A look back at Citi’sofferings in the summer of 1996.
Considering mass collection woes continuing under SEPA (see here), we looked at solutions offered by Citi in our July 22, 1996 issue of International Treasurer, detailing the interfaces and workarounds required pre-SEPA. For Citi at the time, this was part of a shift in focus from mere transaction processing services to providing end-to-end transaction solutions that integrated treasury with commercial AP and AR. This trend of evolving treasury center structures to include centralized payment and collection “factories” and crossing over into Shared Service Centers also continues.
International Mass Payment
Without universal standards, the key to providing an automated electronic interface is found in a bank’s capability to process asingle file containing check, wire transfer, and ACH-type payment instructions.
At the time, Citi offered an International Mass Payment (IMP) service. With IMP, Citi used proprietary standards to format theinformation—making up for the fact that there was no single European standard for each payment type. With corporates increasingly making use of standards based on EDIFACT and related international EDI standards, which Citi was amongthe first global banks to support, the task got easier.
Still for such an integrated service to work, the customer had to be able to generate from the accounting package a pre-formatted file with instructions containing a “reasonable” degree of payment data.
Inpractical terms, this means setting up fields in your accounting system’spayables supplier database, which will contain the ABA-equivalent bank codesfor all the relevant recipient banks across Europe. With this information inplace, Citibank can set up an interface that will automatically generate adisbursement file to transmit via Citibanking whenever its client runs accountspayable.
Focus on the collections side
Then as now the greaterchallenge was on improving the collections side.Here again, Citi used aproprietary approach to collect the relevant information from the variety ofpayment methods used across Europe and provide customers a file to update theirAR systems. As with the AP side, as more companies moved to payments usingstandardized EDI formats the task of providing a single collections interface wouldget easier.
This proceeded back thenon a sector basis. For example, Citi described success working with clients incertain industries (e.g., telecommunications) to repackage their businessofferings to facilitate EDI-enabled centralized collections.
Further as ChrisRobinson, then solutions manager for Citi’s global cash management servicesgroup in London noted:
“The ‘state-of-the-art’ [at that time] is using direct debit todirectly debit out payments from the A/R system” … For example, Citibank will takethe EDI direct debit instructions in the standard DIRDEB EDI-format directly fromthe A/R system, translate this into the local ACH format to debit the customer’saccount, and then provide a single file of the rejected items to the supplier. Thesuppler can automatically reconcile their A/P items because each one has areference number which can be matched up against the rejected items returned. “Oneof our customers has just moved up to 61% of their receivables across theirEuropean business to direct debit.”
It is probably equallytrue today that full automation will not work for everyone. However, over time,the standardization of payment formats will make international payment/collectionsinterfaces available to an increasing array of companies—and without having torely on proprietary bank solutions. Mandates like SEPA can help this along, butthey also mean all these companies need to help pay for such service.