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Achieving the Next Level in Streamlined Connectivity

Microsoft was a trailblazer for SWIFT Corporate Access during the early years, and has continued its pioneering approach by being the first corporate globally to adopt the ISO 20022 XML standard. The initial objective was to migrate to version 2 for bank statement reporting and subsequently expand to other interfaces using the XML standard. Not only has Microsoft achieved considerable quantitative and qualitative results, but the company is once more setting a precedent for other corporations seeking to manage their bank risk, achieve greater visibility and control over cash, and reduce the cost and complexity of bank connectivity.

Goals and challenges

In 2004, the treasury team at Microsoft was one of the first globally to deploy SWIFTNet for electronic bank statement reporting. With 84 bank relationships and around 900 bank accounts, this was a highly successful initiative that provided high-level visibility over 99% of cash globally. However, the credit crisis and geo-political risk that emerged has added a new dimension to risk. No longer was it sufficient simply to have visibility over cash: the company needed to be able to transfer money between banks quickly, manage counterparty risk more effectively and achieve greater efficiency in financial processing. Microsoft recognised that relying on proprietary bank technology was an impediment to these efforts. Furthermore, treasury needed enhanced data that would permit automatic payables and receivables reconciliation, auto-clearing and auto-posting.

Consequently, Microsoft embarked on a project with a view to enhancing its use of SWIFTNet and the quality and consistency of data that was exchanged. The objectives for this project combined both business and IT issues, as follows:

• Track balances in near-time/real-time with better control of the funds transfer process

• Reduce reliance on third-party solutions & applications through a secure, standardised format & single data pipe

• Reduce IT spend on maintaining various communication channels with banks

• Leverage Microsoft technology

• Manage an increasing number of bank accounts without increasing resources whilst obtaining rich data for reconciliation

• Manage counterparty risk by centralising financial processes through a bank-agnostic platform

Creating a solution

Microsoft identified ISO 20022 Cash Management v2 messages as the right format to achieve these objectives, even though this had not yet been implemented in other corporations. ISO 20022 v2 delivered the quality and granularity of data that treasury required, using SWIFTNet as the communication channel. Treasury approached its primary banking providers to discuss the feasibility of pioneering ISO 20022 v2. Bank of America Merrill Lynch committed to dedicating executive support, technical and business resources to the project both to support Microsoft’s business requirements and to build a lasting solution other companies could leverage.

Microsoft embarked on a project with a view to enhancing its use of SWIFTNet and the quality and consistency of data that was exchanged.

The first project phase was initiated in March 2010 and completed in April 2011 when Microsoft went live with ISO 20022 version 2-based bank statements delivered over SWIFTNet, which has since been followed by a related payments project. Over 500 accounts have already been migrated to the new infrastructure, representing over 75% of the company’s US-based cash.

As a pioneer in implementing ISO 20022 v2, it was important for both Microsoft and its primary banking providers to develop a solution that would benefit not only Microsoft, but also other multi-banked corporations that are seeking to achieve visibility and control over cash. Consequently, they aimed to design a best practice approach that had universal applicability. For example, there were challenges in implementing an ISO 20022 v2 without a defined standard or guide for the use of individual fields. In addition, banks are at different levels of maturity with SWIFT Corporate Access and XML, which had the potential to hamper straight-through processing (STP) efforts.

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