Published: September 06, 2013
Philips has been a pioneer in cash, treasury and payments technology for many years, being one of the first companies to implement a centralised payments factory. The theme of innovation has continued with the implementation of a central SAP infrastructure and SWIFT for multi-bank connectivity. In this article, Gary Throup, Vice President, Treasury Control and Operations at Philips outlines some of the drivers, experiences and outcomes of the company’s SWIFT implementation.
At Philips, we have undergone an evolutionary journey in developing and optimising our treasury and payments technology environment. One such development was the implementation of SAP Treasury, which forms the hub of our financial operations. At that point, although SWIFT corporate access was available, it was at an earlier stage in its development, so we implemented host-to-host connections between SAP and three of our major counterparty banks; however, the intention was ultimately to move to a single bank communications platform. In particular, we recognised the benefits of a bank-neutral solution that would enable us to communicate with a large number of banks, which is impractical using host-to-host connections.
In 2010, we demerged the TV business from the Philips group, so its financial operations needed to be detached from those of the rest of the group. As a centralised treasury function with a high degree of integration, this was challenging but also presented an opportunity to further enhance our treasury infrastructure overall. We took a phased approach to separating the demerged entities: initially, the existing Philips infrastructure would be used before operating on a standalone basis. We therefore needed to set up a new global payments and cash management solution for the new business.
We made the decision to set up SWIFT connectivity including ISO 20022 formats initially for the spin-off business, effectively as a ‘pilot’ project for the wider Philips group, together with a new account structure across more than 25 countries. We discussed connectivity options with other corporations and based on their experiences, we made the decision to connect to SWIFT indirectly via a service bureau to avoid having to maintain the SWIFT infrastructure ourselves.
We issued a request for proposal (RFP) to potential service bureaus, and considered a number of providers. Ultimately, we decided to appoint Fundtech’s service bureau, BBP based in Switzerland based on their experience with comparable organisations, comprehensive and competitive offering and positive feedback from existing clients.
We implemented SWIFT for our spin-off TV business first, and using the experience we gained during this project, we moved our payments factory to SWIFT, a process we completed during 2012. This year, we have migrated our treasury payments, and finally we will transfer cash management to SWIFT, at which point our central business functions will be fully SWIFT-enabled.
In addition to migrating to SWIFT in our central departments, we are also seeking to connect our countries that are not included in the payments factory for local payments to our central SAP installation and SWIFT. We have already gone live in some countries, and Brazil is in progress, which we expect to be completed by end 2013 with more to follow.
Having successfully split out our TV onto a separate, efficient and secure treasury, cash and payments management infrastructure, we are now undertaking the same process for another part of the business. Having built up considerable skills and experience in implementing new instances of ERP and SWIFT, we anticipate that the new project will be completed far more rapidly, minimising disruption to our treasury activities.
In addition, however, we have achieved considerable advantages for the Philips group as a whole. SWIFT offers a robust, scalable and bank-neutral solution for bank communications that will enable us to retire our host-to-host solutions and the various web-based banking systems that we have used historically.[[[PAGE]]]
Implementing ISO 20022 formats has brought some challenges, as not all banks are yet experienced with the standard, particularly in emerging regions. Smaller banks also may see some value in maintaining proprietary formats, and it takes time to convince people that standard communication formats offer a win-win situation for all industry participants. However, this investment has paid off, and by successfully implementing ISO 20022 formats, we have been able to standardise processes and minimise the resources required to convert formats, which is labour-intensive and risks error or loss of information as data is exchanged between systems. Furthermore we have been able to meet the requirements for SEPA payment instruments which ensures that we are compliant with the SEPA deadline in February 2014. In addition to converting local credit transfers to SEPA Credit Transfers, we have also migrated local direct debits to the SEPA Direct Debit scheme.
Looking ahead, we will continue our global rollout of SWIFT, and ideally extend the scope of our payments factory into more challenging countries such as Brazil and China. The payments factory already operates on a payments-on-behalf-of (POBO) basis, so there are considerable efficiencies by bringing as much as of the company on board as possible. Implementing SWIFT has been an important step in our ongoing journey towards treasury, cash and payments optimisation, and we will be exploring how we can further leverage our SWIFT infrastructure by expanding the range of services that we access, such as increasing the number of bank statements that we collect through SWIFT, but we see considerable opportunities in the future.
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