High-Quality Reference Data in Demand from Treasurers
Anyone who owns a car knows how much a major repair can interrupt your daily routine. Whether you go to a mechanic or fix it yourself, it’s time consuming and – more importantly – expensive. Similarly, when a high-volume payment fails and needs a repair, it can be a major headache for a corporate treasurer. A key reason that these payments often need repairs is bad or missing reference data.
“When you’re sending a payment, you need to include certain information in that payment instruction to make sure that it goes straight through,” said Joanna Beer, business manager, initiatives for SWIFT Americas. “And when we say ‘straight through,’ that means without any need to repair or investigate that payment.”
Gregory Burns, vice president and product manager for US dollar (USD) clearing services with Bank of America Merrill Lynch, noted that many of his corporate clients have expanded internationally in recent years. As a result, BofA’s front-end applications have needed to evolve to allow those clients to make payments in the proper format. Money needs to be sent to up to 200 countries, all of which have varying requirements. Additionally, the bank’s operations units on the back end need to have access to good reference data to supplement transactions when clients don’t have the full picture.
Traditionally, the bank’s international financial institution customers have been the biggest consumers of reference data. However, in the past two years, BofA’s corporate clients’ demand for reference data has grown exponentially. Furthermore, these clients are requesting data in a different format than the banks have.
“We’re seeing corporates want to improve straight-through processing (STP) rates and cut down on their costs,” Burns said. “It is becoming more expensive for a payment to be repaired and it creates delays in settlement. How can they do that? With better reference data. So we’ve seen a lot of demand out of the corporate space for very, very detailed reference data product offerings.”
One company that is optimising its processes for obtaining reference data is multinational health insurance provider Cigna. Scott Lambert, treasury senior director for Cigna, provided an overview of his treasury operation and explained why he needs better reference data.
Lambert has 38 people in the US, two in a regional finance centre in Hong Kong, a shared service centre (SSC) in Europe that doesn’t report directly to him, and a number of finance people in the Asia-Pacific region who have treasury responsibilities but are not full-time treasury staff. “So it’s very fragmented; very decentralised,” he said. “We don’t have a single system right now where I could look at cash visibility around the world or counterparty exposure. We don’t have a single payments platform – we have one in the US but for many other countries, we’re using bank portals. The audit trails are somewhat inconsistent as well.”
Given the treasury function’s decentralised nature, Cigna is currently undergoing a three-year initiative, implementing a treasury workstation platform that it plans to use globally. It is interconnected with a bank administration platform so treasury can keep track of all of its bank accounts. “We’re also interfacing with a payments hub we used in the US that we’re planning on rolling out globally as well,” Lambert said. “With that rollout, we’re actually looking at standardised format. So for wire transfers, our plan is to use ISO20022 globally.”
The payments hub has made US payments relatively easy; it provides some checks and balances and some validation before Cigna sends out payment. “Globally it’s more of a challenge,” Lambert said. “So we signed up with SWIFT last year, and we’re using service bureaux. But our plan is to roll out our payments hub globally and do more self-service. And with that self-service, we’re going to need more robust reference data.”
Beer asked the panel about the major risks treasurers face when payments don’t go straight through. Lambert explained that Cigna is very customer-centric. “We survey clients and ask them how willing they would be to recommend Cigna,” he said. “So we consider making payments a basic functionality that we should be able to do right every time.”
Additionally, as a large global health insurance company, Cigna has to deal with certain statutory regulations. “When I receive a claim payment, once I adjudicate it, I have a certain amount of time to make that payment to the provider,” said Lambert. “If I don’t, then I have to pay late payment interest. So it’s really important for us to get the payment right the first time.”