AP Hill: No Quick Fix for Treasury

For treasury technology to work, users have to create a bandwagon. So far, it's more like a go-cart.

Corporate treasurers have long dreamed of a seamless payment solution linking customers and suppliers around the world. Instead, they have faced the reality of incompatible, and proprietary, services from banks.

That could have changed with the arrival last year of RosettaNet, an open-source, Web-based XML platform for trading among information technology, electronics, and semiconductor manufacturing companies. Promising to provide an industry standard in a range of business processes, RosettaNet is now in use in more than 400 companies in North America, Asia, and, to a lesser degree, Europe. Its users in Asia range from Taiwanese giants such as Taiwan Semiconductor Manufacturing and United Microelectronics to obscure suppliers such as Xiao Tong Networking Technology of China.

Its adoption, however, is largely due to its upstream capabilities, such as collaborative planning and ordering, and less on the downstream, such as settlement.

No wonder industry leaders are finding limited advantages to becoming first movers in linking to RosettaNet, as Nokia Treasury Services, the treasury arm of the Finnish mobile phone giant, revealed in a discussion paper released last month. Nokia’s frustration is understandable. After all, it intends to buy 40 percent of its purchasing volume this year through RosettaNet.

David Blair, Nokia’s Singapore-based treasury director for Asia, says Nokia still checks payments from smaller customers “the old-fashioned way” — manually. In fact, self-reconciliation of payments is one of the last few missing pieces before Nokia fully automates treasury management processes.

The large corporates using RosettaNet are having “good success in auto-reconciling,” says Nokia, because the volume of business between each of them is large enough to justify advanced cash-management systems that can handle E-settlement across different service providers. “We can [discipline] the banks not to steal too much in fees and value days on our payments,” according to the Nokia paper. “The success rate will drop as fast as we generalize integrating remittance advices through the community. This is why we are eager to develop more tightly integrated E-settlement solutions,” it says. The theft, of course, refers to the number of days a client’s payment remains floating with the bank while Nokia identifies whom it came from. “The money remains idle in the banking system — ‘idle’ for the corporates because the bank is profiting handsomely from it,” says the report.

Reconciling the Difference

This is how self-reconciliation (3C6 in Rosetta-speak) works. A vendor issues an invoice (3C3) or a billing statement (3C5) to a customer via RosettaNet. A billing statement covers all monetary amounts due over a period of time, whereas an invoice notification is sent only on an event-by-event basis. Using the same system, the customer then informs the vendor of when the payments are to be made. (If the payment is not anticipated, the payee performs a manual process to handle the discrepancy.)

Upon remittance through a bank, RosettaNet allows the customer to send a remittance advice to a payee. The advice specifies account reconciliation information, such as amount, invoice numbers being paid for, and bank transaction reference numbers. Because RosettaNet and the bank service could link directly to all parties’ enterprise resource management systems, this should be a painless process. However, not all banking systems’ configurations are the same, and most banks offer payment with reconciliation as a proprietary service. As such, RosettaNet pioneers such as Nokia are eager for an industry standard. “Banks like Citibank offer proprietary solutions which we have rejected as a matter of principle,” says the Nokia paper.

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