AkzoNobel is the largest global paints and coatings company as well as the leading producer of specialty chemicals
AkzoNobel is the largest global paints and coatings company and is a leading producer of specialty chemicals. Many of its brands are household names and are trusted by customers to brighten, protect and preserve their homes, buildings, offices and factories. In addition, chemicals produced by AkzoNobel are essential ingredients in everything from ice cream to asphalt, soup to soap and plastics to paper. Headquartered in Amsterdam, it is consistently ranked as one of the leaders in the area of sustainability.
With operations in more than 80 countries and 50,000 people around the world, AkzoNobel processes more than a million credit transfers with a volume of over 12.5 billion euros and more than 100,000 direct debit transactions annually. In order to further standardise their payment processes, AkzoNobel began using International Bank Account Numbers (IBAN) in 2010 and fully launched its Single Euro Payments Area () implementation programme in October 2012. The company has a coordination team comprised of members of its treasury, cash management relationship team, business units, accounting and management teams, and human resources (HR) country leaders. AkzoNobel completed its migration project in readiness of the 1 February 2014 deadline to comply with European Union (EU) law1 which effectively mandates migration to Credit Transfer () and Direct Debit (SDD) in the euro area by this date.
The AkzoNobel migration project – questions and answers
Newsletter: When did AkzoNobel decide to set up a implementation project?
Gerwin Braam: The project officially started in October 2012 with the aim of getting ready ahead of the original 1 February 2014 deadline. However, we actually started to use IBAN in credit transfer payments for many of our business units already in 2010.
Newsletter: What motivated your organisation to set up a implementation project at a time when there was no legal obligation for customers to implement payment schemes and standards?
Gerrit Willem Gramser: AkzoNobel was keen to implement the standard way of executing euro payments as a way of generally improving our processes. It allows us to save money on bank account fees and to reduce the number of bank accounts we hold. Therefore, we were ambitious to get started straight away so that we could begin to see the results of this harmonisation.
Newsletter: Did your organisation opt to implement and SDD at the same time or did you opt for a phased approach?
Gerwin Braam: Our programme started in April 2010. We then implemented the salary payment in some countries in 2011, with a second round of countries going live in the third quarter of 2013 and January 2014. All HR payments in the region are now compliant.
Our programme to implement SDD went live in July 2013 and all of our individual entities went live between the third quarter of 2013 and January 2014.
Newsletter: Was a implementation team set up? If so, which departments of your organisations were involved in the project?
Gerrit Willem Gramser: Yes, we have a team comprised of members of Information Management, Business Units, accounting, credit control, HR and Treasury, governed by our Treasury management team and a project steering group.
Newsletter: Is implementation viewed as a stand-alone project or is it part of a review/update of processes and applications beyond payments?
Gerwin Braam: At AkzoNobel, we see it as both. We started our project because we had areas in our company where we did not comply with the standard and so we wanted to ensure implementation across the board. However, elsewhere, was already part of and integrated in some of our daily processes such as the payment factory.
Newsletter: Did your organisation opt to upgrade the existing IT architecture or to implement new IT applications and/or accounting/ enterprise resource planning (ERP) systems?
Gerrit Willem Gramser: No, the standards have always been part of our treasury system requirements, but did not materially change our IT plans and schedule. We work with one standard across the globe with all of our cash management banks.
Newsletter: In your view, which posed the main challenge in the implementation project with regard to ?
Gerwin Braam: Our biggest challenge in the early days, let’s say 2010, was the implementation of the ISO 20022 message standards/XML syntax. Our business units have to process SAP or non SAP IDOCS in Pain.001 and Pain.008 format.
Newsletter: Did your organisation opt to implement SDD? If so, did you implement both and SDD Business to Business (B2B)?
Gerrit Willem Gramser: Yes, we decided to implement both and . In order to make the process as smooth as possible for our customers, we informed all legacy direct debit customers about the new and B2B Schemes by sending them an AkzoNobel information letter which included the Mandate ID and Creditor ID details. In addition, we started to collect SDD ‘on behalf of’ the own AkzoNobel legal entity that has direct relationships with the customers.
Newsletter: In your view, which posed the main challenge in the implementation project with regard to SDD?
Gerrit Willem Gramser: SAP did not already have a customer that had implemented the ‘on behalf of’ collection, so we were starting from scratch. We worked with the team to create an SAP mandate form.
In addition, in order to get our business unit migrated, local SAP ERP systems had to be configured into the SDD standard. This involved a lot of individual business units which complicated the process.
Newsletter: Is it possible to quantify the investment necessary to implement the payment schemes and technical standards?
Gerwin Braam: We would estimate that the total investment was 150,000 euros. This includes a lot of support which was needed from our business units and from consultant specialists.
Newsletter: Do you expect that this investment will generate a return – if so, has your company projected related figures and the timeframe required to generate this return?
Gerrit Willem Gramser: We do not have projected related figures, but we have already seen a return on our investment through the benefits we have received by using standardisation. We have more transparent work processes, centralised reporting, only one collection bank and we no longer have to use local banking tools to process local SDDs. By standardising our processes through , it has become much simpler across the board.
Newsletter: In your view, what are the main benefits of implementation?
Gerwin Braam: implementation for AkzoNobel has led to more efficient account reconciliations for our SDD payments, lower IT costs, increased scale of automatic processing, reduced number of bank accounts and banking relations, easier centralisation of our cash management, and increased business opportunities across the region.
Newsletter: Are there any other comments you would like to share?
Gerrit Willem Gramser: Here at AkzoNobel, we have questioned whether the initiative should have also attempted to eliminate local exceptions still existing in some countries such as, for example, Riba, Pagares or LCR, which could have further driven harmonisation within Europe. Unfortunately, because the standardisation process did not include this, companies still have to cater for these local exceptions at the moment2.
Newsletter: Mr Gramser and Mr Braam, thank you very much!
Gerrit Willem Gramser is Director Business Treasury at AkzoNobel and Gerwin Braam is Senior Bank Manager at AkzoNobel Treasury & Investor Relations and its project manager.
The European Payments Council () recommends that organisations in the euro area still working towards achieving compliance with the European Union (EU) ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the Regulation) aim to finalise the migration process as soon as possible. Banks and other service providers are standing ready to support payment service users to complete the transition. Relevant information is also made available with ‘The Migration Tool Kit’ (see ‘related links’ below).
Related articles in this issue:
SEPA 2.0: Reflections on Realising the Potential of SEPA Going Forward. SEPA roll-out so far suggests that there is room for improvement as regards alignment of policies and coordination among the EU institutions and governments driving EU integration in the area of payments
Don't Count on 1 August 2014: Different SEPA Migration Deadlines Apply Across the Euro Area During the “Additional Transition Period” Agreed by the European Commission, the European Parliament and EU Governments. EPC recommends that organisations in the euro area still working towards achieving SEPA readiness complete the migration process as soon as possible
Related articles in previous issues:
1 In February 2012, the European co-legislators, i.e. the European Parliament and the Council of the European Union (EU), adopted the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009', which defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation.
2 The 'Regulation () No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro' (the Regulation) mandates that credit transfers and direct debits in the euro area shall be carried out in accordance with the core provisions of this Regulation by 1 February 2014. At the same time, the Regulation has introduced several possible exemptions regarding the use of the International Bank Account Number (IBAN), the Business Identifier Code (BIC) and the ISO 20022 XML message standards by the February 2014 deadline. Member States have discretion as to whether they will use any or all of the options to derogate from the 1 February 2014 deadline with regard to the use of the IBAN, the BIC and the ISO 20022 XML message standards. Member States were required to notify the European Commission by 1 February 2013 which derogations they will use. In addition, the Regulation permits the continued use of so-called ‘niche products’ during a transitional period. ( Credit transfer and direct debit transactions with a cumulative market share of less than 10% in an Member State must comply with the provisions of the Regulation by 1 February 2016.)
If you would like to comment on this article, please identify yourself with your first and last name. Your name will appear next to your comment. Email addresses will not be published. Please note that by accessing or contributing to the discussion you agree to abide by the EPC website conditions of use.