and so we ended up with SWIFT. The way information was shared with banks had to be standardized as much as possible. This was our starting point with a kick-off on various workflows.”

Fully-fledged tool

The challenge for GlobalCollect was mainly in connecting to banks. The old interfaces had to be replaced with new ones. Whereas SWIFT has everything standardized, it appeared that the banks did not. Roos explains: “Banks who want to connect via SWIFT each send their own technical implementation document; where one sends a single Excel-sheet with technical details, another sends a 20-page contract.” Roos noticed that SWIFT, banks, and corporations were not necessarily used to dealing with each other in this context. “Particularly outside of developed markets, the banks have not come that far yet and there is a good deal of indifference. This makes project-based work and estimation of turnaround times difficult. We approached a number of banks and looked to see which ones reacted the fastest and in the most professional way, and we started with them. This is not what you would normally do. I think we got off to a good start, but the migration path will take a number of months to complete.” The time required for testing individual connections and carrying out test cases can be very long. Roos says: “SWIFT is a fully-fledged tool and the parties used to working with it are large financial institutions. For us as a young, upcoming, dynamic industry, we really have to adapt to the banks – it’s a completely different culture.”

Change of format

With the huge amount of transactions involved, a transfer to another system is risky. “Therefore we ran the two systems in parallel during the migration,” he explains. “We also deliberately decided to link the largest parties first, leaving the legacy system running as we integrated SWIFT into the organization.” This means that a back-up is not necessary. “SWIFT is a unique system, with relatively large numbers of redundancy channels and recovery scenarios, so that it can guarantee unique processing.”

According to Zanders consultant Jill Tosi, this is because SWIFT is owned by the banks: “They have so much trust in their system that they assume responsibility for payments. SWIFT has such a robust system with minimal failure percentages, that customers can put complete trust in its information process.”

At the time of transferring to the new system, GlobalCollect had a lot of IT projects on the go. The SWIFT implementation was also part of a much larger project, Process Excellence, where several systems had to be modernized in order to meet market standards. “There was a lot of pressure on the IT department at GlobalCollect,” Tosi says. “The electronic banking systems were all stand-alone, i.e. not integrated into the daily processes. There were about 50 electronic banking systems, and someone had to log into each one separately with a different token each day. For one or two that is feasible, but 50 is too many.” And Roos adds: “The whole idea was to continue with significantly fewer interfaces – preferably one. And we are still very busy with that.”

While GlobalCollect was carrying out the migration to the new system, the banks were right in the middle of the SEPA migration. “That had consequences for the introduction of new formats within SWIFT,” Roos says. “We had to make a decision: do we go for MT940, the old standard for bank statements, or do we go for CAMT 053, the XML-successor of MT940? XML is a future-proof format but is not offered by all banks. As a consequence of SEPA, some banks will have to be migrated twice: firstly to MT940 and then to XML. An interesting aside is that where SWIFT offers the version 2.0 solution to corporations, many banks are just not ready for SWIFT connectivity with businesses. A number of large Anglo-Saxon banks have indicated that MT940 interfaces are not yet available for a direct connection to SWIFT Alliance Lite2 with corporates.”

Business as usual

The SWIFT migration to large banks is over and this year other banks will follow. After the first three banks, Zanders withdrew from the process. "It is now more like business as usual,” says Roos. "Zanders not only did the implementation, but was also responsible for the learning curve in our company. We have become self-supporting as far as SWIFT is concerned.” After the SWIFT project, Zanders also helped GlobalCollect with the selection and implementation of a new treasury management system (TMS) and a reconciliation tool. "Messages coming from SWIFT could be uploaded to our TMS straight away,” Roos says. "The same goes for our reconciliation system. If we didn’t have the standardization of the SWIFT system, it would have been much harder. In the banks’ own technical file formats there is a degree of standardization, but it’s not complete. It is clear to us that getting the standard functionality working would not have been possible without the successful implementation of SWIFT Alliance Lite2.”