Like many large corporates, Danone Group has pursued the aim of centralising its treasury activities over many years. With a view to developing a payment factory solution, Danone was one of the first companies to centralise its payments processes in the 1990s. Adapting to the availability of new technology, Danone later became an early adopter of SWIFTNet access with BNP Paribas. The company continues to be at the forefront of the latest developments in the payments world through its involvement in pilot tests ranging from the use of new XML standards to the adoption of standardised personal digital signatures.
Groupe Danone – Case study
Atika Scott de Martinville
Treasury Information Systems Manager
Atika Scott de Martinville has been in charge of Danone Group Treasury’s information systems for the last three years. Previously she was a consultant with Eurogroup Consulting, managing IS projects for a number of corporates in the defence, energy and other sectors. Atika holds a PhD in applied mathematics from Rennes University.
Groupe DANONE is a Fortune 500 company and one of the world’s leading healthy food companies. It aims to bring health through food and beverage products to as many people as possible. Groupe DANONE products are present in all five continents and in over 120 countries. Groupe DANONE is the world leader in fresh dairy products and the world’s second largest producer of bottled water. In 2006, Groupe DANONE posted €14 billion in net sales.
Danone operates a centralised treasury based in Paris but maintains treasury personnel in each business unit. Five regional treasurers, each responsible for one of Danone’s five business regions, report to one international treasurer at the group level. Group treasury has centralised most of Danone‘s payment activity.
Centralising cross-border payments
The centralisation of payments is an ongoing project at Danone which started in 1995. Atika Scott, Treasury Manager at Danone, is responsible for the treasury department’s information systems and related projects. She explains that initially the company targeted cross-border payments in its centralisation effort: “At first there was a need to centralise foreign payments due to the complexity that was involved for our business units in managing a large number of accounts and currencies in order to pay their suppliers.” Using CashPooler, a web-based payment factory software provided by the French software house Datalog Finance, group treasury collects all cross-border payment information from its subsidiaries and makes payments ‘on behalf of’, debiting the accounts of Danone Finance International.
In addition, CashPooler has reduced the complexity of banking formats and the number of electronic banking systems that Danone needed to maintain by providing one format for all payments.
Danone and SWIFTNet
The next level of centralisation was made possible when SWIFT opened its network to corporates in 2001 and provided the opportunity for companies to link to one or more of their banks using individual interfaces. Danone was looking for a bank to process all euro payments in a standardised way and the company opted for BNP Paribas to provide this service accessed through a SWIFT connection.
“BNP Paribas is one of our main relationship banks. Due to its presence in France and other countries in the Eurozone the decision was made to use BNP Paribas for euro payments,” says Scott.
In 2004, Danone became a member of a BNP Paribas’ SWIFT Member Administered Closed User Group (MA-CUG) and centralised all its cross-border euro payments through the bank. As a result, each of Danone’s suppliers invoicing in euros is now paid through BNP Paribas. Danone sends a payment file to BNP Paribas using SWIFTNet, SWIFT’s advanced IP-based messaging system.
According to Atika Scott one of the benefits of a connection using SWIFT, in addition to cost savings and improved straight-through processing, is that Danone could change bank relationships more readily and easily than in the past. “Also SWIFTNet enables us to embark on many other projects that were not part of the initial scope. We are currently in a project which aims to centralise the bank communication of domestic payments. This means that when a business unit in Italy, for example, wants to pay a supplier in Italy in the local currency using the local format, they use our tools and they use SWIFTNet,” says Scott.
The fact that Danone banks in Italy with BNL, which is a part of the BNP Paribas Group, also makes it easier to implement such a solution.
Switching to a service bureau
When Danone established a connection to the SWIFT network, the company chose a direct connection due to the lack of viable alternatives. Some other companies have since used third-party bureau to connect to the SWIFT network. Direct access requires that Danone’s systems are connected to SWIFT via a client gateway and host adaptor. This necessary infrastructure needs to be maintained in-house and also secured 24 hours a day.
Danone has now decided to change its connection method to an indirect connection through a service bureau, making the hardware and human resources needed to maintain the SWIFT connection redundant.
As Atika Scott explains, “Maintaining a connection to SWIFT is not part of Danone’s core business and it needs a real expert group of people to manage the necessary hardware and software. We do not want to make the investments that are needed, for example in terms of upgrade projects, which are really not the business of a corporate. We just want to be users.”
The company chose Taolink as the service bureau which will offer Danone the necessary infrastructure to communicate with its banks via SWIFTNet. “We wanted BNP Paribas as one of our banks to be involved in our SWIFTNet activity and, as we already have a service contract and Taolink is linked to BNP Paribas, we made this choice.”
Enhanced security through a personal digital signature
From the start, ensuring the security of the payments process was one of Danone’s main objectives in centralising the payment activity. Currently payments are collected and signed centrally at the headquarters. Using SWIFTNet these payments will authenticate Danone as the sender but there is currently no standardised way of identifying the individual who sent the SWIFT message. “As there is no personal signature, we have put in place strong internal controls in order to make our internal processes secure. But we would like to improve on that and therefore we have participated in pilot tests using personal digital signatures.”
The pilot project, undertaken by Danone, BNP Paribas, Citi, IdenTrust and Datalog, showed that it is possible to use a second personal digital signature in addition to SWIFT’s PKI security to identify the sender of a SWIFTNet FileAct message. BNP Paribas has since declared that the bank has joined the IdenTrust network to provide its corporate banking customers with digital certificates to enable personal digital signatures to be applied to individual payment files sent over SWIFTNet FileAct. FileAct is the SWIFTNet service that allows secure and reliable transfer of files and is typically used to exchange batches of structured financial messages and large reports.
For Scott interoperability is at the heart of the project. “We will use this technology as soon as our requirements are met. We need banks to talk to each other and adopt the same formats, because we want a personal signature that can be accepted by all banks throughout the world.”
Danone “payment on behalf of” centralized structure : one euro disbursement account held in BNP Paribas Paris for cross border Euro Supplier Payments
Decentralised organisation for domestic payments : self-governing subsidiaries
Subsidiaries handle their payments through Datalog CashPooler which enables also functionalities such as internal validation and personal electronic signature. In a next step, files sent to BNP Paribas could be signed through CashPooler with an Identrust electronic certificate
Supplier Cross border payments and Supplier Domestic Payments are sent to BNP Paribas through FILE ACT via the BNP Paribas’s SWIFTNet Service Bureau
BNP Paribas receives files containing MT 101 or local formats for some payments; reporting are sent by BNP Paribas in SWIFT format or in local format for some countries.
BNP Paribas and DataLog Finance’s involvement
SWIFTNet Product Manager
Imad Ben Mariem
Stephanie Niemi, SWIFTNet Product Manager at BNP Paribas, and Imad Ben Mariem, Director at DataLog Finance, discuss their involvement in Danone’s ongoing payment centralisation process and outline its future stages, including the move to a SWIFTNet service bureau.
Both BNP Paribas and DataLog Finance have been part of Danone’s effort to centralise its payments processes. What kind of payment solutions does BNP Paribas provide to Danone?
Stéphanie Niemi: Danone chose BNP Paribas three years ago to provide a payment factory solution. First we implemented treasury credit transfers through the SWIFTNet FIN messaging service.
We then developed a solution for Danone‘s cross-border supplier payments. Danone has one euro disbursement account held in Paris and maintains a structure whereby payments are made centrally ‘on behalf of’ Danone’s subsidiaries.
In a second step we launched a solution for domestic payments in France which includes the local instrument LCR (bills of exchange) and direct debits. We are also currently installing the commercial credit transfer VCOM. In addition we have developed a solution for domestic supplier payments in Switzerland based on SWIFT’s MT 101 payment message format.
And finally we are installing a solution for domestic payments in Italy using the local formats for credit transfers and direct debits. Danone is now using FileAct more and more, which is better adapted to sending mass payment files. We hope to continue this work in other countries and are currently in talks with Danone about this.
What was DataLog’s contribution? I believe you have been working with Danone for 10 years now?
Imad Ben Mariem: Yes, in fact Danone was DataLog’s first customer when the company was founded in 1997. At the time Danone started to use CashPooler, our payment factory solution, in a client server version.
Later Danone added other DataLog products like CashReport and CashNetting and finally a web-based version of CashPooler, which Danone continues to use today and which is also connected to BNP Paribas via SWIFTNet FileAct.
How is CashPooler used within the company?
Imad Ben Mariem: CashPooler is a web-based system that allows all users of the group, not only the treasury users, to handle their payments and other tasks like the import of bank statements.
Generally many hundreds of users are connected to CashPooler and in the case of Danone there are between 600 and 700 users connected to CashPooler in more than 60 countries.
CashPooler is connected to the ERP and payroll systems or any other applications that need to exchange payment information. As CashPooler is connected to all applications in the company, users enter the web-based interface of CashPooler to manage payment related tasks – for example, to validate, view or sign payments or to view account statements.
The software creates a single point from which all communication between the corporate and its banks is executed.
Stéphanie Niemi: This is also the reason why, at the same time, we have developed our relationship with DataLog. We have many customers in common and are increasingly working together. We can also mention, for example, the current XML development for SEPA credit transfers and other payments.
BNP Paribas strongly supports the use of XML messages as it provides a cost-efficient and standardised means of exchanging detailed information between corporates and banks. BNP Paribas is therefore involved in the pilot testing with SWIFT, where we are indeed all working together.
The bank is developing the format, DataLog is adapting its tool and Danone will test the XML formats together with DataLog and BNP Paribas, so it is really a combined effort.
When should a company consider a SWIFTNet connection like Danone did?
Imad Ben Mariem: If you would like to implement a solution like Danone based on one server and one connection you will need to exchange information with a number of banks in several countries. If you only need to send information to a number of banks in one country, normally you will not need SWIFTNet, as it requires only one communication protocol – the one for that particular country. However, if you want to deal with banks in several countries it will be necessary to install a solution for each country and as a result a company like Danone would require 5 to 10 bank communication solutions. This is when it would be more cost-effective to use SWIFTNet instead of maintaining 5 or 10 electronic banking systems.
So if a company needs to exchange information with banks in several countries it should consider a SWIFTNet connection.
Stéphanie Niemi: SWIFTNet can also be used for different business transactions. This means that you can use SWIFTNet not only for all your cash management related messages but also in other areas such as foreign exchange, securities and trading. This is really the substance of this solution and we are developing this aspect in our offering.
What does BNP Paribas’ SWIFTNet offering look like?
Stéphanie Niemi: BNP Paribas was an early adopter of the SWIFTNet technology. We opened the first MA-CUG in 2001 and we are a prominent member of the SWIFT community. For our SWIFTNet solution we have developed a strong offer for cash management. We offer FIN and FileAct services as well as other services built around treasury messages or foreign exchange operations, trading and securities. In addition, last year we launched a SWIFTNet service bureau and we really want to be strongly positioned in that offer. It is our aim to reduce the technical complexity of SWIFTNet access with our service bureau Taolink. We want to make it easier for our customers to connect to the SWIFT network and to standardise SWIFTNet access for all our corporate clients. And finally we are currently launching a solution dedicated to mid-cap corporates in a package which includes a FileAct offer plus the service bureau connectivity.
Where do you offer these services in terms of regional coverage?
Stéphanie Niemi: We have a centralised organisation with a SWIFTNet service platform based in Paris and there are more than 20 BNP Paribas territories connected to this platform. Of course we have also concluded MT 101 agreements with third-party banks and we have around 100 of these MT 101 agreements now.
Danone started to use a direct SWIFT connection relatively early?
Stéphanie Niemi: This is correct, at the time Danone chose a direct SWIFT connection because it was the only available solution to them. What is really significant is that they are now changing to an indirect connection using BNP Paribas’ SWIFTNet service bureau, Taolink.
Is there a trend towards the use of service bureaus?
Stéphanie Niemi: More and more companies are opting for a SWIFTNet service bureau and only companies that view the SWIFT connection as strategic will establish a direct connection. I believe SWIFT stated that two out of three companies are choosing an indirect connection when they are subscribing to SWIFT. The use of a SWIFTNet service bureau simplifies the connection to SWIFT and will minimise the risk, as you do not need any SWIFT experts in-house and it is not necessary to maintain the hardware and software involved. Generally it is also cheaper.
How would you describe the payments centralisation process at Danone?
Imad Ben Mariem: Danone was one of the first companies in the world that decided to centralise their payments and to make payments as we call it ‘on behalf of‘ (its subsidiaries). Using payments ‘on behalf of’ in connection with a solution like CashPooler and a banking solution like BNP Paribas’ will allow a company to convert cross-border payments into domestic payments. This in turn will decrease bank fees for cross-border payments or FX management. In the case of Danone the savings made with this solution amortised the investment in the project in less than one year.
Stéphanie Niemi: Danone’s payment factory solution is also developing further, moving from a direct connection to an indirect one and following the centralisation of cross-border payments with a focus on centralising domestic payments. In the future there may also be further enhancements with the implementation of a personalised digital signature. Danone’s payment factory solution is evolving step by step.
You mentioned the personal digital signature. What is behind this project?
Stéphanie Niemi: It is already possible to sign your files in FileAct with a personal digital signature based on a French domestic solution, which is accepted by different French banks. This is already working today and it is working well. The demand from French customers like Danone is that, while there is a domestic solution in France, there are many different solutions in other countries involving many different certificates. What these customers would like to see is a completely interoperable solution using the same certificate for every bank in every country.
BNP Paribas is working with IdenTrust on the development of this solution. In 2006 we conducted a proof-of-concept pilot test together with Danone, DataLog, Citi and IdenTrust. As part of this test BNP Paribas received a file signed with a Citibank certificate and sent by Danone using the DataLog’s CashPooler signature module. This means the technology is there and working. We now need to develop the solution by extending the community. BNP Paribas has announced that in the future it will issue IdenTrust certificates and the solution is under implementation.