Integrating logistical and financial processes

Case RosettaNet

Sami ToivonenSami ToivonenCash Management Cash Management ConsultantConsultantNordea Corporate Banking DivisionNordea Corporate Banking Division

About Nordea Group

The largest financial services group in the Nordic region with €262 billion in total assets and 29,140 personnelA world-leading Internet banking and e-commerce operation with 3.9 million customersThe largest customer base of any financial services group in the region– 9,6 million personal customers– 930,000 corporate customers

A leading asset manager in the Nordic financial market with €105 billion under managementThe most comprehensive distribution network in the region including 1,200 branch offices

Riga

Vilnius

Tallinn

Helsinki

Luxemburg

StockholmSt Petersburg

Tartu

GdanskGdynia

Frankfurt

Berlin

Hamburg

Radom

Copenhagen

Oslo

Nation-wide Branch Network

Filial or subsidiary

Associate Bank

Moskva

Bergen

The hot topic of today’s financial industry

“Underlining the challenge for global corporates like Coca-Cola, which managed its global business using nine separate treasury systems to interface to the banks … needed to pull information from these systems into its enterprise management and accounting software, a process that was largely inefficient”

David Taggart, vice president and treasurer, Coca-Cola

“…estimated EUR 580 billion in trapped capital as a result of the financial and logistical supply chains operating inefficiently”

“This is the time that the banking industry can really make a difference … by paying attention to the supply chain”

Anne Cairns, head of working capital, ABN AMRO

Current situation in international payments

1. The seller must manually reconcile accounts receivables due to remittance information lost in cross-border payments

2. Payment cycle time creates uncertainty of available funds and complicates treasury planning

3. Buyer risk exists as no confirmation of payment can be given

Financial actions separate from logistical operations

Buyer risk,Labour intensive,

3-5 days uncertainty

SellerBuyer

Costs 2,7% of turnover*

Payment

Paymentinstruction

Advice of incoming payment

Buyer’s bank

Seller’s bank

*) Killen & Associates, 2002

RosettaNet Payment Milestone Program

RosettaNet and leading banks started a development program for integrated payments to remove inefficiencies in liquidity management and transactions

Five key RosettaNet member companies committed to using the standard in their strategic procurement business

www.rosettanet.org/payment

Founding members of integrated payments team

Result: global XML standard for payments

International standard for payments– The SWIFT standards for interbank communication will be extended to

cover messaging between banks and their customers

– Global multibank methods simplify the operations of large corporates across regions (centralized payment factory)

– International relay of payment reference information is made possible

– The bank will generate the needed payment messages based on a single XML file

Communication interface supporting the needs of the industry– Utilization of RosettaNet RNIF-interface in banking as well as supply chain

communication

– Alternative to local security protocols

Example of current local solutionDeliverables Benefits

Paymenttracking

Internationaltransactionreference

Paymentassurance

Multibanking liquidity

management

Integratedfinance

Risk reduction

Automated reconciliation

Process efficiencies and new fi services

Global standard Elimination of local standards

RNIF interface Unified infrastructure

PATU identification,

proprietary X.25

LMP, LUM2, TITO, EDIFACT

Preliminary info incoming pmts

(proprietary)

Corporate-to-Bank XML Message Flow

SellerBuyer

2. Copy reference

3. Deliver reference

MT 103 Existing

SWIFT process

MT940/2

orXML

Corporate to bank process

XML C2B

4. Deliver reference

1. Create reference

XML scheme specific

Rosetta or proprietary process

5. Match references

RosettaNet order-delivery process

Halton

RosettaNet

Partner

Rullaava ennuste 3 kk,sitoutuminen osaan

ennusteesta

Toimituskyky,hinnanmuutokset

Varastokoko, tilauskoot

Lähetä SBI

Kysynnänläpinäkyvyysvuositasolla

Ennusteet noteerattu OK kapasiteetivaraukset,Varastoinnit

Varastosaldot,puskurivarasto

Kuittaus

PIP 4A1

Tarjouskysely

Tarjous

Tilaus

Tilausvahvistus

Vastaanotto

Toimitusaikavalvonta

Tilausvahvistuksenvastaanotto

Enakkotieto

Tarkista lasku

Maksa

Kohdistareskontraan

PIP 4A1

PIP 4A5

PIP 3A2

PIP 4A5PIP 4C1

PIP 3A1

Vastaanotto

PIP 3A2

PIP 3A4

PIP 3C7

PIP 3C6

Toimitusaikaseuranta

Toimitus

PIP 3A7muutosvahvistus

Halton - Partner Rajapintaprosessit

PIP 3A2

PIP 3A4

Valmistus

PIP 3B2

PIP 3A9

PIP 4A5

PIP 3A8muutostilaus

PIP 3A8

PIP 4B2

Kuittaus,Investoinnit

Informaatio uusistatuotteista, kuittaus

PIP 2A1

PIP 3C1

VMI

PIP 4C1

Lähtevä lasku/ URI

Maksajanpankki

SaajanPankki

Saapuvamaksu / URI

Maksun info /URI

Traditional RosettaNet Process Payment and Finance Process

Buyer informs seller of material usage according to the principles of Vendor Managed Inventory. REF lists the used materials.

Self Billing payment process

Buyer

Communicationwith RosettaNet

PIPs

Seller

REF

Send SBIReceive goods

Check SBI

PIP 3C7

The payment initiation includes URI referencenumber, which is also copied to the seller as preliminary information.

Self Billing payment process

Buyer

Communicationwith RosettaNet

PIPs

Seller

Advanceinformation

InitiatePayment

Buyer’sbank

Payments, XML, RNIF, URI

PIP 3C6URI & REF

REF

Send SBIReceive goods

Check SBI

PIP 3C7

Banks relay the transaction and the URI is presented to the seller as a part of the balancereport.

Self Billing payment process

Buyer

Communicationwith RosettaNet

PIPs

Seller Seller’sBank

InterbankPayment

URI

SWIFT Standard

Statement, Credit Advice

URI

Advanceinformation

InitiatePayment

Buyer’sbank

Payments, XML, RNIF, URI

PIP 3C6URI & REF

REF

Send SBIReceive goods

Check SBI

PIP 3C7

Self Billing payment process The references are matched and the payment is booked.

Buyer

Communicationwith RosettaNet

PIPs

Seller Seller’sBank

InterbankPayment

URI

SWIFT Standard

Statement, Credit Advice

URIMatch URIs & REFs and reconcile

Advanceinformation

InitiatePayment

Buyer’sbank

Payments, XML, RNIF, URI

PIP 3C6URI & REF

REF

Send SBIReceive goods

Check SBI

PIP 3C7

In the future

Standardized XML account statement

Financing linked with the supply chain

Global tracking of payment status

Multibank liquidity management

Centralized incoming payments

…

Other quotes

“TeliaSonera as a forerunner of electric billing and payment will benefit from this money transfer automation in several ways. We get improved quality and efficiency in our own payment process.”

Niklas Sonkin, Senior Vice President, Marketing, products and services of TeliaSonera

“The new payment initiative demonstrates the extension of the RosettaNet standard into new, e-business process areas, across multiple industries.”

Jennifer Hamilton, RosettaNet President and CEO

orderconfirmation invoice payment

initiationpaymentreceipt

C2B XML value added services

order

C2B XMLPayment

Pre-Advice?

Finance(factoring)

Paymentassurance,quarantees

Format support

Format support,

Reporting services

Bank-tobank

carriage

Documentcarriage throughFileAct

Local andgatewaypaymentservices

SWIFT tocoordinate

Local andgatewaypaymentservices

NordeaFinancescheme

plan

Feasibilitystudy

SWIFT tocoordinate

RN 3C6 RN 3C6 Finvoice,RN 3C7

C2B XMLpaymentInitiation

C2B XMLCredit advice,

Statement

Message standard

Value addedservice

Nordea actions