Photo of Andrew Wyres and Shona Blackmore, Carnival UK and Clifford Lucas, Bank of America Merrill Lynch.

The treasury team at Carnival took the bold decision to suspend a struggling payments project and start afresh. Exploring how they could apply emerging technology to an age-old challenge in their industry, they selected a new payments rail developed by a financial technology company.

Disrupting traditional payment channels

The challenge

Carnival’s payroll needs are particularly complex. As the world’s largest cruise company with a fleet of ships visiting over 700 ports worldwide, Carnival’s crew is as diverse as its itineraries.

The dynamic and exotic nature of its operations, with staff from 76 countries, proved difficult, as most expect their salaries to be paid into bank accounts in their home nations. Payments via cash on board or costly cross-border wire transfers were commonplace.

The company also had nearly £150m equivalent annually suspended in clearing float and incurred lifting fees and FX spread across the clearing cycle. Cleaning up its payroll process would therefore also deliver significant organisational efficiencies.

The solution

A previous attempt to solve the problem, working with a global bank, had run into challenges before the project got off the ground. But in the 18 months that the process had taken, new technologies emerged that held promise.

After going through a second invitation to tender process, the treasury team turned to Bank of America Merrill Lynch (BofAML) and, in particular, to its relationship with the Earthport payment network.

Under the resulting solution, BofAML’s cross-currency ACH service, Global Bulk FX, now takes a single file from Carnival’s outsourced payroll provider, Cintra, and automatically routes payments through the most efficient channel, whether local clearing, SEPA or wire transfer. Carnival chose to settle from their primary currency accounts in EUR, GBP and USD.

Crucially, the Earthport system means that payments to local bank accounts are routed through the domestic clearing system in 54 out of 76 countries, avoiding correspondent banking charges and ensuring employees get the full amount they are expecting – many previously had an average estimated US$20 in fees deducted every time they received their wages.

Additionally, Carnival is able to benefit from the case management tool within the Global Bulk FX portal that has an audit trail function with traceable and unique Service Request number. This enables more efficient management of exceptions in a secured environment, as opposed to multiple exchanges of amendments over email, especially given the new General Data Protection Regulation (GDPR).

Today, the 6,000+ salary payments made by Carnival every month are now made faster, with less administrative overheads, fewer errors and at much lower cost.

Best practice and innovation

This is an excellent early example of the benefits to be gained from digital disruption of the traditional routes for international payments. The previous Carnival payroll process used a correspondent banking system that had been essentially unchanged for decades.

Using the BofAML/Earthport solution, market specific validation is applied to all transactions, ensuring payments are processed at the highest rates of straight through processing (STP). This minimises exceptions and offers consistent, scalable delivery.

The result is an elegant and efficient digital-era answer to the problem of making thousands of payments to dozens of countries in multiple currencies while avoiding the slow pace and high, unpredictable costs of the correspondent banking network.

Key benefits

• Simplified the payment process.
• Migrated 95% of its in-scope payroll payments to low-value clearings.
• Saved Carnival many hours of administrative operations on each payroll run.
• Reduced the number of errors in payroll and increased STP.
• Freed up millions previously trapped in processing/clearing float.
• Allowed employees to receive their full salary payment, without lifting fee deductions, in their home nation account and denomination – demonstrating goodwill and improving employee satisfaction.

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